Aviva undervalued my father’s life policy by using ‘wrong’ date

I am helping my 83-year-old stepmother sort out my late father’s affairs, and I have been battling with Aviva since early May over what I believe is an incorrect valuation of a life assurance policy.

My father held two life policies with Aviva, of which my stepmother is the beneficiary. The terms of both state the valuation should be at the point of official notification of death, which was made on 16 December.

But one policy has been valued by Aviva on 27 March, nearly 14 weeks later – very conveniently for them after the coronavirus market crash.

Life policy: Aviva shortchanged us £5,600 by valuing it on wrong date - after Covid market crash

Life policy: Aviva shortchanged us £5,600 by valuing it on wrong date - after Covid market crash

Life policy: Aviva shortchanged us £5,600 by valuing it on wrong date – after Covid market crash

We’ve had to deal with two separate departments over these two policies, and received bizarrely different treatment.

Aviva’s life department valued the Axa policy I believe correctly at around £36,500 on the date of death notification, and staff there were swift to respond, helpful and professional.

But Aviva’s bond department valued the Sun Life policy at around £38,600, which is about £5,600 short of what it would have been if valued in mid-December.

This department didn’t even respond to tell us this valuation until the end of April, and its staff have been totally incompetent in dealing with enquiries.

They have refused to explain why they picked a valuation date in March, and after we complained simply referred us to the Financial Ombudsman. The customer service my family has received from them has been appalling.

I’ve now made an official complaint to Aviva’s new chief executive, Amanda Blanc, but have heard nothing since receiving a simple acknowledgement several weeks ago.

Not every individual might have the necessary know-how to value a policy correctly, and find out whether Aviva’s selection of the wrong date has left them out of pocket.

However, I would be interested to know if you’ve received similar complaints from other This is Money readers, regarding undervalued Aviva Life Assurance claims.

Tanya Jefferies, of This is Money, replies: Aviva backed down on this when we got in touch, and has said sorry to you.

It will pay your stepmother an extra £5,653.28, including interest to cover the delay, and an additional £200 by way of apology. Its full statement is below.

Aviva says its terms and conditions say a calculation will be made from the written notification of death. 

But you tell us Aviva never asked you to put it in writing when informed of your father’s death, which seems a major omission on its part if that is the standard requirement.

You would think ‘you need to inform us in writing’ would be the first thing a staff member would say, after offering condolences, in that situation.

The Aviva department dealing with your father’s other life policy apparently accepted verbal notification, which only sowed further confusion about what you were meant to do.

The terms and conditions on written notification were in a document that you tell us wasn’t sent out until after you complained many months later, and even then Aviva staff didn’t draw your attention to this rule.

You first complained in May, and it has taken nearly six months and the intervention of This is Money to get this resolved, though Aviva tells us a senior complaints manager had already begin reviewing your case after you escalated the issue to its new chief executive.

Have you made a claim on an Aviva life policy? 

Tell This is Money your story at tanya.jefferies@thisismoney.co.uk. Please put AVIVA LIFE POLICY in the subject line.

We asked Aviva if it would be carrying out checks to ensure customers haven’t had life policies valued on wrong dates by your bond department, and it says this will be part of its review into your case.

The insurer confirmed it would make up the shortfall for any customer found to be underpaid, and that it would not seek to recover any overpayment it had made in error.

Your calculation of the difference in payout between mid-December and the end of March was pretty bang on, if you take out the interest.

But you are right that not everyone will have the know-how to work this out themselves, if they suspect a problem with a valuation.

We asked a financial adviser experienced in dealing with life policies to explain how to do the sums, and to give his take on your case.  

An Aviva spokesperson replies: We are very sorry that Mr X, acting on behalf of his stepmother, has experienced difficulties in claiming on one of his late father’s policies.

We have conducted a detailed review which has concluded that the claim was originally administered in line with the terms and conditions, which state that the calculation will be made from the written notification of death.

