Not upheld: policy review outcome and surrender value complaint against Zurich Assurance Ltd

Decision detail

Summary

Mr R, as trustee of the R Trust, complained about the surrender values of two whole of life policies taken out in 1990 and the outcome of the 2025 policy review. The policies had experienced significant premium increases (Policy B from £91.69 to £607.43 monthly) and reduced cover levels. Mr R disputed the partial surrenders totalling £72,000 that had been taken from the policies and was unhappy that the surrender values were less than the total premiums paid. The ombudsman found that Zurich properly processed the partial surrenders with trustee authority, adequately communicated the implications, and was entitled to review and adjust the policies to ensure long-term sustainability. The ombudsman rejected the complaint, finding that the surrender value reflects the investment pot after deductions for cover costs and that it is not unusual for this to be less than total premiums paid.

The Ombudsman's reasoning

The ombudsman found that Zurich properly processed the partial surrenders with the authority of the trustees and had adequately communicated the implications. The partial surrenders significantly reduced the fund cushion available to offset the increasing cost of cover with age, which was a primary driver of premium increases. Zurich was entitled to review the policy and adjust premiums and cover to ensure sustainability. The surrender value reflects the investment pot built from premiums after deductions for the cost of cover, and it is not unusual for this to be less than total premiums paid, particularly when partial surrenders have been taken. Zurich's communications met regulatory obligations and good practice standards.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website