The List of Shame
Congratulations to Money Management magazine for naming and shaming the insurance companies and endowment providers, who tired to hoodwink their customers, that the Financial Services Authority (FSA) tried to cover up.
When these shamed companies sold their products to their unsuspecting customers they used industry standard charges laid down by Lautro, the industry regulator at the time, to show the returns etc that would be expected on the policies..
However, their actual charges levied by these shamed companies were often much higher sometimes double the Lautro rate. Needless to say, they chose not to tell their customers this. This shoddy practice took place between 1988 and 1995.
It is estimated that around 200,000 policyholders, with low-cost mortgage endowments, could be owed up to £200m by these companies as a result of this practice.
The list of shame includes:
-Standard Life
-Pearl
-Axa
-Scottish Widows
-Prudential, owned Scottish Amicable
-Scottish Mutual
-Scottish Provident, now owned by Resolution.
Companies were taking up to 0.75% a year in charges from the fund. However, their customers were given the impression that the charge was only 0.3% (ie less than half).
Some companies, including Axa, Legal & General and Clerical Medical, have set aside money to make good these shortfalls. Others, such as Standard Life, have so far refused.
Shoddy practice by a very shoddy industry, and a disgraceful attempted cover up by a toothless partisan FSA.
It is hardly surprising that the British consumer has lost all faith in the financial services industry.
Showing posts with label Clerical Medical. Show all posts
Showing posts with label Clerical Medical. Show all posts
Friday, August 24, 2007
Monday, May 14, 2007
The List of Shame
The List of Shame
Those of us who are unfortunate enough to have bought an endowment policy in the late 1980's and early 1990's may find an analysis produced by Money Management to be of interest.
It shows that, despite rising stock markets, payouts to policy holder continue to fall in most cases.
They compared policies maturing in 2007 with those maturing in 2006, for a male non smoker investing £50 from the outset over 25 years. The variation in returns was staggering. The average growth rate was 8.5%.
The top performer was Reliance Mutual with a return of 13.6%. However, the laggards showing below average returns were as follows (%):
Norwich Union - 8.3
Canada Life - 8.3
CGU - 8.2
General Accident - 8.2
Brittanic Assurance - 8.2
Clerical Medical - 7.9
Legal&General - 7.7
Scottish Widows - 7.3
Scottish Life - 7.2
Standard Mutual - 6.8
Scottish Mutual - 6.8
Friends Provident - 6.7
Equitable Life - 6.5
Eagle Star - 5.7
Well done!
The key question that policy holders should be asking of their endowment company, if they are in one of the under performing ones, is why are your returns worse than others?
Does that not reflect badly on the quality of management, and on the charges levied against the fund?
Those of us who are unfortunate enough to have bought an endowment policy in the late 1980's and early 1990's may find an analysis produced by Money Management to be of interest.
It shows that, despite rising stock markets, payouts to policy holder continue to fall in most cases.
They compared policies maturing in 2007 with those maturing in 2006, for a male non smoker investing £50 from the outset over 25 years. The variation in returns was staggering. The average growth rate was 8.5%.
The top performer was Reliance Mutual with a return of 13.6%. However, the laggards showing below average returns were as follows (%):
Norwich Union - 8.3
Canada Life - 8.3
CGU - 8.2
General Accident - 8.2
Brittanic Assurance - 8.2
Clerical Medical - 7.9
Legal&General - 7.7
Scottish Widows - 7.3
Scottish Life - 7.2
Standard Mutual - 6.8
Scottish Mutual - 6.8
Friends Provident - 6.7
Equitable Life - 6.5
Eagle Star - 5.7
Well done!
The key question that policy holders should be asking of their endowment company, if they are in one of the under performing ones, is why are your returns worse than others?
Does that not reflect badly on the quality of management, and on the charges levied against the fund?
Monday, June 06, 2005
Standards Life's Endowment Debacle
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.
The reason?
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.
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.
The reason?
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.
Wednesday, February 09, 2005
Terminal Decline
Terminal Decline
The Scotsman writes that endowment policies are in "terminal decline". They cite the recent cuts in bonuses, announced by the larger life assurance companies; quote:
"..Standard Life and Clerical Medical were this week the latest in a string of assurors to serve up unpalatable news to policyholders: the former slashed bonuses almost across the board, despite a 10.4 per cent pre-tax return on its with-profits fund, while the latter's investors fared little better, although its fund was up 9.9 per cent.
That followed grim tidings from Scottish Widows, a subsidiary of Lloyds TSB, and Aviva - owned Norwich Union. Like Standard Life, Widows cut final payouts for the sixth time in three years, following a 10.5 per cent lift in its fund.
Earlier, Norwich Union, the UK's largest insurer, became the first this year to deliver a stinging blow, slashing payouts by up to 11.5 per cent when its four funds overall enjoyed the same rise.
Prudential's bonus declaration is over a fortnight away, while Abbey National is not due to make its announcement until March. The Pru has claimed it will increase or maintain total bonus rates on all unitised with-profits and offer good year-on-year increases in value..".
The bottom line to this is that we, the holders of these lousy underperforming polices, are screwed.
The Scotsman writes that endowment policies are in "terminal decline". They cite the recent cuts in bonuses, announced by the larger life assurance companies; quote:
"..Standard Life and Clerical Medical were this week the latest in a string of assurors to serve up unpalatable news to policyholders: the former slashed bonuses almost across the board, despite a 10.4 per cent pre-tax return on its with-profits fund, while the latter's investors fared little better, although its fund was up 9.9 per cent.
That followed grim tidings from Scottish Widows, a subsidiary of Lloyds TSB, and Aviva - owned Norwich Union. Like Standard Life, Widows cut final payouts for the sixth time in three years, following a 10.5 per cent lift in its fund.
Earlier, Norwich Union, the UK's largest insurer, became the first this year to deliver a stinging blow, slashing payouts by up to 11.5 per cent when its four funds overall enjoyed the same rise.
Prudential's bonus declaration is over a fortnight away, while Abbey National is not due to make its announcement until March. The Pru has claimed it will increase or maintain total bonus rates on all unitised with-profits and offer good year-on-year increases in value..".
The bottom line to this is that we, the holders of these lousy underperforming polices, are screwed.
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