Why is a term in a unit linked life policy, which allows the life company to reset the unit price every day, NOT deemed to be an unfair term under the Regulations?

• A. The fluctuating value of the unit fund's assets is outside the control of the life company.
• B. The regulations do not apply to life assurance policies.
• C. The policyholder had the opportunity at the outset to cool off and cancel the policy without cost.
• D. There is no obligation on the consumer to take out the policy in the first place.

Answer: (A)

The idea being tested is how unfair-terms rules treat a price that can change because of market movements rather than because the insurer decides to change it.

In a unit-linked life policy, the value of the policy depends on the price of units in an underlying fund. That unit price is updated regularly—often daily—so the policy value reflects the current market value of the fund’s assets. The important point is that this price movement comes from changes in the fund’s asset values, not from the life company arbitrarily setting a new price. The life company administers the policy and calculates the unit price, but it does not control or manipulate the fund’s underlying asset values.

Under unfair-terms regulations, a term is unfair if it creates a significant imbalance to the consumer’s detriment or removes transparency; a daily unit-price reset that follows market values, with the method disclosed, does not create an undue advantage for the insurer nor hide a penal price. It simply transfers investment risk to the policyholder and reflects the fund’s actual performance.

The other options aren’t the basis for judging fairness: the fact that regulation applies to life policies, the existence of a cooling-off right, or the consumer’s optional uptake of the policy do not determine whether this pricing term is unfair.