War of the widows

One in five life insurance claims is refused by the insurers, often on technicalities. Here, Juliet

When my 47-year-old husband, Nikolai, died of cancer he left me and our three dependent children with a £146,000 mortgage and a £250,000 life insurance policy to tide us over the next few difficult years. He died knowing his family would be cared for by Scottish Widows. Six weeks later, regarded by psychologists as the lowest point following bereavement, the insurance company sent me a letter refusing to pay the claim, citing "non-disclosure of material facts".

I was faced with repossession of the house and moving the children (aged nine, 12 and 15) out of their schools and away from friends. My friends told me to put the insurance issue behind me and move on: who was I, a housewife with a part-time job, to take on a huge corporation? But I knew my husband of 20 years to be an honest man. He would never have deliberately withheld medical information.

I, too, had been at the meeting where a Lloyds TSB adviser (Scottish Widows is the bank's life and pensions subsidiary business) had completed our application form for us on her laptop. So what had gone wrong?

Nikolai told her he had been suffering from unexplained fevers for about three months, but that they had recently stopped and he believed he had recovered. Hospital tests and scans had come back negative but he was due to go for more. The adviser, probably accidentally rather than intentionally (though commissions for policies can run into thousands of pounds), wrongly recorded that his fevers had ceased almost a year before our meeting rather than a month before. She also failed to detail the hospital tests. In fact, she made a number of glaring errors on the three-page computer printout application, including wrongly identifying us both as smokers, spelling our address and our names incorrectly, transposing vital dates and giving one-word answers about medical conditions where the form sought "full details".

We were given no opportunity to see the form, which was sent electronically to the Scottish Widows underwriting system immediately. We were then asked to sign a declaration saying we had read through the form and agreed with its content and to sign against our wrongly spelt names. We were told that the completed application form would be sent to us in the post.

I later discovered that it was never meant to be printed out let alone seen by us. Incredibly, the £250,000 contract came into effect three months later with our names still wrongly spelt. I was outraged when the company dismissed this as part of "a few typographical errors".

The automatic underwriting process loaded Nikolai's premiums by 75 per cent with no explanation and no further medical inquiries. Meanwhile, Nikolai naturally presumed this was because Scottish Widows had taken out a GP report following his disclosure of ongoing tests for his former fevers - and also because he had told the adviser he wasn't in good health. Yet it was only when the claim was made that the company decided it required a GP report and then began looking for evidence of non-disclosure - irrespective of whether it was linked to his death. This common practice is odious and devastating for the policyholder.

In fact, one in five life insurance claims is not met because of this kind of "post-claim underwriting". We knew none of this at the time and completely trusted the adviser and the underwriting system. Nikolai, Russian by birth, was an internationally acclaimed photojournalist and had seen a great deal of global corruption. He wanted to bring his children up in an honest, moral society with rules by which both corporations and public abide. He believed that Britain was such a society and would have trusted implicitly a big-brand insurance company.

But, like many insurance companies, Scottish Widows had abandoned its mutual status to become a public company whose sole responsibility is to maximise profits for shareholders at the expense of policyholders. The iconic, caped Scottish widow is just a PR path to profits now. Yet, ironically, the company was originally set up to protect real young widows during the Napoleonic Wars.

Like 548,337 other people that year, I took my case to the financial ombudsman. This service has seen a general upsurge in complaints from people like myself. It took me three years of intense internet research, mounds of paperwork and many weekends and evenings, time that should have been spent with the children.

The company was determined to see me off. I was forced to sell our family home and move to Somerset. Eventually, to my immense relief, three years after my initial complaint, the ombudsman finally upheld my case, finding that, "although the firm's decision to cover the complainant's husband may have been due to a mistake, this mistake cannot be attributed to the complainant's husband; in my judgement, it is attributable to its own automated underwriting processes and data entry error by its agent".

This system of selling policies has now been changed industry-wide, says Scottish Widows. After the final ruling in my favour on 17 August it issued the following statement, which it reiterated to the NS: "In June 2004, Scottish Widows received a life policy claim following the death of Mr Ignatiev. In July 2004 this claim was declined. We do not take lightly the decision to decline a claim, but in this case we were, and still are, of the view that there was material non-disclosure of relevant information. We recognise the important role of the Financial Ombudsman Service in such cases and have always maintained we will accept the final FOS ruling. This final ruling was received on 17 August 2007 and, as a result, we will be settling the claim."

