Mr C from Co Cork was interested in the recent story about an investor who felt he had been missold an Irish Life Moneyspinner savings policy by a broker who convinced him it would be adequate to meet his school fees bill after 10 years.
Seven years later, the policy had still not broken even and the reader was informed by the company that poor performance reflected the difficult investment conditions of the early 1990s, the policy was designed for longer term savings ie. 15 years.
Mr C's experience with this policy is very different. He too took it out in the mid-1980s, but without going through a broker or direct salesman. Ten years and £6,000 worth of monthly contributions later, his encashment value was £9,907, a profit of nearly £4,000. Similarly, a series of lump-sum contributions to an Irish Life managed fund which he arranged by himself from 1986 also netted him a healthy profit after just eight years. "However, in 1986 I also took out a Select Investment Plan with Irish Life, but this time through a broker. I paid in £1,000 a year (£83 a month) but by 1995 my £7,734 was worth only £7,444. I have failed to get an explanation from Irish Life as to why I made such a good profit on two policies and a loss on the other. I can only conclude that in the latter case the broker got all the profits."
According to Irish Life, the fact that Mr C arranged the first two policies without the help of an intermediary makes no difference to the level of charges paid out. The same deductions would have been made regardless of the fact that no broker or salesman was going to receive the substantial commission paid out back in the mid1980s.
As many others have discovered this is an anomaly of the commission system. The number one priority of the vast majority of insurance companies is to protect their broker distribution network, even if it means that customers who bypass brokers or sales staff are disadvantaged by still losing up to a year's worth of contributions which go straight to the company but are completely unearned.
As to why the first two policies did better than the third, Irish Life believes that investment conditions and the fact that our reader held onto the first policy for a full 10 years was sufficient to recoup the charges. The second investment involved lump sums, and these automatically carry lower charges. In the case of the third one, he mistakenly encashed after seven years.
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