Endowment complaint levels

The Treasury Select Committee reported the FSA saying that in the past year 216,000 complaints were made to companies about endowment mortgages.

In total the FSA’s figures suggest that the number of complaints relative to the number of policies remains well below 10%.

This conclusion was reinforced when we asked the five major insurance companies that gave us evidence what percentage of the endowment policies on their books had so far lodged complaints. The figures ranged from 10% in the case of Standard Life to 2.0% in the case of Scottish Amicable, but across the five companies 5.7% of the 4.68 million policies had prompted complaints.

This figure needs to be compared with the evidence ... that between 50% and 60% of endowment policies were mis-sold. Mr Harvey, Chief Executive of Aviva, told us that he did “not agree with the view that [the percentage of complaints] is a tiny proportion of those who have a potential claim.” While not all mis-sold policies will give rise to a compensatable loss, with around 80% of endowment policies showing a shortfall it nevertheless seems fair to expect many more policyholders to be complaining if they were fully aware of their rights and the complaints process.

The available evidence suggests that 80% of endowment mortgage policies are now showing a shortfall and that 50%–60% of holders of such policies believe they were probably mis-sold.

However, we note that in many cases there is a lack of any contemporaneous record of what the sales person said to the client and vice versa; this will make it difficult to determine reliably what a client’s attitude to risk was at the time the contract was entered into.

Against this background, under 6% of policyholders have so far complained. Urgent action is needed to ensure that the complaints process is better understood and more accessible to policyholders.

Endowment compensation

The FSA told us that so far its interventions had produced “£5.2 million in fines and involves approximately £227 million in compensation to around 183,000 consumers. In addition, through our intervention on a non-disciplinary basis, 19 other firms have delivered approximately £446.5 million in compensation for a further 253,500 consumers.”

In addition, the FSA told us that a “further £200 million has been paid by firms as a result of individual complaints made by consumers. We expect this figure to rise significantly in the forthcoming period.”

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