- Major life insurer AIG docked a declare for a birthday being wrongly recorded
- This led to Maggie Smith’s premiums being underpaid by £253 over 11 years
- The trustworthy mistake led a £23,000 shortfall – till This is Money stepped in
A husband was left ‘devastated’ after his spouse’s life insurer knocked £23,000 off its payout when she died – and all due to an trustworthy mistake that meant she underpaid her coverage by £253, or simply £1.98 a month.
Major life insurer AIG solely paid out the £23,000 after This is Money intervened, so the issue serves as a cautionary story for policyholders to test their particulars rigorously.
Maggie Smith, knowledgeable chef, died in September 2023 of motor neurone illness aged 57.
Her husband Daniel Smith, {an electrical} engineer, had been her carer for 4 years.
Mix-up: It’s not clear how the fallacious birthday was inputted, but it surely had big monetary ramifications
Eleven years earlier, she had spoken to an unbiased monetary adviser who had bought her a life insurance coverage coverage with Aegis, which was later bought to Aviva after which ended up with AIG.
The sum insured was £95,000 – that means upon her loss of life AIG was meant to pay that determine to her husband.
In alternate, Maggie paid premiums of £11.67 a month, which she did faithfully for 11 years.
But after her loss of life AIG seen an issue. Maggie’s birthday was 16 June 1965, however the one recorded on her life insurance coverage coverage was 16 June 1967.
No-one is aware of who made the trustworthy mistake, maybe one of many three life insurers concerned with the coverage, or the unique IFA that bought it.
There isn’t any proof the error was Maggie’s fault. Her husband says it is extraordinarily unlikely she would have made a mistake about her personal birthday – particularly as this info was initially taken down with a pen and paper by the IFA that bought her the coverage.
Sadly the unique report of the coverage has vanished, and the IFA left the trade to run a nail bar, so it’s inconceivable to pin down the supply of the error.
But no matter who made the error, critical penalties had been quickly confronted.
AIG mentioned that Maggie ought to have been paying £1.98 additional a month if her birthday had been recorded accurately – £13.65 as a substitute of £11.67. Over the lifetime of her coverage, that added as much as a shortfall of £253.
But that small underpayment meant AIG paid out £72,121.19 as a substitute of £95,000, a discount of £22,878.81.
That got here as a shock to Daniel, and precipitated him appreciable upset. The level of the £95,000 payout was to fund his spouse’s share of the mortgage within the case of her loss of life, and the lacking £23,000 was a significant shortfall.
AIG’s rationale was that it was solely paying the quantity it was meant to had Maggie’s birthday been right within the first place, and that the onus was on her to test her particulars had been proper.
Daniel provided to pay AIG the lacking £253, and even £2,500, if it could pay him the complete £95,000, however the life insurer refused.
With nowhere else to show, Daniel approached This is Money to lift consciousness of the problem and forestall others struggling in the best way he had.
A easy oversight when taking out insurance coverage had led to a extreme fee shortfall, and at a really unhappy time.
Daniel wished This is Money readers to pay attention to the significance of double-checking all the knowledge on their life insurance coverage offers is right.
Daniel mentioned: ‘I needs to be grateful should you would remind your readers of the tragic penalties that may come up when a mistake – not essentially that of the policyholder – is made, and lies undiscovered till a declare is made.’
AIG has a change of coronary heart…
After This is Money raised the problem with AIG and requested the life insurer to reopen the case, it admitted it had made a mistake.
AIG mentioned it ought to have paid £81,219.78 – nonetheless in need of the unique £95,000.
But in mild of how the problem had affected Daniel, AIG agreed to pay him the complete quantity.
Daniel mentioned: ‘I can not categorical my appreciation of your assist in reaching such a improbable end result. Thank you hardly appears enough.’
An AIG spokesman mentioned: ‘We’re happy we have been in a position to resolve the matter for Mr Smith and we once more supply our condolences to Maggie’s husband at this tough time.
‘We pay 99 per cent of life insurance coverage claims so it is all the time upsetting when we’ve got to inform members of the family we won’t pay the complete quantity.
‘This solely ever occurs when the knowledge we search at claims stage reveals details that might have modified how we insure the shopper.’