Consumer expert: Life insurance and prices displayed without VAT
Life insurance policy up for a harsh review, and prices displayed without VAT. What are your rights? Our expert has the answers...
Q: Hi Dermott, I am enquiring regarding a life insurance policy that my dad has been paying into for over 35 years.
The policy provides for a payment of €28,000 on his death. He was advised, by letter last month that, as he is approaching his 65th birthday, if he wants to continue to have this sum remain intact then he must pay a premium increase of 90pc. Alternatively, the company have suggested that he can pay the same premium for this year but the cover reduces by less than half to €12,500. And that it will drop again next year!
Clearly there is something wrong here and I would appreciate your advice. Peter.
A: Hello Peter. There are thousands, like your dad, who have had the same shocks from these policies. They were sold with specified terms of, in this case, 35 years. Meaning that they become reviewable at that point and are breathtakingly expensive to maintain from then onwards to cover what is the whole of the remainder of the person's life.
It has been argued that these were, potentially, mis-sold to consumers. There are a few issues with that claim. We have what is known as the six-year rule in Ireland which means that it's not possible to take a claim of mis-selling to the Financial Services Ombudsman - or anyone else - as the policy was sold so long ago and is now statute barred.
Also, many of us are living much longer now and so the risk and its cost are increasing. However, I would be of the opinion that the rates are being set at unrealistically and unaffordable levels.
You are doing the best you can and I suggest you sit down with your dad, compare the future premiums in comparison to the payout and see if, for example, saving that premium would be a financially better consideration.
Q: Can you explain please what are the requirements for displaying prices and whether they should be VAT inclusive. I have noticed two very well-known provider websites where the prices displayed aren't inclusive of VAT. I don't want to complain until I'm sure of the law on this one. Arthur.
A: Thanks Arthur. I took a look at the websites you sent me and, yes, at first glance they are confusing and I understand how viewing has raised your concerns.
First of all I should explain that, from a consumer's point of view, we are looking at original EC regulations that go back as far as 2000. The requirement is very clear - prices displayed must be fully inclusive of all taxes to allow the consumer to make simple and easy price comparisons.
However, there is a 1973 Order that makes the same provision - but, that adds how this can be waived where the sale is intended solely for a business customer who claims a refund of the VAT paid. These two sites sell to both business and domestic consumers and so they are showing the initial price without VAT and then, in brackets, the full VAT-inclusive price.
It's all above board, Arthur, but you could suggest to them that they reverse their pricing policy to have the full VAT-inclusive price as the primary one to avoid this confusion for domestic consumers visiting their site.
Dermott Jewell is a consumer rights expert and the Policy and Council Adviser at the Consumers’ Association of Ireland. If you have a consumer-related query you’d like Dermott to help you with, get in touch at firstname.lastname@example.org