The Reckoning
As Neasa MacErlean writes in The Observer:
"One of the biggest financial scandals of the past 30 years reaches its climax in 2008 when thousands of endowment policies linked to mortgages start to mature. Endowment mortgages were sold in massive numbers from April 1983 and - since most home loans were set for 25 years - will start coming up for repayment by borrowers from April 2008."
Norwich Union describes 2008 as a peak year in terms of the numbers of endowments it has maturing, estimated to be about 90,000.
She offers some advice to those hapless endowment holders facing shortfalls, estimated to be on average between £10K to £35K, on their policies.
However, the only effective solution to this shameful scandal is for the life assurance companies to underwrite these useless underperforming products.
Showing posts with label claims firms. Show all posts
Showing posts with label claims firms. Show all posts
Friday, January 04, 2008
Friday, October 19, 2007
Repayments
Repayments
There appears to be something of a sting in the tail for some long suffering endowment holders who make a successful mis-selling claim through the Financial Ombudsman Service (FOS), and then find that in fact their endowment policy recovers to leave no shortfall.
In the event that happens, the policy holder may have to repay money to their adviser.
A county court in Wales has ordered the claimant to pay back the sum of £1689, if their endowment manages to hit its original target of £13,000 in May 2010.
In September the FOS ordered retired independent financial adviser Eifion Hughes to pay the compensation to his client. However, Hughes refused to pay stating that the ombudsman had come to the wrong decision.
In an unpleasant irony, Hughes was then taken to court by the client who was being advised by an IFA acting as a claim-chaser.
The judge has upheld the complaint, but stipulated that the money would have to be paid back to the adviser on the policy's maturity if it reached above its expected value.
Hughes is quoted in The Herald as saying:
"At last this appears to be a victory for common sense. If the client loses out and it is the adviser's fault, he should pay out, but if there is no loss and perhaps even an extra gain, why should the adviser have to offer them money? Natural justice has won the day."
Evan Owen, chairman of the IFA Defence Union, said:
"It is refreshing to see the people who administer the law of the land reaching such conclusions. Let us hope that Lord Hunt takes this view on board as part of his review."
Quite right too!
As to whether many endowment polices will actually meet their targets, is open to conjecture. I can personally state that the two polices I hold with legal & General look very unlikely to get anywhere near their target.
It is also reported that almost 90% of Standard Life mortgage endowments are still highly unlikely to meet their targets.
However, I would also note that to some extent the IFA's (unless they were proven to be negligent) should not be the target of policy holders' wrath.
These lousy products were sold in the same manner as cars, TV's and other consumer products. Their sole purpose being to pay off the mortgage.
As a result of hidden/excess charges, lousy management and misrepresentation of the prospects by the funds themselves, they are massively underperfomring.
They are not fit for purpose.
It should not be the IFA's that are targeted, but the fund managers. The only solution to this shameful scandal is for the fund mangers to underwrite their useless, badly managed, products.
There appears to be something of a sting in the tail for some long suffering endowment holders who make a successful mis-selling claim through the Financial Ombudsman Service (FOS), and then find that in fact their endowment policy recovers to leave no shortfall.
In the event that happens, the policy holder may have to repay money to their adviser.
A county court in Wales has ordered the claimant to pay back the sum of £1689, if their endowment manages to hit its original target of £13,000 in May 2010.
In September the FOS ordered retired independent financial adviser Eifion Hughes to pay the compensation to his client. However, Hughes refused to pay stating that the ombudsman had come to the wrong decision.
In an unpleasant irony, Hughes was then taken to court by the client who was being advised by an IFA acting as a claim-chaser.
The judge has upheld the complaint, but stipulated that the money would have to be paid back to the adviser on the policy's maturity if it reached above its expected value.
Hughes is quoted in The Herald as saying:
"At last this appears to be a victory for common sense. If the client loses out and it is the adviser's fault, he should pay out, but if there is no loss and perhaps even an extra gain, why should the adviser have to offer them money? Natural justice has won the day."
Evan Owen, chairman of the IFA Defence Union, said:
"It is refreshing to see the people who administer the law of the land reaching such conclusions. Let us hope that Lord Hunt takes this view on board as part of his review."
Quite right too!
As to whether many endowment polices will actually meet their targets, is open to conjecture. I can personally state that the two polices I hold with legal & General look very unlikely to get anywhere near their target.
