Guardian Assurance Fined
Guardian Assurance and its associated company Guardian Linked Life have been fined £750K by the Financail Services Authority (FSA) for mishandling endowment complaints.
This is the fourth time that the FSA has fined an insurance company for mishandling complaints.
The FSA said that Guardian's complaints procedure had "serious systemic flaws".
As a result, 5,600 customers had their complaints wrongly rejected, and thus could have lost out on compensation.
Margaret Cole, the FSA's Director of Enforcement, said:
"Guardian failed to treat its customers fairly by exposing those with a valid complaint to the risk that their complaint could be rejected inappropriately.
Consequently, they may not have received the compensation to which they were entitled.
These failings exposed a high number of consumers to potential financial loss."
The FSA role of shame:
-Friends Provident, December 2003, fined £675K
-Dunbar Assurance, March 2004, fined £725K
-Abbey National, May 2005, fined £800K
Between 1988 and 1995 Guardian sold 233,000 endowment policies, before it stopped marketing them.
It received nearly 20,000 complaints from April 2000 to the end of 2004.
At one stage it was rejecting more than three quarters of all its complaints.
I wonder how many other insurance companies are mishandling complaints?
Friday, January 13, 2006
Tuesday, January 10, 2006
FSA Tries To Clean Up Its Act
FSA Tries To Clean Up Its Act
The Financial Services Authority (FSA), stung by recent criticism of its poor litigation record, is now trying to clean up its act.
The FSA has created a new unit to 'stress test' enforcement cases, before they are taken to formal disciplinary review.
The new litigation and legal review unit aims to review the evidence and recommendations that the FSA's enforcement division puts before the Regulatory Decisions Committee (RDC), which makes the FSA's disciplinary decisions.
The change is not receiving unanimous support. One City lawyer warned that the unit could potentially "result in a bottleneck", and drastically slow down the disciplinary process.
The FSA's came under strong criticism during 2005, most notably after the rejection of its endowment misselling case against Legal & General by the Financial Services and Markets Tribunal.
FSA director of enforcement Margaret Cole said it was hoped that the new unit would result in more successful rulings before the RDC, by ensuring that cases were "effectively stress-tested before going before the RDC".
We shall see.
The most effective change that the FSA should make, would be to compel the life assurance companies to underwrite their useless and underperforming endowment policies.
The Financial Services Authority (FSA), stung by recent criticism of its poor litigation record, is now trying to clean up its act.
The FSA has created a new unit to 'stress test' enforcement cases, before they are taken to formal disciplinary review.
The new litigation and legal review unit aims to review the evidence and recommendations that the FSA's enforcement division puts before the Regulatory Decisions Committee (RDC), which makes the FSA's disciplinary decisions.
The change is not receiving unanimous support. One City lawyer warned that the unit could potentially "result in a bottleneck", and drastically slow down the disciplinary process.
The FSA's came under strong criticism during 2005, most notably after the rejection of its endowment misselling case against Legal & General by the Financial Services and Markets Tribunal.
FSA director of enforcement Margaret Cole said it was hoped that the new unit would result in more successful rulings before the RDC, by ensuring that cases were "effectively stress-tested before going before the RDC".
We shall see.
The most effective change that the FSA should make, would be to compel the life assurance companies to underwrite their useless and underperforming endowment policies.
Wednesday, December 14, 2005
The Pain of Mis-selling
The Pain of Mis-selling
It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.
Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.
Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.
In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.
Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.
Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.
How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?
Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.
What goes around, comes around!
It seems that it is not just the hapless owners of underperforming and useless endowment polices that are suffering, sometimes a little of the pain and misery caused by these useless products is spread around.
Mis-selling endowment policies has cost Lloyds TSB has £150M this year, that is in addition to the £360M already paid out in recent years for compensation claims over a variety of financial products.
Lloyds TSB is still reviewing the total cost of compensating its customers, but admitted that this could lead to an increased provision in the accounts.
In a trading update before its 2005 figures, Lloyds TSB revealed that it would also need to set aside another £150M to cover the cost on insurance policies of people living longer.
Lloyds TSB is not the only bank facing claims for mis-selling of endowment policies. HBOS has had to put aside £260M over the last two years.
Lloyds TSB warned that customers were continuing to have difficulty repaying their debts.
How can people be expected to repay their mortgage, if the policy that they bought to repay the mortgage doesn't work?
Analysts at Dresdner Kleinwort Wasserstein have described Lloyds as "strategically challenged". There is now speculation that it may be a takeover target.
What goes around, comes around!
Thursday, December 08, 2005
Backing For Scottish Endowment Compensation
Backing For Scottish Endowment Compensation
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Opposition parties in Scotland have publicly committed their support to the campaign to secure compensation for thousands of Scottish homeowners, who were mis-sold endowment mortgages by their solicitor.
Charles Kennedy, Liberal Democrat leader, and Alex Salmond, SNP leader, urged the government to close a legal loophole which leaves many Scots facing huge shortfalls.
People who bought a policy through a lawyer in Scotland, before December 2001, do not qualify for a settlement under the Financial Services and Markets Act.
Mr Kennedy said:
"It is an absurd situation if people in Scotland don't have the same protection against endowment mis-selling as homeowners in England and Wales. It must be put right immediately."
Friday, December 02, 2005
Scots May Get Compensation
Scots May Get Compensation
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
Scots who claim they have been mis-sold endowment mortgages, may finally be compensated.
