Four million may receive compensation from Aviva

More than four million people could be in line for compensation payments from Aviva. A recent article in thisismoney.co.uk said:

More than four million people have been put on alert they could be affected by a series of failures spanning a decade at Britain’s biggest insurer.

Aviva made hundreds of technical errors which resulted in underpayments over a number of years, some totalling thousands of pounds.

The insurer, which was formerly known as Norwich Union, has now been forced to come up with a total of £323million in order to compensate its customers.

But many – including people with personal pension plans, workplace pensions, life insurance cover and savings – are still yet to be contacted about the mistake.

It is understood that Aviva has written to 4 million policyholders, beneficiaries and trustees to inform them of the issues.

And although a number of savers have already received compensation, some of those affected are elderly and may not live long enough to get their money back.

Aviva has known about the errors since 2007 and has been quietly setting aside money to cover its compensation bill. But it failed to admit the scale of the problem until being contacted for an investigation by the Daily Mail’s sister website Thisismoney.

To date, Aviva has paid out £180million to affected customers – but an estimated £143million still needs to be paid out.

The company later confirmed that it has already paid £163million to 390,000 Aviva life insurance customers and has identified another 390,000 customers that may be due repayment. It said that it would contact customers affected and that they did not need to act.

An industry source said: ‘This whole thing is an absolute mess and Aviva’s handling of it has been a total shambles.

‘It is something the company has been aware of for many years and yet they’re not getting any closer to the root of the problems. In fact, they’ve been finding that the failures have been multiplying, affecting hundreds of thousands more policyholders in the process.’

Problems are believed to have started after the merger of Norwich Union and CGU in 2000. Policies run by both groups were transferred to a central system.

But many of the specific terms and conditions in customer contracts were not applied correctly.

Some customers complained to the independent consumer watchdog the Financial Ombudsman Service after spotting inconsistencies in their policies. For their complaints to have got as far as the ombudsman, Aviva would have had to investigate them and then reject their concerns.

It was only after enough complaints had reached the ombudsman that they started to launch a full-scale investigation.

The probe uncovered a huge range of problems – wrong income tax rates had been used on pension plans, there were problems with how pensioners’ savings had been invested, and some people had been told that the value of their funds would not lose money, when in fact they could.

Among some of the worst affected were people who had taken out endowment plans under the brands Norwich Union and CGU, who may have lost up to 20 per cent of the value of their savings.

And members of long-standing pension schemes run by Aviva, including the Abbey National personal pension account, could also have been affected.

Initially, 196 errors with products were investigated. As of April last year, this had ballooned to 358. And the mistakes are so complicated that it could take another decade to correct them all.

The errors were reported to the Financial Services Authority regulator in 2007. But astonishingly, they never made an announcement to consumers – or Aviva’s shareholders – and instead simply allowed the firm to sort out the issues behind closed doors.

The FSA monitored the repayment programme which the insurer started two years later.

Details of the compensation scheme were never formally set out by Aviva.

However, buried in its company reports for 2007 is a mention of a reserve to cover ‘compensation costs for known governance issues’.

A spokesman for the Financial Conduct Authority, which has now taken over from the FSA, said: ‘We have worked closely with Aviva for some time on this issue so that consumers – where they have lost out – are paid redress and put back into the position they would have been had the issues not occurred.’

An Aviva spokesperson said: ‘At Aviva we believe in doing the right thing for our customers. We regret that these historical mistakes were made. If any error has been made we will put it right.

‘Since 2007 we have strengthened our processes and controls to prevent these types of issues happening again. We are working through any outstanding cases systematically and are making good progress. Any customers who may be affected can be confident we will contact them.

‘We found the issues, we are fixing them and we are putting them right.’

If you think you may have been mis-sold a financial product please call 0800 107 3000.