Standard Life's Endowment Debacle
Further to my earlier article about Standard Life's failing Homeplan endowment policy, it seems that the shortfalls on this useless product will be more than previously thought.
It seems that the value of many of the company's Homeplan policies, sold in the early 1990s, could be as much as 12% lower than the amount originally estimated.
It is estimated that the losses could exceed £250M.
Standard Life set its premiums at an artificially low level in order to attract new business.
Standard Life are continuing to reject demands that the company compensate those who face shortfalls.
Well they would, wouldn't they?
A Standard Life are quoted as saying:
"At the time it was launched, Homeplan was an innovative and popular product. The innovative flexibility offered by Homeplan meant it was an immediate success and helped tens of thousands of people onto the property ladder."
Not much comfort to those facing a shortfall now though is it?
As I have repeated, time and time again, what is the point of an endowment policy if it is not going to pay off the mortgage?
People would not have taken these useless policies out if they didn't think that they would work.
In other words, it is the duty of the life assurance companies to underwrite these policies.
Standard Life are keen to blame the independent financial advisers (IFAS) for their mess. They are reportedly saying that the way the product was designed meant that IFAS, who were responsible for selling Homeplan policies at the time, could themselves decide the level of premiums that their clients should pay.
Janet Walford, editor of Money Management, politely says that this is of course bollocks:
"This just does not seem logical to me. Life offices price their policies on complex actuarial assumptions, including underwriting risk, assumed performance and charges. How would an IFA know what to charge? It's madness."
Other life insurers, have realised the error of their ways and have quietly paid compensation to their policyholders in a similar position.
The list of recalcitrants includes; Scottish Widows, Axa, Clerical Medical, Legal & General, Norwich Union and Canada Life.