Since Nikolai's death I have uncovered many pitiful and heart-rending stories, where bereaved or terminally ill people have been refused what was rightfully theirs.

Jan Trainer appealed to the ombudsman when her 43-year-old husband Dave was diagnosed with terminal cancer. Scottish Widows refused to pay out, relying on the innocent non-disclosure of an unrelated medical condition. "It's a blatant and cruel use of a technicality to renege on an agreement," says Jan. "As a solicitor, I am up against insurance companies on a daily basis; my work involves obtaining compensation for individuals injured in often very serious accidents. It never ceases to amaze me what tactics are used to avoid meeting their obligation to victims. And the people who have to take on these powerful companies are mostly vulnerable individuals already crippled with emotional pain."

It took the ombudsman's office only three days to uphold Jan and Dave's complaint.

Jerry and Rosemary Horsman, both farmers, were devastated when their daughter Alice was crushed in a farm accident, leaving two small children. Scottish Widows denied her claim because of innocent non-disclosure of a medical condition. Her parents took the case to the ombudsman, but had to battle for two and a half years for justice. "What still horrifies me," says Jerry, "is that the 2001 application form was ludicrously flawed. It was a cheap and cheerful policy to scoop up premiums.

"The inadequate application process makes it ridiculously easy for companies to cherry-pick medical evidence in order to wriggle out of paying. It's shocking to think how many of us are living in a fools' paradise thinking we have cover when we don't."

The ombudsman looks at what is fair and reasonable as opposed to the strict letter of archaic law. However, the Law Commission is now reviewing the 100-year-old insurance law and forward-looking judges, such as Lord Eassie (former chairman of the Scottish Law Commission), are aligning themselves with the ombudsman in recognising that the law is heavily biased against the consumer. Last year, Valerie Cuthbertson, a theatre manager, won a landmark ruling in court when Lord Eassie ruled that Friends Provident was wrong in denying her critical illness cover. Her appeal to the ombudsman had not been upheld but she fought on with the help of legal aid and won through the courts.

We are being mugged by the corporate world. Perhaps ordinary individuals who stand up against the big corporations are the have-a-go-heroes of personal finance.

Do we make a difference? I would certainly like to think so.

548,337 number of complaints each year to insurance ombudsman

1 in 10 UK adults admit to having cheated on an insurance claim

52% of people fail to check life policy details to ensure they have adequate cover

1st reason for life assurance after age 60 is to minimise inheritance-tax liability

70% of insurance sales included hidden extras of which customer oblivious

49% of people never know precisely what they have insurance for

10% rise in complaints about insurance to ombudsman in the year to 2006/2007

£750,000 paid in fines by one insurer after flaws in handling complaints

Research by Jo Barrett

This article first appeared in the 17 September 2007 issue of the New Statesman, How the Americans misled Blair over Iraq

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Why the elites always rule

Since an Italian sociologist coined the word “elite” in 1902, it has become a term of abuse. But history is the story of one elite replacing another – as the votes for Trump and Brexit have shown.

Donald Trump’s successful presidential campaign was based on the rejection of the “establishment”. Theresa May condemned the rootless “international elites” in her leader’s speech at last October’s Conservative party conference. On the European continent, increasingly popular right-wing parties such as Marine Le Pen’s Front National and the German Alternative für Deutschland, as well as Poland’s ruling Law and Justice party, delight in denouncing the “Eurocratic” elites. But where does the term “elite” come from, and what does it mean?

It was Vilfredo Pareto who, in 1902, gave the term the meaning that it has today. We mostly think of Pareto as the economist who came up with ideas such as “Pareto efficiency” and the “Pareto principle”. The latter – sometimes known as the “power law”, or the “80/20 rule” – stipulates that 80 per cent of the land always ends up belonging to 20 per cent of the population. Pareto deduced this by studying land distribution in Italy at the turn of the 20th century. He also found that 20 per cent of the pea pods in his garden produced 80 per cent of the peas. Pareto, however, was not only an economist. In later life, he turned his hand to sociology, and it was in this field that he developed his theory of the “circulation of elites”.

The term élite, used in its current socio­logical sense, first appeared in his 1902 book Les systèmes socialistes (“socialist systems”). Its aim was to analyse Marxism as a new form of “secular” religion. And it was the French word élite that he used: naturally, one might say, for a book written in French. Pareto, who was bilingual, wrote in French and Italian. He was born in Paris in 1848 to a French mother and an Italian father; his father was a Genoese marquis who had accompanied the political activist Giuseppe Mazzini into exile. In honour of the revolution that was taking place in Germany at the time, Pareto was at first named Fritz Wilfried. This was latinised into Vilfredo Federico on the family’s return to Italy in 1858.

