Not upheld: benefit calculation methodology under income protection insurance policy complaint against Aviva Life & Pensions UK Limited

Decision detail

Summary

Mrs R complained about how Aviva calculated her income protection insurance benefit following her incapacity in July 2020. Aviva had calculated her benefit using six months of 2020 earnings plus 50% of her RPI-adjusted 2016 pre-incapacity income, resulting in approximately £131,000, and had linked her 2020 claim to her previous incapacity to waive the deferred period. Mrs R argued that Aviva should have annualized her six months of 2020 earnings and that the linking of claims was incorrect based on later medical evidence. The ombudsman found that Aviva's calculation method was reasonable and more beneficial to Mrs R than strict policy terms would require, and that linking the claims was justified by medical evidence available in 2020. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that while the policy terms strictly required calculation based on 12 months of income prior to incapacity, Aviva's approach of using six months of 2020 earnings plus 50% of RPI-adjusted 2016 income was reasonable and more beneficial to Mrs R than strict adherence to policy terms would have been. The ombudsman rejected Mrs R's argument that annualizing the six months of 2020 earnings was the only fair approach, finding that Mrs R did not actually have 12 months of earnings at that level. Regarding the linking of claims, the ombudsman found it was reasonable based on the medical evidence available to Aviva in 2020, and noted that even if the claim had been treated as new, the benefit calculation method would have been the same. The ombudsman also found that Aviva was not bound by what a financial advisor had been told in a hypothetical scenario.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website