Life insurance and economic abuse – a new briefing from SEA

“He took out life insurance on myself and I begged him to cancel the policy. I had to contact the insurance company, change the direct debit payments, then default to get it stopped.” Victim-survivor  

Today Surviving Economic Abuse (SEA) launches a new briefing identifying the impact of life insurance policies on victim-survivors of economic abuse. Authored by Professor James Davey, University of Bristol, and Johnny Timpson OBE, ‘Life insurance and economic abuse’ explains the legal and regulatory challenges which mean life insurance can be used as a tool for abuse.  

The briefing makes recommendations for how the insurance industry can prevent the use of their products as a form of economic abuse through changes to policies and practice. The recommendations also set out the critical role of industry leaders in producing guidance, like UK Finance’s Financial Abuse Code, published in 2021 with the support of SEA. This guidance should make best practice recommendations for firms to follow, in line with their Consumer Duty to prevent foreseeable harm to victim-survivors of economic abuse as vulnerable customers.

Read ‘Life insurance and economic abuse’ here. 

What does life insurance have to do with economic abuse?

Life insurance policies represent an important financial protection for many people. However, life insurance can also be used as an opportunity for economic abuse and coercive and controlling behaviour both during a relationship, and long after separation. 

Our new briefing identifies some of the key issues, including:  

  • Life insurance policies being taken out without the policy holder’s consent or knowledge is an opportunity for ongoing coercive and controlling behaviour and economic abuse.  
  • Joint life insurance policies cannot be split without both parties’ consent, which means that victims-survivors of economic abuse are dependent on abusers to consent to separate life insurance policies. Abusers are then able to use this as a form of post-separation control and financially gain from the victim-survivors’ death after separation.  
  • Abusers’ ability to financially gain from a victim-survivor’s life insurance cover, even after separation, has been known to create an incentive to kill, which places victims of domestic abuse at a constant risk of homicide. 

“11 years after separation, I found out that for 10 years my ex-husband had a life insurance policy on me, and that was a moment that I felt really scared. I didn’t know this was possible, the audacity to do something like that, that he would gain from my death on top of the years of economic abuse – if something happened to me, he would get rewarded from me dying. It doesn’t stop after divorce at all.” Victim-survivor 

This form of economic abuse forces a victim-survivor to remain financially tied to an abuser, causing long-lasting effects on their safety and economic independence.  

The Financial Conduct Authority’s (FCA) recently implemented ‘Consumer Duty’ requires firms to put their consumers’ needs first, with a particular emphasis on customers who may be at a greater risk of harm. This provides financial services firms, including insurance providers, with the opportunity to transform their response to economic abuse and consider how life insurance policies can act as a barrier to a victim-survivor leaving an abuser, facilitate further abuse post-separation and prevent the victim-survivor from gaining economic safety.  

Therefore, it’s vital that the regulator considers how they support firms to prevent and respond to situations where life insurance is being used as a form of economic abuse in line with the Consumer Duty. Additionally, we recommend the regulator encourages industry leaders to develop an industry-led code of best practice for responding to this.  

Lauren Garrett, Financial Services Manager at SEA said,  

“Insurance products, particularly life insurance, are often overlooked when considering responses to economic abuse. However, as our paper identifies, life insurance is intrinsically linked to physical safety, and has been used as a form of coercive and controlling behaviour, including threats to kill victim-survivors – and in the worst cases, financially benefit from killing them. It’s vital that insurance professionals are aware of the harm that these products can cause, and their role in both identifying and preventing it from happening through the products and services that they offer. The Consumer Duty places a responsibility on firms to do this, however clear guidance from industry leaders is needed so that insurance professionals know how to identify when this form of abuse is happening and close it down.” 

Johnny Timpson OBE, report author said, 

“The lived experience of victim-survivors of domestic abuse informs us that general and life insurance covers can, and are, used for the purposes of economic abuse and exercising coercive control. As insurance professionals it is essential that we are ever vigilant and aware of financial abuse plus and importantly, that we embrace the training, Consumer Duty Guidance and recommendations being made available to us by Surviving Economic Abuse.  Simple steps such as writing single life insurance policies in trust rather than joint life policies reduces the risk of financial abuse and improves customer outcomes.”  

Professor James Davey, University of Bristol, report author said, 

“The formal legal position on the sale of life insurance over the lives of spouses is in urgent need of modernisation. That might be by statutory change, but is more likely to be via regulators (such as the FCA) and the insurance markets coming together to resolve an enduring source of economic abuse” 

 If you would like to find out more about how your firm or organisation can improve policies for victim-survivors of abuse, please get in touch with SEA by emailing [email protected] 

Life insurance and economic abuse’ builds on wider work from SEA on how insurance products are used as a form of abuse and how insurance firms can respond. Find out more in SEA’s briefing Insurance and economic abuse’.