In the past, NN has wrongly charged high costs to customers who had purchased investment insurance from the insurer. These customers were also insufficiently informed about a number of specific risks associated with these products, which are now known as ‘usury policies’. The court in The Hague decided this on Tuesday evening in a case brought by claim association Woekerpolis.nl.
Woekerpolis.nl now wants to talk to the owner of the insurance brand Nationale-Nederlanden about compensation for the woeker policyholders. However, NN has announced to appeal against the ruling and in the meantime, seeing no reason in the court’s ruling for compensation for affected customers.
The ruling of the Hague court is the first in a series of appeals by claim groups against all major Dutch insurers. The court’s ruling is expected to be a blueprint for the other cases against Reaal (now also part of NN), ASR, Aegon Nederland (part of ASR) and Achmea – these other cases were even on hold pending the NN ruling.
Now that NN is in cassation – which may also be a blueprint for the other insurers – the extortionate policy affair that broke out 17 years ago will drag on for a few more years.
Little return in practice
This affair revolves around investment insurance, which was taken out by many consumers, especially in the 1990s, as cover for a mortgage or as an extra savings pot during retirement. In total, approximately 6 million of these insurance policies have been sold. NN has sold approximately 700,000 of them.
The idea was that the insurer invested the customer’s monthly premium, so that at the end of the insurance term he had more money left than all of the money invested. With that return, for example, a mortgage could be paid off.
Although warnings had previously been issued by, among others, an industry ombudsman, it became generally known in 2006 through excavation and a lot of attention from the television program Radar – which also came up with the successful ‘usury policy’ frame – that in practice many investment insurance policies have some there was no return.
Also read: The affair surrounding the extortionate policy could easily flare up again
Confidential research by the financial watchdog AFM showed that the costs charged by insurers were too high for approximately half of the policies. As a result, almost no return could be made – the investment had already been spent on, for example, fees for intermediaries before shares or bonds could be purchased. Customers also appeared to be poorly informed about the risks of investing.
Since then, claim clubs have sprung up to approach insurers for compensation. Some of these entered into agreements with insurers for reimbursement in the past; However, Woekerpolis.nl thought these fees were far too low and went to court about ten years ago. NN was largely right in the court in Rotterdam. After asking questions to the Supreme Court and waiting for a ruling from the European Court of Justice, the court now draws different conclusions.
No grounds for commissions
In a 41-page judgment, the judges of the Court uphold various claims by Vereniging Woekerpolis.nl, which collaborates with the Consumers’ Association and Consumer Claim. For example, according to the judges, NN wrongly charged commission costs and collection costs to customers. NN stated that customers could have deduced the existence of those costs from sample calculations and a general term ‘management and administration costs’ in the policy conditions; the court rejects that.
In addition, the court believes that the insurer was not sufficiently clear to customers about the amount of a term life insurance policy that was part of NN’s investment product. That premium was very high: in one example, the judges wrote that a customer had paid almost half of his 8,500 euros in annual premium on such a term life insurance policy. The insurer should therefore have been more explicit about this product component, the court found.
The court also points out that NN should have pointed out to customers a number of investment risks specific to investment insurance, such as the effect that poor investment results caused the result to drop extra sharply because the death risk premium would then increase. This left even less in the customer’s investment insurance pot at NN.
Sledgehammer blow
In a response, Woekerpolis.nl calls the court’s ruling “a hammer blow”. According to the association, the ruling is a breakthrough. “For the participants in the claim, I hope that Nationale-Nederlanden will accept the ruling and that we can quickly enter into consultations to arrive at an adequate compensation scheme,” said director of Consumer Claims Stef Smit in response to the ruling.
NN has now quashed that hope. The insurer believes that the court misinterprets the laws and regulations and the rulings of the Supreme Court and the European Court. That is why NN believes it can appeal to the Supreme Court – which does not assess the substantive content of rulings, but examines whether the lower courts have properly applied the laws.
Even if NN had not appealed, the case against the insurer would not have been ready yet. The current lawsuit started under older legislation, when mass claims with damage allocation could not yet be negotiated in court. Woekerpolis.nl must therefore still meet with the insurer to arrive at a claim payment. NN acknowledges that ultimate financial consequences for the company could be “substantial”. The listed company says it cannot quantify how high.