It is also reported that almost 90% of Standard Life mortgage endowments are still highly unlikely to meet their targets.
However, I would also note that to some extent the IFA's (unless they were proven to be negligent) should not be the target of policy holders' wrath.
These lousy products were sold in the same manner as cars, TV's and other consumer products. Their sole purpose being to pay off the mortgage.
As a result of hidden/excess charges, lousy management and misrepresentation of the prospects by the funds themselves, they are massively underperfomring.
They are not fit for purpose.
It should not be the IFA's that are targeted, but the fund managers. The only solution to this shameful scandal is for the fund mangers to underwrite their useless, badly managed, products.
Tuesday, August 07, 2007
Time Bar Challenge
Time Bar Challenge
BrunelFranklin.com and CPH Financial Service have launched a legal challenge against the practice of endowment providers using a timebar to prevent claims being made for underperforming endowment policies.
Brunel and CPH have made a request for a judicial review, to establish if setting a time frame in which a complaint must be registered is fair and legal.
At present, endowment providers can "time bar" a complaint if the consumer makes the claim more than three years after they first receive a letter warning them of a "high risk" of shortfall on their policy.
Firms must also send out a "red letter" six months before the deadline, informing the consumer of the impending date.
It is estimated that the number of people affected by time barring exceeds 2 million.
Ian Allison, corporate relations director at BrunelFranklin.com, said:
"This is a very exciting day for us all.
We have been aggressively lobbying against time bars for three years and we are now reaching a point where there is a serious chance of a positive outcome for all those people who have been time barred.
We have always believed the time bar process and the communications with consumers was wrong and fundamentally flawed.
Many customers never received shortfall letters. For those that did, the letters never mentioned the issue of a mis-sale.
The use of these letters therefore to legally start the time bar clock ticking is a disgrace. This was never fair and we believe a judicial review will find in favour of the consumer."
I wish them well with their challenge. The fact remains that the insurance companies will do whatever they can, to avoid taking responsibility for the endowment mortage scandal.
BrunelFranklin.com and CPH Financial Service have launched a legal challenge against the practice of endowment providers using a timebar to prevent claims being made for underperforming endowment policies.
Brunel and CPH have made a request for a judicial review, to establish if setting a time frame in which a complaint must be registered is fair and legal.
At present, endowment providers can "time bar" a complaint if the consumer makes the claim more than three years after they first receive a letter warning them of a "high risk" of shortfall on their policy.
Firms must also send out a "red letter" six months before the deadline, informing the consumer of the impending date.
It is estimated that the number of people affected by time barring exceeds 2 million.
Ian Allison, corporate relations director at BrunelFranklin.com, said:
"This is a very exciting day for us all.
We have been aggressively lobbying against time bars for three years and we are now reaching a point where there is a serious chance of a positive outcome for all those people who have been time barred.
We have always believed the time bar process and the communications with consumers was wrong and fundamentally flawed.
Many customers never received shortfall letters. For those that did, the letters never mentioned the issue of a mis-sale.
The use of these letters therefore to legally start the time bar clock ticking is a disgrace. This was never fair and we believe a judicial review will find in favour of the consumer."
I wish them well with their challenge. The fact remains that the insurance companies will do whatever they can, to avoid taking responsibility for the endowment mortage scandal.
Monday, July 23, 2007
Stating The Obvious
Stating The Obvious
Congratulations to Baronworth Investment Services, who have stated the obvious; namely that a "degree of disillusionment" among endowment policy holders is a key factor in the decision to sell or cash-in.
Colin Jackson, director of Baronworth Investment Services, sates:
"There's a lot of adverse press about endowment policies, some of it quite justified."
No kidding!
Congratulations to Baronworth Investment Services, who have stated the obvious; namely that a "degree of disillusionment" among endowment policy holders is a key factor in the decision to sell or cash-in.
Colin Jackson, director of Baronworth Investment Services, sates:
"There's a lot of adverse press about endowment policies, some of it quite justified."
No kidding!
Tuesday, June 26, 2007
Every Cloud Has a Silver Lining
As can be seen from this article in the Evening Star, whilst the long suffering holders of endowment polices may be suffering, claims firms are doing rather well out of the endowment mortgage scandal.
