Insurance companies have been ordered to pay over €600,000 in awards and repayments to dissatisfied customers arising from the latest batch of complaints settled by the Financial Services Ombudsman.
The ombudsman, Joe Meade, today released the details of 21 significant findings he had made in the second half of this year, 11 of which were upheld and 10 rejected.
Mr Meade says the number of complaints his office is handling is up 28 per cent so far this year, as the financial crisis bites and more and more consumers allege problems with investment products and financial institutions.
In the largest award published today, the ombudsman directed an insurer to pay a customer who had been seriously injured in a "horrific" accident €325,000 in specified illness benefit. The insurers had argued that, while the person's injuries limited his physical capacity and his intellectual ability, he did not qualify for benefit under the policy heading of "loss of independence".
The man's two friends had been killed in the accident and he remained in a post-traumatic state of amnesia for six days after, according to Mr Meade's report. His injuries left him unable to bend, suffering pain to his groin and with reduced mobility and pain in his left arm. He also suffered frequent nightmares and panic attacks.
In assessing his injuries, the insurance company found that he had failed a number of tests; it found, for example, that he could climb stairs and dress himself. However, Mr Meade found that the man could dress himself only in a basic sense and managed by doing without socks and wearing slip-on shoes. He had difficulty negotiating the step to his shower, slept downstairs and suffered short-term memory loss. He directed the company to pay the benefit.
In another case, Mr Meade directed an insurance company to reimburse a customer the €250,000 it had invested on her behalf in a UK geared property fund. The customer, a retired teacher, had complained after discovering that the fund was high risk and the value of her investment had dropped by €100,000.
In this case, the woman obtained a €250,000 mortgage on her family home. She was going to an apartment in Paris but was persuaded by the company to invest in the fund instead. She claimed she was not told this fund was high risk at the time of purchase.
The company argued that she was "willing to appreciate" the risk associated with investment in property and the question of whether its advice was good or bad would only be answered in the long term.
In his decision, Mr Meade said it was strange that the company formed the opinion that an individual relying mostly on pension income was a suitable candidate for the investment of a substantial sum of borrowed money in a product with a higher risk profile than the risk tolerance recorded for her.
The company's advice that the product "lacks the volatility" associated with equity markets was, according to Mr Meade, "nothing short of disingenuous".
The geared fund was "simply not suitable" to her circumstances, he concluded. "She was retired from work, supplementing her pension income with income from lodgers and by carrying out grinds, but she did not have large amounts of money available to put at high risk."
He directed the company to reimburse the woman but said the interest she paid on the mortgage was a matter for herself. The company appealed the decision to the High Court but later withdrew the appeal.
In other findings, the ombudsman ordered an insurance company to pay €3,000 in compensation to a couple whose €100,000 lump sum investment fell in value by €13,500 after a year, and told another company to pay €14,000 to a customer for poor service and refunded commissions in a dispute over a PRSA product.
A case in which an Irishman living in South Africa invested €35,000 with an Irish-based insurance company through a broker in South Africa, only for the broker to defraud him of the money, was settled with the Irish company made a €25,000 ex gratia payment.
