Warning over endowment complaints

The Financial Services Authority (FSA) believes some firms are not treating customer complaints fairly and thousands of endowment holders, who believe they were wrongly advised, are currently pursuing mis-selling claims.

The FSA's warning follows concerns raised to it by the Financial Ombudsman Service, a financial arbitration scheme, over how firms are handling complaints. The ombudsman has told the FSA that it is receiving a rising numbers of complaints against firms.

It is also upholding a high level of complaints against some firms, "suggesting that these firms may not be handling complaints properly". In the worst cases, it said that some firms were refusing to comply with awards made by the ombudsman until threatened with court action.

Endowment Facts

Eight out of 10 endowment mortgage holders are facing a shortfall
Average shortfall across policies is £5,500, adding up to £40bn overall
Six in 10 policyholders could have been victims of mis-selling
2013 will be the peak year for endowments reaching maturity
Just 5% of new mortgages taken out in 2002 were endowments

In a letter to industry chief executives, Clive Briault, FSA managing director, warns firms not to shirk away from their responsibilities and offload cases onto the ombudsman.
"Firms should not manage their own caseloads by allowing an excessive number of complaints to flow through to the Financial Ombudsman Service," he said.

Mr Briault also said the FSA's research had identified "inconsistencies in some firms' decision-making". "Such behaviour is not in keeping with the spirit or letter of our requirements," he said.

Most recently, in December 2003, it fined Friends Provident £675,000 and, in March 2004, it fined Allied Dunbar £725,000.

But Which?, formerly the Consumers' Association, believes the FSA should change its approach to endowment mis-selling.
Which? wants the FSA to order a wholesale re-investigation of all rejected complaints to ensure people have been dealt with fairly.

"The FSA must continue to take these bad apples to task by immediately naming and shaming them, and then implementing significant fines where rules have been broken," Louise Hanson, head of campaigns at Which?

Full story : http://news.bbc.co.uk/1/hi/business/4145775.stm

Jan 4, 2005
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Lloyds TSB plc has allocated a further £110 million to compensate endowment policyholders. This is in addition to the £250 million which was set aside to pay compensation in 2003.

Lloyds TSB plc to impose a time bar on endowment policyholders that were mis-sold their policies in order to prevent them from making a claim

Reported in the Daily Telegraph December 2004

Mortgage endowment policyholders are collectively going to face a shortfall estimated at £ 40 billion

The average amount of compensation where a policy has been mis-sold is estimated to be £3,000
Source ABI (The Association of British Insurers) 2006