When Pareto wrote his masterpiece – the 3,000-page Trattato di sociologia ­generale (“treatise on general sociology”) – in 1916, he retained the French word élite even though the work was in Italian. Previously, he had used “aristocracy”, but that didn’t seem to fit the democratic regime that had come into existence after Italian unification. Nor did he want to use his rival Gaetano Mosca’s term “ruling class”; the two had bitter arguments about who first came up with the idea of a ruling minority.

Pareto wanted to capture the idea that a minority will always rule without recourse to outdated notions of heredity or Marxist concepts of class. So he settled on élite, an old French word that has its origins in the Latin eligere, meaning “to select” (the best).

In the Trattato, he offered his definition of an elite. His idea was to rank everyone on a scale of one to ten and that those with the highest marks in their field would be considered the elite. Pareto was willing to judge lawyers, politicians, swindlers, courtesans or chess players. This ranking was to be morally neutral: beyond “good and evil”, to use the language of the time. So one could identify the best thief, whether that was considered a worthy profession or not.

Napoleon was his prime example: whether he was a good or a bad man was irrelevant, as were the policies he might have pursued. Napoleon had undeniable political qualities that, according to Pareto, marked him out as one of the elite. Napoleon is important
because Pareto made a distinction within the elite – everyone with the highest indices within their branch of activity was a member of an elite – separating out the governing from the non-governing elite. The former was what interested him most.

This is not to suggest that the non-governing elite and the non-elite were of no interest to him, but they had a specific and limited role to play, which was the replenishment of the governing elite. For Pareto, this group was the key to understanding society as a whole – for whatever values this elite incarnated would be reflected in society. But he believed that there was an inevitable “physiological” law that stipulated the continuous decline of the elite, thereby making way for a new elite. As he put it in one of his most memorable phrases, “History is the graveyard of elites.”

***

Pareto’s thesis was that elites always rule. There is always the domination of the minority over the majority. And history is just the story of one elite replacing another. This is what he called the “circulation of elites”. When the current elite starts to decline, it is challenged and makes way for another. Pareto thought that this came about in two ways: either through assimilation, the new elite merging with elements of the old, or through revolution, the new elite wiping out the old. He used the metaphor of a river to make his point. Most of the time, the river flows continuously, smoothly incorporating its tributaries, but sometimes, after a storm, it floods and breaks its banks.

Drawing on his Italian predecessor Machiavelli, Pareto identified two types of elite rulers. The first, whom he called the “foxes”, are those who dominate mainly through combinazioni (“combination”): deceit, cunning, manipulation and co-optation. Their rule is characterised by decentralisation, plurality and scepticism, and they are uneasy with the use of force. “Lions”, on the other hand, are more conservative. They emphasise unity, homogeneity, established ways, the established faith, and rule through small, centralised and hierarchical bureaucracies, and they are far more at ease with the use of force than the devious foxes. History is the slow swing of the pendulum from one type of elite to the other, from foxes to lions and back again.

The relevance of Pareto’s theories to the world today is clear. After a period of foxes in power, the lions are back with renewed vigour. Donald Trump, as his behaviour during the US presidential campaign confirmed, is perfectly at ease with the use of intimidation and violence. He claimed that he wants to have a wall built between the United States and Mexico. His mooted economic policies are largely based on protectionism and tariffs. Regardless of his dubious personal ethics – a classic separation between the elite and the people – he stands for the traditional (white) American way of life and religion.

This is in stark contrast to the Obama administration and the Cameron government, both of which, compared to what has come since the votes for Trump and Brexit, were relatively open and liberal. Pareto’s schema goes beyond the left/right divide; the whole point of his Systèmes socialistes was to demonstrate that Marxism, as a secular religion, signalled a return to faith, and thus the return of the lions in politics.

In today’s context, the foxes are the forces of globalisation and liberalism – in the positive sense of developing an open, inter­connected and tolerant world; and in the negative sense of neoliberalism and the dehumanising extension of an economic calculus to all aspects of human life. The lions represent the reaction, centring themselves in the community, to which they may be more attentive, but bringing increased xenophobia, intolerance and conservatism. For Pareto, the lions and foxes are two different types of rule, both with strengths and weaknesses. Yet the elite is always composed of the two elements. The question is: which one dominates at any given time?

