Further Endowment Confusion
As if endowment policy holders were not confused and worried enough, there is now a report that suggests that some of the warnings of shortfalls may in fact be wrong.
According to Independent Financial Adviser, Alan Lakey of Highclere Financial Services, not all endowments linked to a mortgage, where red or amber warning letters have been issued, will suffer a shortfall.
In a report in Money Management magazine, he warns that some are being sent out where no real risk exists.
"What began as an exercise designed to advise policyholders of the probable maturity value of their plans, and the possible need to take remedial action, has since turned into a major bloodletting,".
Lakey makes the point that the typical reprojection letter appears to show the with profit endowment as off track, and unlikely to hit the relevant target. However, he points out that not all red or amber warning letters are issued on the same basis.
He also notes that the deluge of warnings has led to the creation of a compensation industry, designed to extract money from the hapless policy holders.
To my view the best way for the life assurance industry to restore some of their shattered credibility, and brand value, would be for them to unconditionally underwrite their endowment products.
This would, at a single stroke, eliminate the need for a compensation industry which is living off the misery of policy holders.