Cooling off period
The policy holder has a 14 days cooling off period from when the cancellation notice is received. If no cancellation notice is sent then the policyholder can cancel within the first two years of the policy.
During the cooling off period the policyholder can exercise his right to cancel by signing and returning the cancellation form. They do not need to use the cancellation form, but could if they wanted to just send in a letter to the same effect. The intention to cancel must be posted during the cooling off period to be valid.
If the policyholder exercises his/her right to cancel as prescribed in the cooling off period then they are entitled to a full refund of the life premium paid to the life office or its agents. In a single premium policy the life office is entitled to deduct any shortfall caused by variation in the value of the units purchased. This rule is to stop investors using the cooling off period as a way of playing the market.
Cancellation by one joint life policyholder is valid cancellation by all.
Projections
When ever a life office or firm shows projections of future benefits then the projection rules apply. These projects could be shown in a financial promotion, letter, quotation, key features document or post sale confirmation.
The rules impose the use of a common calculation basis using the FSA’s assumed rates of interest with the provider then applying their own charges basis to these. The FSA assumed rates are different for different types of policy and are changed as market conditions change.
The life office must make it clear that the projects are based on assumed figures and as such are only examples and are not guaranteed. There are various forms of prescribed words that are used for this statement.
Generic projection can be given at a single rate in certain circumstances e.g. in comparative tables and to calculate the likely cost of a proposed transaction. The single rate projection can not relate to an existing contract and cannot exceed the higher FSA rate applying to that class of business. Again it must be stated that the figure is only for illustration purposes and that the assessment of the clients needs will be confirmed before a recommendation is made.
With profits guide
All life offices who provide with profits policies must also supply customers with a ‘with-profits’ guide if they request the guide. The guide was originally intended for intermediaries and journalists and its content and format are set out in the FSA rules.
The object of the guide is to describe the life offices bonus systems, allocation policy and expenses and solvency margins. This allows those who wish to compare one office against another, to gain a better understanding of the market.
The guide must be updated each year and at shorter periods if the changes are such that the old guide would become misleading.