What we know of Theresa May’s government suggests that she runs a tight ship. She has a close – and closed – group of confidants, and she keeps a firm grip on the people under her. She is willing to dispense with parliament in her negotiation of Brexit, deeming it within the royal prerogative. Nobody yet knows her plan.

The European Union is a quintessentially foxlike project, based on negotiation, compromise and combination. Its rejection is a victory of the lions over the foxes. The lions are gaining prominence across the Western world, not just in Trumpland and Brexit Britain. Far-right movements have risen by rejecting the EU. It should come as no surprise that many of these movements (including Trump in the US) admire Vladimir Putin, at least for his strongman style.

Asia hasn’t been spared this movement, either. After years of tentative openness in China, at least with the economy, Xi Jinping has declared himself the “core” leader, in the mould of the previous strongmen Mao Zedong and Deng Xiaoping. Japan’s prime minister, Shinzo Abe, has also hardened his stance, and he was the first world leader to meet with President-Elect Donald Trump. Narendra Modi in India and Rodrigo Duterte in the Philippines are in the same mould, the latter coming to power on the back of promising to kill criminals and drug dealers. After the failed coup against him in July, Recep Tayyip Erdogan has also been cracking down on Turkey.

***


In Les systèmes socialistes, Pareto elaborated on how a new elite replaces the old. A, the old elite, would be challenged by B, the new, in alliance with C, the people. B would win the support of C by making promises that, once in power, it wouldn’t keep. If that sounds like the behaviour of most politicians, that is because it probably is. But what Pareto was pointing out was how, in its struggle for power, the new elite politicised groups that were not political before.

What we know of Trump supporters and Brexiteers is that many feel disenfranchised: the turnout in the EU referendum could not have been greater than in the 2015 general election otherwise, and significant numbers of those who voted for Trump had never voted before. There is no reason to think that they, too, won’t be betrayed by the new leaders they helped to bring to power.

In the last years of his life, Pareto offered a commentary on Italy in the 1920s. He denounced the state’s inability to enforce its decisions and the way that Italians spent their time flaunting their ability to break the law and get away with it. He coined the phrase “demagogic plutocracy” to characterise the period, in which the rich ruled behind a façade of democratic politics. He thought this particularly insidious for two reasons: those in power were more interested in siphoning off wealth for their personal ends than encouraging the production of new wealth, and consequently undermined national prosperity (remember Pareto’s training as an economist); and, as the demagogic elites govern through deceit and cunning, they are able to mask their rule for longer periods.

Much has been made of Trump’s “populism”, but the term “demagogic plutocrat” seems particularly apt for him, too: he is a wealthy man who will advance the interests of his small clique to the detriment of the well-being of the nation, all behind the smokescreen of democratic politics.

There are other ways in which Pareto can help us understand our predicament. After all, he coined the 80/20 rule, of which we hear an intensified echo in the idea of “the One Per Cent”. Trump is a fully paid-up member of the One Per Cent, a group that he claims to be defending the 99 Per Cent from (or, perhaps, he is an unpaid-up member, given that what unites the One Per Cent is its reluctance to pay taxes). When we perceive the natural inequality of the distribution of resources as expressed through Pareto’s “power law”, we are intellectually empowered to try to do something about it.

Those writings on 1920s Italy landed Pareto in trouble, as his theory of the circulation of elites predicted that a “demagogic plutocracy”, dominated by foxes, would necessarily make way for a “military plutocracy”, this time led by lions willing to restore the power of the state. In this, he was often considered a defender of Mussolini, and Il Duce certainly tried to make the best of that possibility by making Pareto a senator. Yet there is a difference between prediction and endorsement, and Pareto, who died in 1923, had already been living as a recluse in Céligny in Switzerland for some time – earning him the nickname “the hermit of Céligny” – with only his cats for company, far removed from day-to-day Italian politics. He remained a liberal to his death, content to stay above the fray.

Like all good liberals, Pareto admired Britain above all. As an economist, he had vehemently defended its system of free trade in the face of outraged opposition in Italy. He also advocated British pluralism and tolerance. Liberalism is important here: in proposing to set up new trade barriers and restrict freedom of movement, exacerbated by their more or less blatant xenophobia, Trump and Brexit challenge the values at the heart of the liberal world.

***


What was crucial for Pareto was that new elites would rise and challenge the old. It was through the “circulation of elites” that history moved. Yet the fear today is that history has come to a standstill, that elites have ­become fossilised. Electors are fed up with choosing between the same old candidates, who seem to be proposing the same old thing. No wonder people are willing to try something new.

