Upheld: policy administration error — incorrect reduction of sum assured following partial surrender; inconsistent and incorrect information provided to customer complaint against Phoenix Life Limited
Financial Ombudsman decision DRN-5928322 of 2026-06-04T00:00:00+00:00. policy administration error — incorrect reduction of sum assured following partial surrender; inconsistent and incorrect information provided to customer complaint against Phoenix Life Limited. Outcome: Upheld.
Decision detail
| Reference | DRN-5928322 |
|---|---|
| Decision date | 2026-06-04T00:00:00+00:00 |
| Firm | Phoenix Life Limited |
| Product | Life / income protection |
| Claim type | policy administration error — incorrect reduction of sum assured following partial surrender; inconsistent and incorrect information provided to customer |
| Outcome | Upheld |
| Remedy | Phoenix Life Limited must: (1) reissue the partial surrender payment to Miss C; (2) pay 8% simple interest (less tax) on that amount from 7 April 2025 to the date of payment reissue; (3) provide a tax deduction certificate upon request; (4) restore the policy to the position as though the partial surrender had been paid with the full sum assured remaining in place throughout; (5) provide Miss C with confirmation that the policy has been corrected; (6) pay £350 in total compensation (£250 already paid plus further £150 offered) |
Summary
Miss C complained that Phoenix Life Limited incorrectly reduced the sum assured on her whole of life policy following a partial surrender in January 2025, despite being told the sum assured would remain unchanged until the next policy review. Phoenix Life's partial surrender statement dated 20 March 2025 showed the sum assured had reduced from £8,600 to £2,250. Miss C attempted to return the uncashed cheque to reinstate the sum assured, but Phoenix Life initially refused, then later reapplied the funds to the policy after stating it could not accept the return. Phoenix Life subsequently confirmed the sum assured should not have been reduced. The ombudsman upheld the complaint, requiring Phoenix Life to reissue the partial surrender payment with 8% interest from 7 April 2025, restore the full sum assured, and pay £350 total compensation for the distress and inconvenience caused by the inconsistent information and prolonged uncertainty.
The Ombudsman's reasoning
Phoenix Life made clear errors by inconsistently informing Miss C about the impact of the partial surrender on her sum assured, first verbally stating it would remain unchanged, then showing it reduced in the statement, and later confirming it should not have been reduced. The firm compounded this by initially refusing to accept the returned cheque, then reapplying the funds after stating it could not do so. To put Miss C back in the position she would have been in had the errors not occurred, Phoenix Life must reissue the partial surrender payment with interest from the date she would reasonably have cashed the cheque, restore the full sum assured, and pay compensation for the significant distress and inconvenience caused by the inconsistent information and prolonged uncertainty about her family's protection.
How this compares
| Group | Decisions | Uphold rate |
|---|---|---|
| Phoenix Life Limited, all decisions | 1,109 | 20% |
| Life / income protection, all decisions | 10,405 | 21% |
Source
Read the original decision on the Financial Ombudsman Service website