They have taken their dispute to Westminster, where MPs have signed a Commons motion demanding an end to a loophole which currently means that Scots who bought policies through lawyers are not due any settlements.
The House of Commons Treasury Select Committee is also calling for urgent action.
Scots who bought endowment policies through solicitors before December 1 2001, do not qualify for compensation from the Financial Ombudsman Service.
This was the date when the Financial Services and Markets Act came into effect.
This also means Scots who were mis-sold endowment policies by lawyers before the 2001 deadline, can only receive £1K maximum payout set by the Law Society.
Thursday, November 24, 2005
Never Ending Debt
Never Ending Debt
According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.
Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.
It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.
According to the Office for National Statistics, approximately 600,000 people over 65 still have a mortgage. This figure means that 10% of pensioners are still paying mortgages.
Apparently many pensioners are remortgaging, at expensive rates, because of a shortfall on their endowment mortgages.
It seems that a lifetime of debt is what many owners of these useless policies have to look forward to.
Wednesday, November 16, 2005
Compensation Shortfall
Compensation Shortfall
The Financial Services Compensation Scheme (FSCS) has said that its budget of 7000 endowment claims for 2005 is massively below reality, the actual level in fact is more likely to be 22000.
This means that it will face a shortfall in 2006.
The compensation scheme is funded through contributions from financial services companies, and is available to those who have endowment policies sold to them by IFA's that have subsequently gone bust.
This is the second year in succession that the scheme has underestimated the number of claims. In 2004 it had to ask the investment industry for an extra £15M, to cover compensation above the original budget of £33M.
It seems that not all the "collapses" of IFA's are as clear cut, as one might expect in an industry that is meant to domonstrate probity and integrity.
Berry Birch & Noble Financial Services ceased trading last year, and its assets were transferred to the almost identically named Berry Birch & Noble Financial Planning.
The firm's liabilities, including any compensation due to investors mis-sold products such as high risk income bonds, have been left with the defunct firm. This means that the FSCS have to pick up the "tab".
Loretta Minghella, FSCS chief executive, said:
"New endowment claims have been received at unprecedented levels, way beyond our expectations. As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."
I don't know why they are so surprised at the level of claims, these endowment products simply do not work.
The best solution would be for the life assurance industry to underwrite these worthless, useless, products.
The Financial Services Compensation Scheme (FSCS) has said that its budget of 7000 endowment claims for 2005 is massively below reality, the actual level in fact is more likely to be 22000.
This means that it will face a shortfall in 2006.
The compensation scheme is funded through contributions from financial services companies, and is available to those who have endowment policies sold to them by IFA's that have subsequently gone bust.
This is the second year in succession that the scheme has underestimated the number of claims. In 2004 it had to ask the investment industry for an extra £15M, to cover compensation above the original budget of £33M.
It seems that not all the "collapses" of IFA's are as clear cut, as one might expect in an industry that is meant to domonstrate probity and integrity.
Berry Birch & Noble Financial Services ceased trading last year, and its assets were transferred to the almost identically named Berry Birch & Noble Financial Planning.
The firm's liabilities, including any compensation due to investors mis-sold products such as high risk income bonds, have been left with the defunct firm. This means that the FSCS have to pick up the "tab".
Loretta Minghella, FSCS chief executive, said:
"New endowment claims have been received at unprecedented levels, way beyond our expectations. As ever the challenge for FSCS is to strike the right balance between providing an efficient and timely service to consumers with our responsibility to the industry to keep costs under control."
I don't know why they are so surprised at the level of claims, these endowment products simply do not work.
The best solution would be for the life assurance industry to underwrite these worthless, useless, products.
Monday, November 14, 2005
The Price of Justice
The Price of Justice
It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.
Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.
Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.
Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.
Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.
It is reported that Paul Flynn, a Labour MP, has agreed to pay approximately £36K by way of settlement of a libel action brought against him by Endowment Justice.
Endowment Justice are a complaints handling firm, that specialise in endowment mortgages.
Mr Flynn's solicitor said that the MP was retracting allegations he had made against Endowment Justice.
Endowment Justice launched legal proceedings against Mr Flynn this year, after he criticised the complaints handling firms that work for endowment mis-selling victims.
Although Endowment Justice had held talks in the past with Mr Flynn over its concerns about bad practices at several complaints handling firms, Flynn then went on to name Endowment Justice in accusations he made about the whole sector.
Monday, November 07, 2005
98% To Experience Endowment Shortfall
98% To Experience Endowment Shortfall
The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.
He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.
He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".
98%?
That's a lot of very unhappy people.
Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?
The Times reports that Ned Cazalet, of Cazalet Consulting the independent analyst, predicts that about 98% of the 2.7M households with endowment mortgages will suffer a shortfall.
He believes that many companies are still understating the size of the problem, because they are basing projections on an "unrealistic" 6% growth rate.
He notes that the life assurance companies "make a thing of the fact that many policies maturing today are on target, but these policies are only a handful of the total..".
98%?
That's a lot of very unhappy people.
Surely that's a large enough number of people, to make it worthwhile to get together in a class action against the life assurance companies?
Tuesday, November 01, 2005
Standard Life Demutualisation
Standard Life Demutualisation
Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.
It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.
Those of you with endowment policies in Standard Life, may find this article in This Is Money to be of interest.
It explains the effects that the proposed demutualisation of Standard Life may have on endowment policies.
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