The Endowment Diary

The Endowment Diary


The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Wednesday, April 27, 2005

Sir Brian Stewart's Deluded View of Reality

Sir Brian Stewart's Deluded View of Reality

Sir Brain Stewart, chairman of Standard Life, gave an interview recently in which he expressed the desire to bring back the endowment policy.

He went on to say that endowment policies "weren't all bad news", and that they had "worked for a lot of people".

I have to ask, I wonder on which planet Sir Brian is exactly residing?

There are currently 8 million people facing a shortfall on their useless and underperforming endowment policies.

Does he seriously think that this shows that these unloved and useless products work?

Let us remind ourselves of some of the problems with these products:

1 They don't work

2 The commissions being charged by the life assurance companies further reduce their value

3 Many of the life assurance companies mismanaged them, so that their returns are even worse than the norm

4 Many life assurance companies paid out too much in the way of bonuses in the late 80's and early 90's, in order to attract new customers and to prop up their share price.

The result?

The funds were stripped bare of reserves, for the leaner times ahead.

5 Many of the life assurance companies are doing their level best to hinder the compensation process, hardly a sign of integrity or honesty

6 There are very strong rumours that many life assurance companies knew, as early as the late 80's, that the policies would fail. Yet they sat on their hands and did nothing!

The above points, and they are not exhaustive by any means, clearly show that the reputation of the products and the companies that sold them have been irreversibly shot to pieces.

The above should give any level headed individual good cause to think twice before re-inventing these useless products.

Sir Brian please take note.

Tuesday, April 26, 2005

Fines All Round

Fines All Round

The Financial Services Authority (FSA) has issued a warning that up to 10 endowment firms face disciplinary action, for refusing to pay adequate compensation to customers who were mis-sold policies.

It seems that these 10 firms are still flouting FSA guidelines, which were drawn up 4 years ago, on the handling of endowment complaints.

The FSA is quoted as saying:

"In January we warned the small number of firms that were still not handling mortgage endowment complaints adequately to improve the standard of their work or risk enforcement action. Intensive work is ongoing and the time for these recalcitrant firms to lift their game is certainly short."

It is reported that Abbey National is on the list.

The FSA has already fined Friends Provident £675K and Allied Dunbar £725K for mishandling complaints, in the last 18 months.

Is it any wonder that people have lost confidence in the providers of these worthless products?

Monday, April 25, 2005

Insurers Bite Back

Insurers Bite Back

Following on from the drubbing that the Financial Services authority (FSA) received from the Financial Services and Markets Tribunal, in its case against L&G, insurers have been quick off the mark to bite back.

Insurers have demanded that the FSA "improve" its investigation and enforcement procedures.

The Association of British Insurers (ABI) have accused FSA staff of building cases against insurers, to send a tough message to the market.

The FSA is reviewing its investigation procedures, after Legal & General had a fine for mis-selling cut on appeal.

The FSA said it would "consider" the ABI's views and respond in July.

The ABI said that the FSA's Regulatory Decisions Committee (RDC), the body which oversees enforcement, needed to be more open with firms under investigation.

The ABI said:

"There is a perception that FSA enforcement staff are often intent on delivering a particular message to the market and seek to build a case... to support that message..".

Needless to say, whatever the outcome of this spat, it will not be benefit the holders of worthless endowment policies.

Wednesday, April 20, 2005

News From The Pru

News From The Pru

The Life insurer Prudential reported an 11% increase in first-quarter sales today.

This is in line with forecasts, and hence allowed it to reiterate its positive outlook for its organisations based in Asia, the United States and Britain.

Revenues for the first three months of the year were £478M vs £433M in 2004.

The consensus forecast sales had been £477M.

Will this help those with endowment policies?


Wednesday, April 13, 2005

Abbey To Be Fined

Abbey To Be Fined

It seems that Abbey, owned by Banco Santander, is to be fined by the Financial Services Authority (FSA) over its endowment mortgage complaint procedures.

The FSA are now punishing providers for not only mis-selling endowment products, but also for failing to handle the complaints properly.

There have been two firms fined to date for mishandling complaints, Allied Dunbar and Friends Provident, both of which were fined £700K.

Despite warnings from the FSA it seems that a number of providers are content to ignore their duty to investors.

In other words, some life assurance companies don't "give a stuff" about the policy holders.

Complaints to the Financial Services Ombudsman are expected to pass 65,000 in the year to April 2005, and more than 700,000 policies are surrendered short of maturity each year.

Sunday, April 10, 2005

The Gestation Period of An elephant

The Gestation Period of An Elephant

Taking, what I can only describe as, the gestation period of an elephant; my "professional" claims handling firm has finally come back to me on the complaint that I raised around a year ago, in relation to the mis-selling of my first endowment policy.

They state that they have received notification from my policy provider that it was sold to me by an IFA, they knew this already, and "due to the current rate of success in this type of complaint (it was sold pre 1988) we do not feel that we can help you".

This response, in a nut shell, shows you why complaint handling firms are in general a waste of space.

In effect the service that they are really only prepared to offer is that of filling in paperwork, that you could well do yourself, and raise the matter with the life assurance provider and the FOS.

They are then happy to take 30% of any compensation that you receive, for their "endevours" on your behalf.

The bottom line is that you can save yourself this 30% fee, by doing precisely the same work for yourself.

The only way that they can conceivably add value is where you have already taken these actions yourself, and got nowhere, just as I did.

Unfortunately, as we can see, they are not prepared to help.

I am of course more than happy to hear from any complaint handling company that would actually like to do some real work to earn its fee.