Experiences Connect, of Ipswich, has seen turnover rise from £344K in 2005 to £925K in 2006 with forecasts for 2007 of £1.4M.
The firm aims to have increased its workforce by between 15 and 20 new members of staff, within the month.
As the old saying goes:
"every cloud has a silver lining".
Experiences Connect, of Ipswich, has seen turnover rise from £344K in 2005 to £925K in 2006 with forecasts for 2007 of £1.4M.
The firm aims to have increased its workforce by between 15 and 20 new members of staff, within the month.
As the old saying goes:
"every cloud has a silver lining".
Tuesday, December 12, 2006
Extra Compensation Won
Extra Compensation Won
The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
The Financial Services Authority (FSA) claims that due to its pressure, life assurance companies and others involved in the most notorious financial scandal in recent British history, have been forced to pay compensation to over 100,000 customers whose endowment mis-selling complaints had previously been rejected.
The FSA claims that due to its pressure, 75% of the rejected claims have so far been decided in favour of the customers.
This represents around an extra £120m in compensation.
Vernon Everitt from the FSA gave warning to the financial services industry that the FSA would be keeping a very close eye on how the firms were operating.
Quote:
"It is encouraging that firms have improved the speed and quality of how they handle complaints.
News of a potential shortfall is a major worry for consumers and firms owe it to them to deal with their complaints quickly and fairly.
They need to pay particular attention to helping people deal with shortfalls when policies mature."
Around 1.8 million people have received compensation for mis-sold underperforming useless endowment products, totalling £2.7BN.
The FSA should be wary of indulging in too much self congratulations. Millions of people are still facing a shortfall on their endowment policy, with little idea of how they are going to cover their mortgage debt.
The life assurance industry could put a stop to this chaos now, by agreeing to underwrite these useless underperforming products. Instead they are more than happy to pass the buck to others.
Thursday, December 07, 2006
Naive
Naive
Research carried out by the Financial Services Consumer Panel indicates that consumers are using mortgage endowment claims companies to save time, and help them through what they see as a complex process.
The research also claims that around 66% of successful claimants believe that they have received value for money from mortgage endowment claims firms. Given that the claim firms usually charge between 20%-30% of the compensation recovered, for work that the claimant usually do himself, this "value for money" seems to be a somewhat misguided belief.
Even more bizarrely, 25% of those who were unsuccessful said that they would definitely recommend the services of a mortgage endowment claims firm.
Given the alarmingly naivety of the respondents, it is hardly surprising that the financial services industry make such "hansom" profits out of the British public year in year out.
John Howard, chairman of the Financial Services Consumer Panel said:
"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.
It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms; not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs."
Quite why this is a DCA matter is beyond me, as it clearly comes under the FSA's and Treasury's remit.
Research carried out by the Financial Services Consumer Panel indicates that consumers are using mortgage endowment claims companies to save time, and help them through what they see as a complex process.
The research also claims that around 66% of successful claimants believe that they have received value for money from mortgage endowment claims firms. Given that the claim firms usually charge between 20%-30% of the compensation recovered, for work that the claimant usually do himself, this "value for money" seems to be a somewhat misguided belief.
Even more bizarrely, 25% of those who were unsuccessful said that they would definitely recommend the services of a mortgage endowment claims firm.
Given the alarmingly naivety of the respondents, it is hardly surprising that the financial services industry make such "hansom" profits out of the British public year in year out.
John Howard, chairman of the Financial Services Consumer Panel said:
"Some consumers seem quite prepared to pay part of their compensation to a claims firm, especially when the alternative is to receive no compensation at all, because they do not have the time or the confidence to pursue a claim themselves.
It is not clear the claim firms save consumers that much time and there was dissatisfaction with some aspects of the service provided by some firms; not giving details about the fees up front, and poor service in telling clients when the claim was not successful. This needs to be considered as the government starts to regulate this arena through the Department of Constitutional Affairs."
Quite why this is a DCA matter is beyond me, as it clearly comes under the FSA's and Treasury's remit.
Wednesday, September 06, 2006
Friends Provident In The Wrong
Friends Provident In The Wrong
In a rare piece of good news, it seems that the thousands of endowment policy holders who have been told that they have run out of time to complain about their useless and underperforming mortgage endowment policies have been offered some hope of compensation.