However, we acknowledge that we did not make the date of valuation clear when the family first contacted us and that our claims service on this occasion was not what it should have been.

We are therefore honouring the payment from the earlier verbal notification date. 

Gary Smith: Ask the provider to put in writing how death benefits are valued before simply accepting the amount they offer

Gary Smith: Ask the provider to put in writing how death benefits are valued before simply accepting the amount they offer

Gary Smith: Ask the provider to put in writing how death benefits are valued before simply accepting the amount they offer

Gary Smith, chartered financial planner at Tilney, replies: I was surprised that your reader has suffered such poor service, in respect of the death claim as, from my experience, death claim departments are typically highly efficient, compassionate and process claims in a timely manner.

I was particularly concerned that your reader was referred to the Financial Ombudsman, as that shows a complete lack of understanding from the individual they were dealing with at Aviva.

Once your reader has made a complaint, Aviva should acknowledge the complaint in writing, and then provide their decision in writing and, only once this has been received and, if your reader disagrees with the outcome, can they take this to the Financial Ombudsman.

I am pleased to hear that your reader is finally going to receive the correct amount and that Aviva are doing the correct thing by applying interest, and an apology payment, for the delays and inconvenience suffered.

This is how their complaint should have been dealt with from the outset.

Unfortunately, I have had to deal with a number of death claims so far this year, and I have to say that I have not experienced any difficulties when dealing with insurance providers, even during the period when staff were working from home due to lockdown restrictions.

I would hope that this was a one-off bad experience, rather than a systematic issue with the insurance provider’s processes. 

How are life assurance claims normally dealt with by insurers?

Once notification of death has been provided to insurance companies – and it is best to do this in writing via email or recorded delivery, as well as verbally – they will respond detailing exactly what they require, and this could include a request for:

1. The death certificate

2. Potentially a copy of the will

3. Potentially a request for probate

4. Details of what death benefits will be payable, and what date of valuation will be used.

The situation differs depending upon what type of policy the deceased had.

So, if it was a life cover policy with a sum assured of £100,000, written under trust, then the value will represent the sum assured on the policy and a death certificate is usually all that is required, along with confirmation from the trustees where the proceeds are to be paid.

The situation can differ where there is an investment and, as your reader correctly identified, checking the policy document to clarify how death benefits are calculated is important.

However, often policies have been in place for decades and policy documents can get misplaced over time, so ask the provider to put in writing how death benefits are valued before simply accepting the amount they offer.

Good practice might be to keep policy documents with your will, or provide the executor of your will with a list of assets, as this will make the administrative process of an estate far more straightforward and reduce the potential for policies to be missed.

Unfortunately, this does happen, and I had a recent case where a client had received notification (coincidentally from Aviva), that they had located a bond that was owned by her late mother, who had died during 2009, with the payment only now being made.

This wasn’t the provider’s fault, as they can only process the death claim where they are informed of the death.

A further point to highlight is that death doesn’t necessarily mean that the policy has to come to an end or pay out a value.

Often policies can be written on a joint life, second death basis, so the death of the first life assured won’t result in any proceeds paying out.

Furthermore, some off-shore bond products can be written on a capital redemption basis, meaning that the death of the lives assured won’t automatically result in the surrender of the bond, and the beneficiaries could choose to keep the investment, and surrender it in the future.

How do you check a life policy was valued correctly? 

When submitting a death claim on a life policy which includes an investment element, ensure that you ask the provider to produce a breakdown of how they have calculated the value that will be made as part of the claim, writes Gary Smith of Tilney.

Once this has been provided, you can check that the value is correct, by following some simple steps.

1. Identify the number of units in each fund: Most policies will be unitised, meaning that units are held in the underlying fund(s).

2. Identify the unit price: Each fund will have a unit price, which is typically valued on a daily basis. The statement should include the unit price used on the valuation date.

3. Check the unit price: Go to the website of the provider and in the fund sections, you will often be able to put in a date, and the unit price on that date will show.

4. Multiply the number of units by the unit price: This is how the value is calculated.

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