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Last Updated: Saturday, 2 February 2008, 15:16 GMT
Mis-sold care insurance refunds
By Chris A'Court
BBC Radio 4's Money Box

Road sign warning of elderly people
Firms often failed to give adequate warnings about possible risks
Elderly people who were mis-sold insurance for nursing home care can claim compensation.

The Financial Ombudsman says firms offering pre-funded long-term care policies in the 1990s sometimes failed to warn of all the risks.

Customers with certain PPP "Lifetime Care" policies are now in line for full refunds.

The insurance firm AXA, which now owns PPP, says it disagrees with the Ombudsman's ruling but is bound by it.

The concept

In the mid-90s people were invited to buy policies by sales people, who said they might not be able to afford nursing home care, as there was little or no government help.

No one really suggested that there could be such savage changes
Alan Birtles, took out a policy in 1996
They said people might be forced to sell properties to pay care costs, but that insurance would help avoid that.

For a one-off lump sum payment, the insurance promised a monthly benefit towards the cost of care, if that became necessary.

Alan Birtles and his wife Maria were among those taking out a policy in 1996, at a price of over 14,000.

In reality

What they did not anticipate was that after ten years, the monthly benefit could be slashed to under half of what it was at the start and that to maintain benefits at the same initial level, they would have to invest thousands more.

In the Birtles' case, the firm wanted an additional 30,000.

Alan Birtles told BBC Radio 4's Money Box:

"The mention of risk is in the literature produced at the time, which we have, but no one really suggested that there could be such savage changes."

Some of those 14,500 can certainly apply for compensation, possibly many of them
Tony Levene, personal finance journalist at the Guardian newspaper
Although the Birtles have not yet won compensation, the Ombudsman has now found in favour of others like them and has ruled that the insurance firms should refund all the policyholders' money, plus interest.

Most of these policies were sold by the direct sales forces of PPP, now owned by AXA, and several other insurance firms.

Who might claim?

The exact number of people who could make a claim for compensation is unknown, but Tony Levene, a personal finance journalist at the Guardian newspaper, says that two years ago AXA told him there were 14,500 policies in the category recently examined by the Ombudsman.

He said "Some of those 14,500 can certainly apply for compensation, possibly many of them.

"The ones who cannot are those who have already claimed on the policy, so for instance, they have already had long-term care fees paid."

In a statement, AXA said that it strongly disagreed with the Ombudsman's ruling, but that it is bound by the decision and committed to treating customers fairly.

Pre-funded "Lifetime Care" policies are not sold any more, though the brand name continues to be used.

BBC Radio 4's Money Box was broadcast on Saturday, 2 February 2008 at 1204 GMT.

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