The Endowment Diary

The Endowment Diary


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

Tuesday, May 31, 2005

Standard Life Faces £50M Compensation Claims

Standard Life Faces £50M Compensation Claims

Standard Life is facing calls to compensate up to 100,000 mortgage endowment customers, whose charges are much higher than those they were quoted at the time and who are likely to face shortfalls when their policies mature.

The shortfall, for those who took out Homeplan endowments between 1991 and 1994, could be £50M.

Which? made the call for compensation. It seems that up to 11 other companies, which sold policies with similar charging structures to that of Standard Life have been topping up their own clients' investments.

The Financial Services Authority (FSA) is reported to have carried out a review in 2001, that found that a number of companies had been engaged in "pre-contractual mis representation and in some a breach of contractual warranty".

The companies that have admitted they have paid redress to tens of thousands of their customers include Norwich Union and Legal & General.

Which? contend that Standard Life were doing the same thing, and as such should compensate their customers.

Standard Life, which intends to float on the FTSE in 2006/7, has 2.6M with-profits policyholders.

During 1988 and 1994 Lautro, the insurers' watchdog, required its members to give "standard charge projections" in their product literature; based on an industry-wide "average" of how much a product might cost and how much it might pay out, based on presumed level of growth.

The figures turned out to be garbage, in fact they were misleading, like everything else concerned with these endowment products.

The charges levied were higher than those set out, ie the customer was not being given the facts.

The insurers, like the Nazis, argue that they were simply following the regulator's orders!

Standard Life claim that the figures "in no way formed a part of the contract [and] charges could change over the term of the policy".


So what on earth was the point of them then?

Insruance companies used the misleading figures to charge customers. Hence they could pretend to be more competitve than others.

Following talks with the FSA, L&G agreed to top up its policies. Norwich Union says it did the same with 10,000 policies it inherited, when it took over Provident Mutual.

Am I the only person to think that endowment policies were the biggest con trick perpetrated on the British public in the 20th cetury?

To my view, people should be going to jail over this scandal.

Friday, May 27, 2005

Legal and General Have Fine Cut

Legal and General Have Fine Cut

Legal & General Group (L&G) have had their fine for misselling mortgage endowments cut in half in a ruling that criticised the FSA.

L&G will now pay a £575K, the Financial Services and Markets Tribunal said in a decision posted on its Web site.

The original fine was £1.1M.

The ruling said that the insurer was "justified in feeling aggrieved" about the FSA's probe. The watchdog used a report from PricewaterhouseCoopers LLP as the basis of its case when it should have used its own evidence, the ruling said.

L&G was the first life assurance company to appeal against an FSA penalty, this may encourage other companies to challenge the regulator's decisions.

Abbey National was fined £800K by the regulator for mishandling complaints from endowment clients.

Maybe they could employ one of these endowment compensation firms to help them?

Thursday, May 26, 2005

The Shabby Habit

The Shabby Habit

Abbey, the mortgage lender, has been fined £800K by the Financial Services Authority (FSA) for mishandling complaints from its customers over endowment policies.

The FSA also accused Abbey of giving it inaccurate information, while failing to treat its customers fairly.

The FSA said Abbey mishandled about 5,000 complaints between October 2001 and September 2003.

Seemingly Abbey rejected 3,500 complaints that should have in fact been upheld.

The FSA are quoted as saying:

"By putting its own interests ahead of those of its customers with a mortgage endowment complaint, Abbey has singularly failed to treat its customers fairly,"

Abbey said it accepted that its complaint procedures for endowment products were inadequate, and said it was reviewing all complaints from the period and would pay compensation where appropriate.


"Abbey takes this extremely seriously and continues to fully review its complaints handling policies and procedures,".

Abbey said it was re-evaluating about 50,000 complaints made over the past five years, and would be writing to the customers affected by 22 June.

So there you have a nice example of a leading brand name, not treating its customers fairly.

I wonder how many others have acted in the same way?

Monday, May 23, 2005

Standard Life's Secrecy

Standard Life's Secrecy

It seems that some life assurance companies, despite happily trumpeting their endowment payouts a few years ago, now try to keep their hapless policy holders in the dark.

Maybe it is something to do with the fact that these policies are useless?

One firm that has employed this "Orwellian" technique of information management is Standard Life.

Its with-profits policyholders have been receiving annual statements which do not disclose the policy's estimated terminal bonuses.

This information restriction was introduced in 2003. Seemingly, Standard Life believe that too much information will confuse policy holders.

Sorry, but what utter nonsense!

How stupid do they think we are to fall for that excuse?

However, after pressure from financial advisers, Standard Life finally relented; they are now "allowing" their policy holders the opportunity to find out how badly their policy is performing.

Unfortunately this "generous" release of information is not as "generous" as it may seem. The hapless policy holders will only be able to find out about the failings of their policies, if they ask an independent financial adviser.

