Lakey, director of CIExpert and an IFA, claimed that FOS is “setting a precedent” by finding in favour of claimants in every instance when a complaint was made involving flexible whole of life plans.
He said: “If you accept the ombudsman has made a precedential decision they’ve opened the floodgates for people with flexible whole of life plans and it’s the same with level term insurance to a lesser extent.
"The FOS is guilty of very weird short-term thinking without understanding how these can be beneficial plans.”
He referred to two separate cases which he said demonstrated this “weird” thinking. In one case the ombudsman ruled that a whole of life plan was unsuitable because it would run beyond the term of the mortgage and would not decrease in line with the mortgage balance.
And in another case a single man benefited from his employer’s death-in service scheme and the FOS concluded that this meant his life cover was not needed.
Lakey said: “This ignores the fact that the client might move job, while with the whole of life ruling the same applies to all such plans. The ombudsman will never agree that it sets precedents but it does – let’s not kid ourselves – it already has with payment protection insurance. Advisers who have never had a complaint will be in blissful ignorance but they can’t be safe given that claims management companies are running rampant and looking at new targets.”
A spokeswoman from the FOS hit back at Lakey’s claims and said it always reviews every complaint on an individual basis.
She said: “While we’d certainly encourage advisers wanting to know more about how the ombudsman service works to take a look at our database of ombudsman’s decisions, it’s important to bear in mind that the decisions are not precedents.
“Tempting though it may be to draw conclusions, our ombudsmen make their decisions based on the individual circumstances of each case. For reasons of anonymity and practicality some of our decisions involve large amounts of evidence; we can’t go in to all of the details of the case in our published decisions. So there’s a danger in drawing wide-ranging conclusions on that basis.
“We know that advisers pride themselves on giving the best possible tailored advice to their clients – and the vast majority of IFAs will never have a complaint that comes to the ombudsman service. So a product that might be suitable for one person’s circumstances may not be for another, even though their situations might seem similar.”
Professionals are divided on whether looking at past FOS cases is worth their time.
Barry Pappin, co-director at Vita Financial in Cardiff, said: “It’s sensible to review the stance of the ombudsman before setting up a policy. We have monthly compliance meetings where we meet to discuss such issues.”
But Donald Nicely, a mortgage and insurance broker based in Stoke-on-Trent-based Potteries Mortgage Desk, said: “The ombudsman is the last place I’d look before setting up a policy because I don’t think it would ever get to that stage as you always do what’s best for the client.”