This fear of the immobility of elites has been expressed before. In 1956, the American sociologist C Wright Mills published The Power Elite. The book has not been out of print since. It is thanks to him that the term was anglicised and took on the pejorative sense it has today. For Mills, Cold War America had come to be dominated by a unified political, commercial and military elite. With the 20th century came the growth of nationwide US corporations, replacing the older, more self-sufficient farmers of the 19th century.

This made it increasingly difficult to ­distinguish between the interests of large US companies and those of the nation as a whole. “What’s good for General Motors,” as the phrase went, “is good for America.” As a result, political and commercial interests were becoming ever more intertwined. One had only to add the Cold War to the mix to see how the military would join such a nexus.

Mills theorised what President Dwight D Eisenhower denounced in his January 1961 farewell speech as the “military-industrial complex” (Eisenhower had wanted to add the word “congressional”, but that was thought to be too risky and was struck out of the speech). For Mills, the circulation of elites – a new elite rising to challenge the old – had come to an end. If there was any circulation at all, it was the ease with which this new power elite moved from one part of the elite to the other: the “revolving door”.

The Cold War is over but there is a similar sense of immobility at present concerning the political elite. Must one be the child or wife of a past US president to run for that office? After Hillary Clinton, will Chelsea run, too? Must one have gone to Eton, or at least Oxford or Cambridge, to reach the cabinet? In France is it Sciences Po and Éna?

The vote for Brexit, Trump and the rise of the far right are, beyond doubt, reactions to this sentiment. And they bear out Pareto’s theses: the new elites have aligned themselves with the people to challenge the old elites. The lions are challenging the foxes. Needless to say, the lions, too, are prototypically elites. Trump is a plutocrat. Boris Johnson, the co-leader of the Leave campaign, is as “establishment” as they come (he is an Old Etonian and an Oxford graduate). Nigel Farage is a public-school-educated, multimillionaire ex-stockbroker. Marine Le Pen is the daughter of Jean-Marie Le Pen. Putin is ex-KGB.

Pareto placed his hopes for the continuing circulation of elites in technological, economic and social developments. He believed that these transformations would give rise to new elites that would challenge the old political ruling class.

We are now living through one of the biggest ever technological revolutions, brought about by the internet. Some have argued that social media tipped the vote in favour of Brexit. Arron Banks’s Leave.EU website relentlessly targeted disgruntled blue-collar workers through social media, using simple, sometimes grotesque anti-immigration messages (as a recent profile of Banks in the New Statesman made clear) that mimicked the strategies of the US hard right.

Trump’s most vocal supporters include the conspiracy theorist Alex Jones, who has found the internet a valuable tool for propagating his ideas. In Poland, Jarosław Kaczynski, the leader of the Law and Justice party, claims that the Russian plane crash in 2010 that killed his twin brother (then the country’s president) was a political assassination, and has accused the Polish prime minister of the time, Donald Tusk, now the president of the European Council, of being “at least morally” responsible. (The official explanation is that the poorly trained pilots crashed the plane in heavy fog.)

It need not be like this. Silicon Valley is a world unto itself, but when some of its members – a new technological elite – start to play a more active role in politics, that might become a catalyst for change. In the UK, it has been the legal, financial and technological sectors that so far have led the pushback against a “hard” Brexit. And we should not forget how the social movements that grew out of Occupy have already been changing the nature of politics in many southern European countries.

The pendulum is swinging back to the lions. In some respects, this might be welcome, because globalisation has left too many behind and they need to be helped. However, Pareto’s lesson was one of moderation. Both lions and foxes have their strengths and weaknesses, and political elites are a combination of the two, with one element dominating temporarily. Pareto, as he did in Italy in the 1920s, would have predicted a return of the lions. But as a liberal, he would have cautioned against xenophobia, protectionism and violence.

If the lions can serve as correctives to the excesses of globalisation, their return is salutary. Yet the circulation of elites is a process more often of amalgamation than replacement. The challenge to liberal politics is to articulate a balance between the values of an open, welcoming society and of one that takes care of its most vulnerable members. Now, as ever, the task is to find the balance between the lions and the foxes. l

Hugo Drochon is the author of “Nietzsche’s Great Politics” (Princeton University Press)

This article first appeared in the 12 January 2017 issue of the New Statesman, Putin's revenge