Life is uncertain ~ planning the future becomes increasingly difficult in an ever increasing inflationary World. Life insurance contracts comes in handy to protect the lives of the individual as also make some financial long term planning for the future. The policy holder typically pays a premium, either regularly or as a lump sum ~ for guaranteed returns + bonuses. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Life-based contracts tend to fall into two major categories of Protection policies (designed to provide a benefit in the event of specified even) and Investment policies (with the main objective of future growth)
Far away from the relaxed way of life that existed a few decades ago - work hard, save a lot and retire early seems to be the dream of many belonging to the Indian salaried class today. But truth is, even if you manage the first two actions, the third may prove difficult as the savings may not be enough to take care of a relaxed retired life, which can be ensured by regular income plans. After a long hiatus, life insurance companies have recently begun to re-launch their pension plans, with assured returns as mandated by the insurance regulator. In finance An annuity is a series of payments made at fixed intervals of time. A life annuity is a financial contract in the form of an insurance product according to which a seller (issuer) — typically a financial institution such as a life insurance company — makes a series of future payments to a buyer (annuitant) in exchange for the immediate payment of a lump sum (single-payment annuity) or a series of regular payments (regular-payment annuity), prior to the onset of the annuity.The expectation is that the pension policy must assure capital protection and pay more. For sometime Unit linked policies were a big hit as they offered the benefit of equity exposure with basic protection. When there is minimum guarantee, the Insurers will play it safe and will not offer risky equity-linked fund options. So longterm planning is difficult – but after reading this article from Daily Mail, you may perhaps be forced to rethink your plans and recalculate whatever you get, viewing it with doubt !!!Daily Mail of 8.2.14 reports that Insurer formerly known as Norwich Union faces huge payouts over breaches of terms and conditions. The post states that more than four million savers have been left out of pocket by a series of failures spanning a decade at Britain’s biggest insurer. Aviva made hundreds of technical errors which resulted in underpayments over a number of years, some totalling thousands of pounds. The insurer, which was formerly known as Norwich Union, has now been forced to come up with a total of £323million in order to compensate its customers. But many – including people with personal pension plans, workplace pensions, life insurance cover and savings – are still yet to be contacted about the mistake. Although a number of savers have already received compensation, some of those affected are elderly and may not live long enough to get their money back.Aviva has known about the errors since 2007 and has been quietly setting aside money to cover its compensation bill. But it failed to admit the scale of the problem until being contacted for an investigation by the Daily Mail’s sister website Thisismoney. To date, Aviva has paid out £180million to affected customers – but an estimated £143million still needs to be paid out to around 500,000 policyholders. An industry source said: ‘This whole thing is an absolute mess and Aviva’s handling of it has been a total shambles. ‘It is something the company has been aware of for many years and yet they’re not getting any closer to the root of the problems. In fact, they’ve been finding that the failures have been multiplying, affecting hundreds of thousands more policyholders in the process.’ Problems are believed to have started after the merger of Norwich Union and CGU in 2000. Policies run by both groups were transferred to a central system. But many of the specific terms and conditions in customer contracts were not applied correctly.Some customers complained to the independent consumer watchdog the Financial Ombudsman Service after spotting inconsistencies in their policies. For their complaints to have got as far as the ombudsman, Aviva would have had to investigate them and then reject their concerns. It was only after enough complaints had reached the ombudsman that they started to launch a full-scale investigation. The probe uncovered a huge range of problems – wrong income tax rates had been used on pension plans, there were problems with how pensioners’ savings had been invested, and some people had been told that the value of their funds would not lose money, when in fact they could. Among some of the worst affected were people who had taken out endowment plans under the brands Norwich Union and CGU, who may have lost up to 20 per cent of the value of their savings.Initially, 196 errors with products were investigated. As of April last year, this had ballooned to 358. And the mistakes are so complicated that it could take another decade to correct them all. The errors were reported to the Financial Services Authority regulator in 2007. But astonishingly, they never made an announcement to consumers – or Aviva’s shareholders – and instead simply allowed the firm to sort out the issues behind closed doors. The FSA monitored the repayment programme which the insurer started two years later. Details of the compensation scheme were never formally set out by Aviva. However, buried in its company reports for 2007 is a mention of a reserve to cover ‘compensation costs for known governance issues’. An Aviva spokesman said: ‘We stand by the promises we make to customers. If we get something wrong we always put it right.They added: ‘Like many large UK insurance companies, reviews are an ongoing part of our business. Customers can be reassured that if we identify an error we’ll do the right thing and put it right.’Astonishing is the way technology and major Companies work and treat their customers...With regards – S. Sampathkumar
11th Feb 2014PS: the Aviva report excerpted from : www.dailymail.co.uk