The Financial Ombudsman Service (FOS) has ruled that Friends Provident was wrong to impose a time limit on an endowment misselling complaint bought by a Mr and Mrs Smith, and has ordered the insurer to reopen their case.
The Smiths are physically disabled, and that has impacted the decisions of the FOS. However, endowment claims and legal specialists reportedly believe that this judgement could impact on all policyholders who have been time barred.
Tim Moore, of EndowmentClaims.com, said:
"This ruling suggests that if policyholders can prove that they were too confused, for whatever reason, to make accurate financial choices that the time bar may be invalid."
Under FSA rules, endowment policyholders who want to complain must do so within three years of receiving a "red" warning letter.
The FOS ruled that the Smiths were too confused to make an accurate decision about their mortgage options, as such the time bar was invalid.
The ombudsman is quoted as saying:
"I take the fact that Mr and Mrs Smith are unable to work as a good indication they may find coping with day to day normal life a challenge, and consider their circumstances are exceptional for the purposes of the mortgage endowment time bar rules."
A "coalition" of endowment claims experts including; Donns Solicitors, Endowmentclaims.com, CPH Financial Advisory Services, Whitehall Randall, and Michael Booth QC is reportedly ready to test whether it can be applied to all policyholders, not just the disabled.
Andrew Hummersone, from Whitehall Randall, said:
"In light of this ruling, our next step will be to send another 10 time barred cases to the FOS.
The minute a claim is rejected we will immediately seek a High Court review, with the aim of confirming once and for all whether time bars have any validity."
As ever with the endowment scandal, the lawyers and claim firms will do very well out of it.
However, as I keep repeating, the best way for all of the parties involved in this disgrace would be for the life assurance companies to do the decent thing and bite the bullet of underwriting these useless underperforming policies.
In a rare piece of good news, it seems that the thousands of endowment policy holders who have been told that they have run out of time to complain about their useless and underperforming mortgage endowment policies have been offered some hope of compensation.
The Financial Ombudsman Service (FOS) has ruled that Friends Provident was wrong to impose a time limit on an endowment misselling complaint bought by a Mr and Mrs Smith, and has ordered the insurer to reopen their case.
The Smiths are physically disabled, and that has impacted the decisions of the FOS. However, endowment claims and legal specialists reportedly believe that this judgement could impact on all policyholders who have been time barred.
Tim Moore, of EndowmentClaims.com, said:
"This ruling suggests that if policyholders can prove that they were too confused, for whatever reason, to make accurate financial choices that the time bar may be invalid."
Under FSA rules, endowment policyholders who want to complain must do so within three years of receiving a "red" warning letter.
The FOS ruled that the Smiths were too confused to make an accurate decision about their mortgage options, as such the time bar was invalid.
The ombudsman is quoted as saying:
"I take the fact that Mr and Mrs Smith are unable to work as a good indication they may find coping with day to day normal life a challenge, and consider their circumstances are exceptional for the purposes of the mortgage endowment time bar rules."
A "coalition" of endowment claims experts including; Donns Solicitors, Endowmentclaims.com, CPH Financial Advisory Services, Whitehall Randall, and Michael Booth QC is reportedly ready to test whether it can be applied to all policyholders, not just the disabled.
Andrew Hummersone, from Whitehall Randall, said:
"In light of this ruling, our next step will be to send another 10 time barred cases to the FOS.
The minute a claim is rejected we will immediately seek a High Court review, with the aim of confirming once and for all whether time bars have any validity."
As ever with the endowment scandal, the lawyers and claim firms will do very well out of it.
However, as I keep repeating, the best way for all of the parties involved in this disgrace would be for the life assurance companies to do the decent thing and bite the bullet of underwriting these useless underperforming policies.
Thursday, August 24, 2006
Berkeley Independent Advisers Network in Default
Berkeley Independent Advisers Network in Default
The Financial Services Compensation Scheme (FSCS) has declared Berkeley Independent Advisers (BIA) network in default, five months after Tenet acquired it for £700K.
The FSCS said that the decision had been made after receiving 300 claims for compensation from individuals, and after being advised by administrators PricewaterhouseCoopers that it did not have sufficient assets to meet the cost of redress.
Consumers will now be able to receive compensation for alleged poor advice from BIA's advisers in relation to endowment mortgages, investment bonds and personal pensions.
All other regulated financial services firms, including other advisers, will cover the bill for compensating former BIA clients through their annual levy to the FSCS.
