Although the Pru accepted the policy was fraudulently surrendered by a third party, the clients, known as Mr and Mrs B, refused their offer.
They were unhappy about how the fraud took place given the fraudsters were able to obtain their personal details.
They rejected the proposal to reinstate it, putting back the £37,000 plus given to a third party on surrender. The company had said it would then add the growth and bonuses, which would have accrued since then if the policy hadn’t been surrendered.
The firm said if Mr and Mrs B wanted to put back the £35,600 plus they should’ve paid in premiums since the surrender, it would put this amount back immediately if they agreed to a plan to pay this sum over a reasonable period of time.
The couple said the firm hadn’t explained how the fraudsters obtained their account number nor had it explained why no checks were made to establish if they’d moved.
They said it admitted it was aware of this type of fraud across several accounts so asked: why were no additional security checks put in place?
Ombudsman Tony Moss said: “I am satisfied the Pru is responsible for paying the proceeds of Mr and Mrs B’s policy to a third party, and therefore needs to repay this money to them along with lost growth and bonuses since the surrender. It agreed to do this before this complaint was brought to us.”
The endowment policy was fraudulently surrendered in 2008 after being taken out in 1999.
According to the FOS report, the Pru said the fraud was caused by a third party publishing names, addresses and personal details of company directors which allowed the fraudsters to use these details to change addresses and fraudulently claim funds from policies.
The company stated it had followed the correct security checks and processes and wouldn’t have been able to identify that the person calling wasn’t Mr B and the address wasn’t correct.
Ombudsman Tony Moss said: “It was this fraudulent surrender which led to Mr and Mrs B’s direct debit being cancelled without their agreement, and it seems clear they would’ve continued paying this monthly sum for the eight years since if not for this. In this context, they have clearly suffered as a result of the Pru’s mistake as they now need to find more than £35,600 to put their fund back into the position it would now be if not for the Pru’s mistake.”
The firm said it had been the customer’s responsibility to ensure that premiums were paid, and Mr and Mrs B should’ve noticed when their sizeable direct debit was no longer leaving their account.
Mr Moss agreed on this point and said that Mr and Mrs B “ought to have realised, at some point, that the monthly premium was longer being taken from their account, particularly given the sums of money involved”.
He said: “I agree with the adjudicator that Mr and Mrs B ought to have checked their direct debits at regular intervals, and should’ve spotted this problem within six months. I also feel his proposed compensation is about right, taking account of both parties’ arguments.”
The couple accepted they weren’t diligent in checking their bank statements and noticing the direct debit had stopped but had no reason to check this, the report stated.
Mr Moss instructed Prudential to:
· Put back all the missing premiums, amounting to more than £35,600, and apply these from the date Mr and Mrs B would’ve paid them
· Add the bonuses and growth that would’ve been applicable, thereby making the policy’s current value equal to that it would now be worth if not fraudulently encashed
· It is, however, only required to do this if Mr and Mrs B choose to keep the policy and agree to pay the back payments minus the cost of six months’ worth of premiums in an agreed timetable of no more than two years.
· pay Mr and Mrs B £500 for the trouble and upset it has caused.