Jack Connah,

Law Commission,

Steel House,

11 Tothill Street,

London SW1H 9LJ

26 February 2010

Dear Jack,

AFM Response to consultation on Intestacy and Family Provision Claims on Death

  1. I am writing in response to this consultation paper, on behalf of the Association of Financial Mutuals. The objectives we seek from our response are to:
  • Comment on the proposals and provide further suggestions around improving the handling of death claims by financial companies.
  1. The Association of Financial Mutuals (AFM) was established on 1 January 2010, as a result of a merger between the Association of Mutual Insurers and the Association of Friendly Societies. Financial Mutuals are member-owned organisations, and the nature of their ownership, and the consequently lower prices, higher returns or better service that typically result, make mutuals accessible and attractive to consumers.
  1. AFM currently has 56 members and represents mutual insurers and friendly societies in the UK. Between them, these organisations manage the savings, protection and healthcare needs of 19 million people, and have total funds under management of over £80 billion.
  1. As organisations who provide products which become the subject of a claim on the death of the policyholder, we frequentlydeal with families and other beneficiaries who are either suffering as a result of intestacy, or are confused by the requirements of the current law. We therefore conclude that the proposals made in the consultation are sensible and appropriate, as part of a solution to the problems regularly faced today, though we caveat this by stressing that we have made no attempt to explore the implications, which we consider are better considered by family lawyers and other more relevant parties.
  1. In addition, we believe other steps are necessary. First, we believe that whilst simplification of the law is very attractive, it does create new risks, and it will be vital that consumers are made aware initially, and at each significant life change (e.g. marriage, birth of children, divorce, death etc.), the implications and risks of dying intestate. It is inevitable that some people will fall foul of the unintended consequences of the law changes, but we would hope this can be minimised by clear communication.
  1. Secondly, whilst the paper indicates that the average value of an intestate estate is low at £57,000, due to the low value of many of our products, a significant proportion of our death claims involve estates where the friendly society savings policy may be the single most valuable part of the estate which is realisable. In our experience, many such beneficiaries are frustrated more by the restrictions of probate limits than the law surrounding intestacy.
  1. We have responded to previous consultation by the Law Commission to highlight these issues and do so again now:
  1. Current friendly society legislation (Schedule 9 to the Friendly Societies Act 1992) allows a member of a friendly society to ‘nominate’ a sum to be payable on their death to a named person or persons. That limit is, at present, £5k having not been increased for many years.
  2. This is often insufficient for a beneficiary such as a spouse who has no other income or available savings, to maintain their standard of living, or meet the costs such as the funeral.
  3. As a result, friendly societies have adopted various positions under the probate rules to help their members at this difficult time (see the Appendix). It should be pointed out however that any amount paid above £5k is paid at the society’s risk and if it is later proven that the amount has been paid to an incorrect party, the amount would need to be repaid to the correct party.
  1. We suggest in light of our analysis that anominations limit of £20,000 would be useful to ensure that most claims can be handled quickly. This also provided some future-proofing given the length and irregularity of reviews.
  1. Thirdly, we accept that current processes in the sector could be streamlined further, and would be keen to engage with officials and other trade bodies to consider how to identify common standards. This might include areas to improve payments to beneficiaries: for example, to enable payments to be made directly and without delay to recognised funeral directors, or to achieve consensus to accept copies of death certificates which are certified by a lawyer rather than originals.
  1. Wewould be pleased to discuss further any of the items raised by our response.

Yours sincerely,

Martin Shaw

Chief Executive

Association of Financial Mutuals

Appendix: Processing Death Claims

A range of AFM members responded to a survey of how firms handle death claims, including the actions taken to identify the appropriate beneficiary. These are provided as background to the issue we have highlighted around probate and nomination limits.

1. Mutual A:

"As a general rule we request death certificate and probate."

2. Mutual B:

"We require sight of an original death certificate.

Joint Life Policies

The policy is owned by the surviving life – we do not need probate. We would not normally seek to re-establish ID. We would pay a cheque to the beneficiary using their full name. We might make further enquiries as appropriate e.g. if the address did not tally with our records.

Other claims over £10,000

We require probate and would make a cheque payable to “The executors of [full name]”. We would normally send to the solicitors involved, or the surviving partner at the address held on our records if they were handling the probate without solicitors. In other cases, we might make further enquiries.

Claims under £10,000

We are prepared to pay a cheque to the next of kin (if that can be established to our satisfaction) without requiring probate. We would not normally seek ID where the next of kin lived at the address held on our records for the member. We might otherwise, depending on the sum involved."

3. Mutual C:

"Firstly we always insist on production of a certified copy death certificate as evidence of death. We will accept a Coroner’s interim certificate.

To establish who is entitled to claim the benefits due and give us a valid receipt, we will request one of:

  • Copy Grant of Probate
  • Copy Letters of Administration
  • Copy of the Will (if GoP is not being applied for)

Exceptionally, if there is no Will, GoP or LoA, and the amount due is small (under £5,000) we can accept written confirmation from the claimant that they are entitled to claim, and know of no-one else who could be entitled to claim. The claimant(s) must sign an indemnity which is included in the Claim Form. If we are aware of the existence of other potential claimants (children, siblings, etc.) we would ask for written agreement from those persons to our paying solely to the claimant; we also do this where we have a copy Will but not all of the named executors are claiming.

