They said people might be forced to sell properties to pay care costs, but that insurance would help avoid that.

For a one-off lump sum payment, the insurance promised a monthly benefit towards the cost of care, if that became necessary.

Alan Birtles and his wife Maria were among those taking out a policy in 1996, at a price of over £14,000.

In reality
What they did not anticipate was that after ten years, the monthly benefit could be slashed to under half of what it was at the start and that to maintain benefits at the same initial level, they would have to invest thousands more.

In the Birtles' case, the firm wanted an additional £30,000.

Alan Birtles told BBC Radio 4's Money Box:

"The mention of risk is in the literature produced at the time, which we have, but no one really suggested that there could be such savage changes."

Who might claim?
The exact number of people who could make a claim for compensation is unknown, but Tony Levene, a personal finance journalist at the Guardian newspaper, says that two years ago AXA told him there were 14,500 policies in the category recently examined by the Ombudsman.

He said "Some of those 14,500 can certainly apply for compensation, possibly many of them.

"The ones who cannot are those who have already claimed on the policy, so for instance, they have already had long-term care fees paid."

In a statement, AXA said that it strongly disagreed with the Ombudsman's ruling, but that it is bound by the decision and committed to treating customers fairly.

Pre-funded "Lifetime Care" policies are not sold any more, though the brand name continues to be used.

Source; BBC