Connells Limited has been told to compensate a couple of first-time buyers it recommended a joint life and critical illness cover policy to.
Ombudsman Julia Chittenden said the mortgage intermediary should have flagged that a cheaper decreasing term policy was available to first-time buyers Miss G and Mr W.
Connells Limited recommended a joint life and critical illness policy in 2014 to protect the couple’s mortgage.
In 2016 Miss G and Mr W complained to the business about their policy.
Connells rejected their complaint but “as a goodwill gesture” offered to pay the difference between the cost of level term and decreasing term assurance.
The couple rejected Connells’ offer and then complained to the Financial Ombudsman Service.
The ombudsman found there was nothing recorded to indicate that Miss G and Mr W wanted additional cover on top of mortgage protection and thought as the business was unable to offer a decreasing term assurance policy it should have advised the pair go elsewhere.
Ms Chittenden thought that if Miss G and Mr W had been advised of the alternatives, they would have probably obtained a more competitively priced policy.
She said: “I am not satisfied that the statement of demands and needs explains why the adviser recommended level term cover instead of decreasing term cover.
“It says that they had a need for their mortgage to be paid in full but there is nothing about the additional cover that the policy would provide as the mortgage liability reduced over the years.
“In the circumstances I would have expected there to have been something recorded to explain that Miss G and Mr W wanted additional cover and why.”
Connells argued the statement of demands and needs made it clear that Miss G and Mr W had accepted the recommendation for level term cover.
But, Ms Chittenden said she was not satisfied they would necessarily have known that decreasing term assurance was available or the way that it worked.
Connells Limited was ordered to pay Miss G and Mr W of the difference between the average cost of a decreasing term assurance policy at the time and the cost of their policy plus interest.