‘Scottish Widows refused to pay out for funeral costs’

‘I had to borrow money from my daughter for his cremation. I just wanted to give her the money back’

Avril and David Arthur thought they were doing the sensible thing when they took out life insurance policies 30 years ago.

But after David died, Scottish Widows refused to pay out, leaving Mrs Arthur forced to borrow money from her daughter to pay for her late husband’s cremation.

The couple were in their 50s when they took out two “senior protection plan” policies in the mid-1990s with high street bank TSB – which was selling Scottish Widows products at the time.

Mrs Arthur was still working, but her husband had a spinal injury. With little income, they decided to insure the sum of £3,000 each (worth more like £ 5,700 today) in the event of either of their deaths.

They each took out separate policies paying different premiums (costing £9 and £10 a month, respectively). The couple paid these premiums for nearly 30 years, but when Mr Arthur passed away last October none of this seemed to matter.

Instead of automatically paying out, Scottish Widows sent a letter to Mrs Arthur – seen by The Telegraph – telling her that the policy was written as “joint life last survivor”. In other words, the insurer said she would need to die or reach the age of 90 before receiving a penny.

It was then that the provider stopped collecting her premiums, leaving her unsure as to whether she herself was still insured in the event of her own death.

Mrs Arthur said: “I’ve never missed a payment since I took the policy out. I feared that them stopping my direct debits would give them the opportunity to say I’d missed payments.”

Well over a month went by after Mrs Arthur was told by a Scottish Widows call handler that she would be sent the relevant forms to reinstate her premiums. To add insult to injury, Scottish Widows had taken a further payment from her husband 16 days after his death – despite her daughter informing them that he had died.

Alan Lakey, a financial adviser at Highclere Financial Services, looked at the policies and said they were not “joint life” as Scottish Widows had claimed, and that Mrs Arthur should have been paid the death benefit.

Adam Higgs, at the comparison site Protection Guru, also highlighted that there were separate policy numbers and that the lives insured were singular not plural.

After this newspaper intervened, the provider went on to admit it had sent the widow incorrect information, and that Mrs Arthur “did not receive the level of service she should have at what was already an extremely difficult time”.

She was, as a result, paid the sum assured from her husband’s life policy and received an additional £1,000 in compensation, £4,000 in total.

Her direct debits have also now been reinstated.

Mrs Arthur said: “It’s not like I was asking for a million pounds, it’s just what I took out. It’s not much to them. They’re supposed to be a big firm.

“I had to borrow money from my daughter for his cremation. I just wanted to give her the money back.”

A Scottish Widows spokesman said: “We are very sorry that Mrs Arthur did not receive the level of service she should have at what was already an extremely difficult time. The money has been received along with interest and we have offered an additional payment to acknowledge the time it has taken to put things right.”

Mrs Arthur is not the only Scottish Widows customer who has had to battle with the company for their payout. Last year, complaints against Scottish Widows to the ombudsman surged 63pc.

There are around 1,400 members of the Facebook group “Scottish Widows Complaint Platform” – set up by campaigner Mark Radin – as a place for customers to discuss their problems with the insurer, which is a part of Lloyds Banking Group.

He said most older claimants would have stopped at Scottish Widows’ first refusal letter, adding: “It saddens me knowing many investors have lost out because of such maladministration. But pleased we could help Mrs Arthur.”

Last year, The Telegraph reported on the case of Karen Gibson, 36, from Glasgow, who took out critical illness cover in 2019 from Scottish Widows – but was denied payment after a multiple sclerosis diagnosis in January 2022.

The insurer argued it was not informed of information that could have indicated early signs of her condition. But an ombudsman investigator later found that Scottish Widows did not treat Ms Gibson fairly.

The Telegraph pressed Scottish Widows for answers in November. While it still has not paid out on the claim, which is yet to receive a final decision, the company did agree to pay a settlement figure of £125,370.37 on a non-admission basis – acknowledging Ms Gibson’s vulnerability.

Stephen Timms MP, the chairman of the Commons work and pensions committee, met Donald MacKechnie, the company’s chief operating officer, at the start of Parliament’s summer recess last year. He was told that the provider had invested in more workplace training, increased the number of employees answering calls and reallocated experienced staff to more complex cases.