CR201 Paid-up value – informed decision

• Paid-up value – informed decision

The complainant’s endowment policy, offering life and disability cover, had been in force for some 20 years when, in June 2003, he experienced financial difficulties. He telephoned the insurer’s call centre regarding his options. He was anxious to interrupt the payment of his premiums until his financial position had improved whereupon he intended to resume full payment. What he wanted, so he explained, was to make the policy “paid-up”.

According to him the call centre assured him that he would not have to repay the missed premiums but when, in October 2003, he applied to have the policy re-instated, he was advised that the premiums would have to be brought up to date. He reluctantly agreed that double premiums could be recovered for three months but having made that promise the insurer failed to deduct double premiums and only collected normal premiums as from November 2003. Furthermore, he received medical forms which he was requested to complete and when he queried it the insurer promised to get back to him, which never happened.

No premium was deducted in March 2004 and when he once again enquired about it he was informed that the money was in a “suspense account” and that the policy had not been re-instated. He clearly did not appreciate the full import of that information. The insurer then informed him that they were waiting for an HIV test. According to the complainant he had not previously been informed that one was needed. He nevertheless underwent the test on 1 April 2004. On 7 April 2004 he received further medical forms for completion. Once again he phoned the insurer to find out why this was needed. Once again nobody returned his call.

According to the insurer the complainant was advised in October 2003 that a full medical examination was required before the policy could be re-instated. Since all the requirements were not received they advised the complainant by fax on 14 November 2003 of the outstanding HIV test. On 29 March 2004 the complainant was again telephonically advised of the outstanding HIV test. This was provided by him on 5 April 2004. Meanwhile the declaration of health and medical information had become outdated. The insurer faxed the complainant another declaration of health on 7 April 2004, which they duly received on 16 April 2004.

The insurer was prepared to reinstate the life cover but not, because of the complainant’s deteriorating health, the capital sum disability cover.

According to the complainant the insurer, when he called the call centre in June 2003, never informed him that he would have to reimburse the missing premiums or that he would have to undergo further medical tests to reinstate the policy. Had he known that this was required, so he said, he would have found other means to keep the premiums up to date.


We requested and received a transcription of the telephonic discussion the complainant had with the call centre. The complainant clearly had not made a fully informed decision. The call centre brought him under the wrong impression that he could stop paying premiums for a few months and then resume payment without any adverse consequences. This is what he understood “paid-up” to mean and on that basis his belief was not unreasonable.

We held, first, that the policy had to be fully reinstated with both life and disability cover against payment of all arrear premiums and, secondly, that the insurer was not entitled to updated medical reports.


The complainant paid the arrear premiums and the policy was duly and fully re-instated. Because of the satisfactory result and notwithstanding the unsatisfactory service no compensatory award was made.

November 2006