Two more readers in France have contacted The Connexion since we wrote about how a couple’s life assurance policy with Aviva in the UK was being closed due to Brexit.
One says he will sue the firm if it goes through with its threats to cancel his policy.
The issue relates to ‘whole of life’ policies which have low ‘cash-in’ value as they are aimed for a pay-out to a survivor on death.
Aviva says that France’s stance on Brexit rules means it cannot continue the policies if they require a permitted change under the terms of the policy, e.g. adjusting the premiums or death benefits – a common practice with this type of product – and so they must be cashed in.
In May, we reported how Vivien and Peter Reynolds face receiving very little despite paying in for decades.
Aviva had decided their monthly premiums and/or the amount of the policy’s death benefit payments had to change following a periodic review.
It said France’s post-Brexit rules do not allow a UK-based firm which has lost the right to carry on business in France to make any changes and so it must close their policies.
Paying in since the 1980s
Retired soldier Teddy Bagnell, 88, from the Lot-et-Garonne, said he has lodged an official complaint since being told Aviva planned to cancel his policy after a review.
So far, the policy has continued since then, he said.
His policy, taken out in the 1980s, is against the lives of both himself and his wife, and is meant to make a £63,000 payment shared between their daughters. He has been paying around £91/month.
“I have the same problem as the first couple and received the same kind of letter,” he said.
He said the issue would not arise with a French policy because the premiums and pay-out would be set once and for all, unlike UK ‘whole of life’ policies, which are typically subject to reviews every few years.
‘I will sue them in the English courts’
He says, having sought expert opinions, he rejects the idea that Aviva can simply cancel his policy unilaterally, whether under UK or French law.
There is no mention of this in his terms and conditions, he said.
“I have spoken to their customer team several times,” he added.
“I accused them of using the French law as an excuse to take all the money and not pay out. If they cancel it before this is settled, for example with an opinion from a judge, I will sue them in the English courts.”
Zero cash-in value
He has been told the ‘cash-in’ value of his policy is zero, but he believes Aviva closing it should not be equivalent to him ‘cashing it in’.
“Having paid in for 30-odd years, I was going to get absolutely nothing back,” he said.
Take payment and waive rights
Another couple, Marlene and Robin Butterfield, said they are being offered £2,650 to cash in (the highest a reader has so far cited) but are being told that to take it they must waive any future rights to take action against Aviva.
Maureen Sheldon, 71, who has lived in Ain (Auvergne-Rhône-Alpes) since 1983, complained to the financial ombudsman over her policy, which was meant to provide her children with £131,000 and for which she has been paying £81/month.
Mr and Mrs Reynolds are also considering this, having received a letter from Aviva in which it reiterated that a French law of December 16, 2020, gave it “no alternative but to cancel”.
Aviva blame France
The firm added: “Every other territory in the EU will allow a policy to be amended – premium increase/sum insured reduced – following a review. It is only France that has imposed a more rigid approach.”
Aviva attributes responsibility for the law to the French regulator ACPR.
It said it did not have anything further to add to comments given for our previous article, in which it stressed the effect of the French law.
ACPR declined to confirm if its rules oblige closure of the account in such cases or to comment on the claim that its rules are stricter than others’.
France refused ‘cross-border’ recommendation
European insurance body Eiopa said France, unlike other countries, had not accepted a relevant recommendation it had made to national EU insurance regulators.
This sought to clarify that where a person had taken out a policy with a UK provider while living in the UK, and had then moved to the EU, the contract had not involved any ‘cross-border services’ being provided by the UK firm.
Eiopa said the aim had been to “provide reassurance that a UK policy-holder being already resident in, or moving to, an EU member state would not lead to the UK insurer being considered to carry out unauthorised EU cross-border business due to the loss of passporting rights for UK insurers as a result of Brexit”.
Even so, Eiopa was unable to confirm that its recommendations would allow subsequent ‘changes’, such as altering the premiums or death benefits.
It stated, however, that the loss of passporting does raise legal risk for UK insurers when actively servicing existing policies.
Ombudsman has same view as Aviva
The ombudsman’s service told us that in the event of complaints such as these it gives both customers and the company time to submit their evidence, but it could not comment on specific cases.
The service, however, has a similar interpretation to Aviva as to the impossibility of continuing policies for clients in France that fail a premium review (ie. if a change is needed.)
‘Whole of life policies’ no longer popular
Financial adviser Robert Kent, of Kentingtons, said ‘whole of life’ policies (with no end date) are no longer popular, but were often taken out in the past.
He said they typically involve investment into a fund which is managed such that some value might in theory accrue, and possibly also reduce the premiums.
However, he said in practice most “run out of money” and they often end up being worth little, with premiums being increased.
No transfer to Aviva France
He confirmed the ombudsman would be correct to query the decision but said there might be a legitimate issue.
“If you are doing a review on an investment for a French resident and have no legal mandate for it because you have no office in France, then I can imagine this does break the rules.”
He said he doubted it would have been possible for the policies to be transferred to Aviva France instead, as he said the two have always been run totally separately.