Questions are being raised as to the speed with which BIA has been declared in default.
As repeated time and time again on this site, if the life assurance companies just agreed to underwrite their useless underperforming endowment policies much of this pain and extra cost could be avoided.
Failing that people, and the life assurance industry, are going to be saddled with this problem for years to come.
The Financial Services Compensation Scheme (FSCS) has declared Berkeley Independent Advisers (BIA) network in default, five months after Tenet acquired it for £700K.
The FSCS said that the decision had been made after receiving 300 claims for compensation from individuals, and after being advised by administrators PricewaterhouseCoopers that it did not have sufficient assets to meet the cost of redress.
Consumers will now be able to receive compensation for alleged poor advice from BIA's advisers in relation to endowment mortgages, investment bonds and personal pensions.
All other regulated financial services firms, including other advisers, will cover the bill for compensating former BIA clients through their annual levy to the FSCS.
Questions are being raised as to the speed with which BIA has been declared in default.
As repeated time and time again on this site, if the life assurance companies just agreed to underwrite their useless underperforming endowment policies much of this pain and extra cost could be avoided.
Failing that people, and the life assurance industry, are going to be saddled with this problem for years to come.
Monday, July 31, 2006
Endowment Claims Double
Endowment Claims Double
The Financial Services Authority (FSA) has doubled its estimate of how much firms have paid out in compensation for mis-selling endowment mortgages in the past, up to £2.2BN.
The FSA said the estimate is up to April 1, 2006.
The previous estimate of £1.1BN was up to the end of 2004.
Compensation payments have jumped sharply, £945M was paid in the year to April 1 with the number of complaints rising to 767,152.
In the year to April 1, 2005, compensation was £601M for 324,935 complaints. In 2003/04 compensation was £424M for 202,200 complaints, and before April 2003 compensation totalled £225M for 250,000 complaints.
Bradford & Bingley on Thursday announced its compensation provision would rise to £165M.
All of this pain could be avoided if the life assurance companies bit the bullet between their teeth, and agreed to underwrite these useless policies.
The Financial Services Authority (FSA) has doubled its estimate of how much firms have paid out in compensation for mis-selling endowment mortgages in the past, up to £2.2BN.
The FSA said the estimate is up to April 1, 2006.
The previous estimate of £1.1BN was up to the end of 2004.
Compensation payments have jumped sharply, £945M was paid in the year to April 1 with the number of complaints rising to 767,152.
In the year to April 1, 2005, compensation was £601M for 324,935 complaints. In 2003/04 compensation was £424M for 202,200 complaints, and before April 2003 compensation totalled £225M for 250,000 complaints.
Bradford & Bingley on Thursday announced its compensation provision would rise to £165M.
All of this pain could be avoided if the life assurance companies bit the bullet between their teeth, and agreed to underwrite these useless policies.
Wednesday, February 01, 2006
The Financial Services Compensation Scheme Online Claim
The Financial Services Compensation Scheme Online Claim
The Financial Services Compensation Scheme (FSCS) has launched an online service today, to help people who think they may have been mis-sold an endowment policy decide whether they have a claim that FSCS may be able to help with.
FSCS is the UK's statutory fund of last resort for customers of financial services firms.
The FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it.
The service is free to consumers.
The new online questionnaire is available on the FSCS website, www.fscs.org.uk.
It is designed to help speed up response times for consumers. It will help people determine whether FSCS may be able to help with their endowment complaint, and will automatically generate an application form for those who may have a claim.
Loretta Minghella, FSCS chief executive says:
"FSCS plays a vital role in protecting consumers and maintaining confidence in the industry.
Without our help thousands of consumers would have nowhere to turn. Since we became operational on 1 December 2001, FSCS has paid consumers over £650M in compensation.
Over the past couple of years endowment claims have been received at unprecedented levels, way beyond our expectations.
The processes we are putting in place should ensure a faster response for consumers and help us to deal with their enquiries more quickly."
The majority of new investment claims received by FSCS over the past couple of years relate to mortgage endowment claims.
It is expecting to receive 22,000 new endowment claims in the financial year 2005/06, and a further 26,000 in 2006/07.
This compares to just under 9,000 new endowment claims received in 2004/05.
Whether the FSCS will be able to handle this extra workload remains to be seen.