If there is a nominee under Schedule 9 of FSA 1992, and the amount due is £5,000 or less we pay on completed Claim Form (incl. indemnity) only."

4. Mutual D:

"Most of our policies are paid to the Executor of the deceased’s estate, we request a copy of the signed and dated will at the time of sending a claim form however make payment without a copy of the will if the claim form is completed by a person who states and signs that they are the executors and if the claim is under £5,000.

We also have a high number of policies which are nominated, proposed or assigned in which case these policies are paid on receipt of a signed claim form by the policy owner or nominee. If a claim is over £10,000we require the Probate or Confirmation document."

5. Mutual E:

Industrial Branch Business

  • Coroner's Certificate can be accepted as evidence of death so long as we have the cause of death and it is not suspicious (if in doubt refer to line manager). Death Certificate Verification Form completed by a solicitor is acceptable evidence of death.
  • If the Death Certificate does not record the cause of death (Scotland), request further details to ensure death isn't suspicious or accidental death cover applicable etc.
  • A copy Will can be accepted without certification. However, if there are concerns regarding family disputes or the Will is not signed or dated etc. you can insist on the original Will.
  • The funeral account can be paid in full (to the funeral director) on receipt of original account - never pay costs to a 3rd party.
  • Self-proposed policies - Administration of Estates Indemnity is required to be completed by all equal next of kin for death claims where the claim value is below £9,000/€13,000.
  • Self-proposed policies - Grant of Representation is required where the claim value is £9,000/€13,000 or over. If a Grant is being extracted but the claim value is below the limit (£9,000/€13,000), it is not necessary to wait for the Grant unless you are suspicious about title or if there is a known dispute.

Ordinary Branch Business

Self Policy:

  • Will (if one has been completed),
  • Administration of Estates Form of Indemnity (if claim is between £500 and £9,000)
  • Grant of Representation if claim is over £9,000
  • Death Certificate (Will accept Coroner’s Certificate if sure death is by natural causes or accident.
  • Form of Authority if more than one equal next of kin.

Life of Another / Nominated / Assigned

  • Death Certificate (Will accept Coroner’s Certificate if sure death is by natural causes or accident.)

Written in Trust

  • Death Certificate (Will accept Coroner’s Certificate if sure death is by natural causes or accident.)
  • Copy of Trust Deed
  • Form of Authority if more than one Trustee

It is no longer standard practice to request policy documents. However, if there is a concern over legal title, we will insist that the policy be submitted - if lost, we will insist on the completion of a Lost Policy Statutory Declaration witnessed by a solicitor.
If Probate is being extracted but the claim value is below £9,000, it is not necessary to wait for the Grant unless you are suspicious about Title or if there is a known dispute.
This information relates to UK business only.

6. Mutual F:

"It very much depends on the value of the policy, type of policy and what documentation is in place to support the claim. The main routes are:

  1. A death certificate and a completed claim formis required in all cases (copies okay). If it is a sickness policy and below £5000 being paid out then nothing else is required.
  2. If it is below £5000 and it is an Investment product then we also ask for the policy schedule.
  3. If there was no nomination made with the policy then we would ask for a copy of the will (copy okay).
  4. If the value of the policy exceeded £5000 then we would wait for probate which would stipulate the beneficiaries.
  5. If there is no will and the policy exceeded £5000 then we would ask for the letter of administration which again would stipulate the beneficiaries.
  6. If they had an Investment product (Tesp for example with a sum assured) and they died early in the policy (first 3 years) then we would ask to see the medical report to check they did not have a pre existing condition that was not declared on the application.

That would be the documentation required. In terms of identification if it is a low value claim and they have provided the above documents then no further ID would be requested. If it is a higher value claim then the will or letter of administration stipulates the beneficiaries. As long as it is that person completing the claim form and being paid to their account then no further documentation would be requested."

7. Mutual G:

“Documents required before claim can be submitted:

  • Original death certificate is required which is checked for cause of death. (The Payout on Accidental Death can only be made if the cause of death on the death certificate states this as the reason for death).
  • Original policy schedule/certificate is required and is checked against records held at Head Office to ensure it corresponds with the information held on file.

For payments to beneficiaries of:

£5000.00 or less

The payment can proceed once the Society has received the death certificate, and is satisfied with the reason for the death. If the spouse is the beneficiary then the system will identify this, otherwise the entitlement to the proceeds must be established.

£5000.01 - £15,000.00

Payment can proceed once the Society has received the Death Certificate and has satisfied itself concerning the reason for the death. A statement is required from the beneficiary informing the Society that the beneficiary is legally entitled to the proceeds.

£15,000.01 +

Payment can proceed once the Society has received the Death Certificate and has satisfied itself concerning the reason for the death. Sight of the original Grant of Representation or Letters of Administration is required.

Identifying Next of Kin

The employer of the member is contacted to request information on Next of Kin.”

AFM Response to consultation on intestacy1 of 6

February 2010