Standard Life won't give the policy holders the information directly!

It seems that the life assurance industry is still treating us, the hapless policy holders, with contempt.

Wednesday, May 18, 2005

Traded Endowment Policies

Traded Endowment Policies

There is quite an interesting article in The Telegraph, about traded endowment polices (TEPS).

TEPS is the market for buying and selling second endowment polices.

Tuesday, May 10, 2005

Money For Old Rope

Money For Old Rope

The third party complaint handlers, that do the work that endowment complainees are well able to do themselves, managed to rake in £12M in fees last year.

These companies can charge up to 50% of the compensation awarded, just for filling in the same paperwork that the endowment policy holder should complete himself.

This "easy money" scheme is now being put under pressure by the life assurance companies.

Prudential and Norwich Union have stopped paying compensation for endowment mis-selling to unregulated claims-handling firms.

The Prudential will no longer pay compensation directly to these firms. Instead it will send payments to their clients, who can chose whether or not to pay the intermediary. Norwich Union is understood to have taken a similar stand.

Consumers claiming they were mis-sold an endowment policy by the direct sales forces of the Prudential and Norwich Union are instead being urged to go directly to them.

Sunday, May 08, 2005

Endowment Crisis Worsening

Endowment Crisis Worsening

It seems that things are lurching from bad to worse in respect of the performance of the underperforming and useless endowment policies, held by 10 million people in the UK.

It is reported that over 50% of all policies, due to mature this year, will not meet their targets.

Norwich Union said that 19,000, or 58%, of its 33,000 policies will fall short this year.

Standard Life said that over 14,000, or 47%, of its 30,000 policies maturing this year will fall short.

That did not prevent Sir Brian Stewart, chairman of Standard Life, from deluding himself and others last week by saying that endowments were "not all bad"; in fact he was even predicting that they would make a comeback!

Scottish Widows is expecting that 2/3rds will not meet their targets this year.

L&G didn't seem to have any figures, they were not "readily available", how reassuring!

However, Prudential said that none of its 8,376 policies due to mature this year would fall short.

Maybe Prudential has something to teach the other life assurance companies, as to how to manage an endowment fund?

Wednesday, May 04, 2005

Time Bar To Bring Chaos

Time Bar To Bring Chaos

Life assurance companies, who sold underperforming and useless endowment policies to 8 million home owners, are using a number of methods to reduce the claims being made against them for compensation.

One such method is the time bar, whereby claimants are given a deadline to complain or lose their right to do so for ever.

This neat little trick is allowed by the Financial Services Authority (FSA), which said that an insurer may disregard a case for mis-selling three years after a policyholder receives the first "red" letter warning that an endowment has a high risk of not meeting its target.

Needless to say, there is now a deluge of complaints swamping the system.

Many hundreds of thousands of red letters were sent out in early 2003, this means that the deadline is now fast approaching for these people to make a claim.

The deluge has been further exacerbated by the fact that the FSA has told the life assurance companies that they must remind people 6 months before the final deadline, as to their right to make a claim.

Needless to say the life assurance companies and the Ombudsman will be hard pressed to cope with this deluge of complaints.

It has taken me over two years to reach the final stage of my claims which, for the record, were both rejected.

Simply put, the system can't cope!

This problem is exacerbated by the fact that, according to Chief Ombudsman Walter Merricks, 45% of endowment mis-selling cases were upheld by his office after being turned down by life companies.

These companies are reportedly issuing time bars:

Norwich Union - it has 1M endowment policyholders. It began warning of a time bar last October, giving 12 months' notice.

Standard Life - it has 1.2M endowment policyholders. It will write to customers in coming weeks to remind them about its deadline, giving 12 months' notice.

Royal & SunAlliance - it has 450K policyholders. It began reminding policyholders about time-barring last May and gives policyholders six months to complain after a second red warning letter.

Allied Dunbar/Eagle Star - it has 100K policyholders. Policyholders have 12 months to complain after receiving second letter.

Friends Provident - it has 450K policyholders. They have imposed a three-year time bar after policyholders receive their first red letter.

Pearl/NPI/London Life - it has 100K policyholders. Time barring applies three years after the first red letter.

Axa - it has 160K endowment policyholders. It introduced time-barring last month and is writing to customers giving 12 months' notice.

Scottish Widows - it has 165K endowment policyholders. It introduced time-barring in February, giving customers 12 months to complain after receiving their second red letter.

Good luck!

Tuesday, May 03, 2005

Lazy Claims

Lazy Claims

Prudential, one of the UK's biggest sellers of endowment policies, is to refuse to pay "claims handlers".

These companies, which are unregulated, take on customers' mis-selling claims in return for up to 50% of the compensation payouts.

The market for claims handlers has grown rapidly over the past year, as many of the 7m endowment holders realise they may be entitled to compensation.

The simple truth is, people are using these companies because they are lazy.

Make the claim yourself, and save the fee!