Since the 1980s, some insurance companies have sold whole of life insurance policies with increasing premiums which became so expensive that customers canceled their policies -some of the premiums went up by as much as 75% year-on-year.
It is estimated that less than 5% of these policies were paid out, in some cases only because the customer passed away prematurely.
A test case was settled for a six-figure sum in recent years, proving the viability of the group action.
It comes at a time when, as a result of the current cost of living crisis, more than two in five UK adults are considering, or will be actively cancelling, insurance policies as household budgets are squeezed – with one in five now reported to be considering or planning to cancel their life insurance cover.
Karl Cameron, lead lawyer on the case, said: “By selling whole of life insurance policies with unreasonable and unjustified premium increases, insurers were selling a product that was incredibly unlikely to ever serve its purpose.
“Regulations are in place to make sure customers are protected from financial products that do not do what they should, and any customer finding themselves without the protection they were promised, through no fault of their own, should be entitled to recover the losses they have suffered.
WLI Claims is seeking customers that took out whole of life policies from 1980 onwards, with a UK insurer and with an insured value of over £100,000.
Whole of life insurance or assurance policies guarantee a lump sum payment to family or beneficiaries when the policyholder dies. Nearly half of UK adults (43%) with dependents say they have made the appropriate arrangements to protect them in the unlikely event of their early death.
Those affected include policyholders as well as would-be beneficiaries or personal representatives of a policyholder. If a policyholder is deceased, an executor may claim on behalf of their estate.
The research carried out on behalf of WLI Claims has also shown that trust in insurance companies by consumers is low, with 50% of UK adults indicating that they don’t trust insurers to act in their best interest.