Red letter day for endowment shortfalls

Tens of thousands of Standard Life mortgage endowment holders discovered last week that the clock is ticking if they want to lodge a mis-selling complaint.

The Edinburgh-based insurer has started sending "time-bar" letters to its 1.3 million endowment policyholders warning them that they have just 12 months to register a mis-selling claim. Those whose complaints are successful will receive compensation for mortgage shortfalls.

Standard Life is not alone. On Thursday Barclays decided to jump on the time-bar bandwagon when it announced the introduction of a deadline within which its 130,000 customers can make a complaint about the sale of Barclays Life and Woolwich Life mortgage endowment policies. Unlike Standard Life it is giving customers only six months to complain.

It reckons it has done more than enough to encourage customers to take action, having issued letters to customers every year telling them whether their mortgage endowment policy remains on track. "This exceeds the Association of British Insurers' requirements," Barclays says.

Tomorrow Lloyds TSB will start to mail 300,000 time-bar letters to Scottish Widows policyholders, while Norwich Union will begin posting letters to its 1m endowment customers in the next few days.

Many insurers now routinely impose time bars on endowment mis-selling claims. These give policyholders just three years to complain from the date they were first warned that their endowment policy was no longer on track to pay off their home loan.

However, last year the Financial Services Authority introduced new guidelines forcing insurers to give at least six months notice of any impending cut-off date. It is this new rule that has triggered the latest mailing onslaught.
The first warnings were contained in the so-called "traffic-light" re-projection letters, with a red letter warning homeowners that their endowment would not cover their mortgage. Eighty-six per cent of Standard Life mortgage endowment customers are in the "red", Lloyds TSB is sending red letters to 87 per cent of its policyholders, while Norwich Union has 84 per cent of homeowners facing a similar shortfall.

Not all insurers impose these time bars – Prudential and Legal & General are two big insurers that have yet to go down this route. But Standard Life, Norwich Union, Royal & SunAlliance and Friends Provident all announced last year that they were setting cut-off dates for policyholder complaints.

This decision has provoked controversy. Two endowment claims handlers, Endowment Justice and Brunel Franklin, argue that it is "grossly unfair". Brunel Franklin has fired off a letter John Tiner, the chief executive of the FSA, urging him to stop providers from imposing time bars. Its main gripe is that people are complaining because they have been mis-sold – not simply because there is a shortfall.

Full story http://www.money.telegraph.co.uk/

Feb 23, 2005
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