The Endowment Diary

The Endowment Diary

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

Monday, March 15, 2004

Following on from the Treasury Select Committee report into endowment mortgages (the full report can be viewed here), the Association of British Insurers (ABI) issued a press release in which it stated that it would be taking a number of steps:

  • The ABI Code on Mortgage Endowments will be revised in consultation with the FSA and other stakeholders and re-issued as soon as possible. Recommendations from the Select Committee will be considered as part of this process.


  • The industry is now in the process of sending out a third round of re-projection letters. The ABI will continue to consult on ways of improving all communications with policyholders. The industry is committed to providing the right information to enable customers to take prompt and appropriate action.


  • The industry is also committed to handling complaints fairly and promptly. The ABI will work to make improvements in complaints handling wherever these are needed, in consultation with the FSA and the Financial Ombudsman. We will consider the Committee’s suggestions as part of that process.


  • The ABI will shortly produce guidance for member companies to use when communicating with customers following a complaint and any award of compensation.


  • The industry recognises the need for accurate data and, with the FSA, has already provided a great deal of statistical material to the Select Committee. The ABI will work with the FSA to improve the data further. In particular, we will examine what actions customers have taken as a result of receiving re-projection letters and will update research on the numbers of endowment policies that are still being used to pay off a mortgage.


I welcome steps to improve the situation. However, this problem affects some 6 million people; I don't see that the above steps, other than improving communication, address the fundamental issue.

Namely, endowment polices were not sold as investments but as products; such as cars or TV's.

When a new car or TV breaks down (ie it is not "fit for purpose") you return it to the manufacturer and get it fixed, or a replacement that works.

Endowment policies have been shown to be "not fit for purpose" (they will not pay off the mortage), the 6 million people facing a shortfall need to have a product that works; ie something that will pay off their mortgage.

The insurance industry needs to come up with a solution; otherwise we will see both the collapse of the housing market, and the destruction of the insurance industry, as these policies and their associated shortfalls crystalise.


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