The solution, as I keep reminding you all, is for the life assurance industry to underwrite these useless underperforming products.
The Financial Services Compensation Scheme (FSCS) has launched an online service today, to help people who think they may have been mis-sold an endowment policy decide whether they have a claim that FSCS may be able to help with.
FSCS is the UK's statutory fund of last resort for customers of financial services firms.
The FSCS can pay compensation to consumers if a financial services firm is unable, or likely to be unable, to pay claims against it.
The service is free to consumers.
The new online questionnaire is available on the FSCS website, www.fscs.org.uk.
It is designed to help speed up response times for consumers. It will help people determine whether FSCS may be able to help with their endowment complaint, and will automatically generate an application form for those who may have a claim.
Loretta Minghella, FSCS chief executive says:
"FSCS plays a vital role in protecting consumers and maintaining confidence in the industry.
Without our help thousands of consumers would have nowhere to turn. Since we became operational on 1 December 2001, FSCS has paid consumers over £650M in compensation.
Over the past couple of years endowment claims have been received at unprecedented levels, way beyond our expectations.
The processes we are putting in place should ensure a faster response for consumers and help us to deal with their enquiries more quickly."
The majority of new investment claims received by FSCS over the past couple of years relate to mortgage endowment claims.
It is expecting to receive 22,000 new endowment claims in the financial year 2005/06, and a further 26,000 in 2006/07.
This compares to just under 9,000 new endowment claims received in 2004/05.
Whether the FSCS will be able to handle this extra workload remains to be seen.
The solution, as I keep reminding you all, is for the life assurance industry to underwrite these useless underperforming products.
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.
Thursday, September 08, 2005
It's An Ill Wind..
It's An Ill Wind...
As the saying goes, "it's an ill wind that blows nobody any good". This certainly appears to be the case for Avalon, a firm of solicitors based in Warrington.
Whilst those of you who hold underperforming endowment policies may be wondering how to pay off the shortfall, Avalon are doing rather well out of the crisis.
Avalon is headed by former TV presenter, Andrew Nulty, and has recently opened a second office. Its turnover is now £5m for the 12 months to the end of July.
Mr Nulty, who presented "Hitman and Her" before setting up Avalon in Manchester four years ago, is confident that fee income will reach £15m over the next year as the firm's caseload is expected to increase.
Avalon switched from being a personal injury practice, to one specialising in industrial disease (eg mining compensation claims) and financial negligence cases.
Mr Nulty is leading a team of 30, who are acting for thousands of people who claim to have been mis-sold endowment policies.
Quote:
"We saw a niche in the market. We are representing thousands of people who are facing shortfalls on their endowment policies.
Our role is to recoup their losses from the insurance companies, and we take a percentage of the money they receive as a fee."
As the saying goes, "it's an ill wind that blows nobody any good". This certainly appears to be the case for Avalon, a firm of solicitors based in Warrington.
Whilst those of you who hold underperforming endowment policies may be wondering how to pay off the shortfall, Avalon are doing rather well out of the crisis.
Avalon is headed by former TV presenter, Andrew Nulty, and has recently opened a second office. Its turnover is now £5m for the 12 months to the end of July.
Mr Nulty, who presented "Hitman and Her" before setting up Avalon in Manchester four years ago, is confident that fee income will reach £15m over the next year as the firm's caseload is expected to increase.
Avalon switched from being a personal injury practice, to one specialising in industrial disease (eg mining compensation claims) and financial negligence cases.
Mr Nulty is leading a team of 30, who are acting for thousands of people who claim to have been mis-sold endowment policies.
Quote:
"We saw a niche in the market. We are representing thousands of people who are facing shortfalls on their endowment policies.
Our role is to recoup their losses from the insurance companies, and we take a percentage of the money they receive as a fee."
Monday, July 11, 2005
The Can of Worms
The Can of Worms
It seems that the "dear old" life assurance companies, who manage the underperforming and useless endowment polices that are held by over 8 million people, are not content with the damage that these products have done to their reputations.
As if to further dig the knife deeper into this self inflicted wound, some of them are not spelling out clearly enough the time bar deadline on their "red warning letters".
That is at least the view of solicitors Beresfords, from Doncaster, who say that many "red letters" are failing to give adequate warning to policy holders about the time deadline for complaining.
Beresfords is preparing a report on the time limit issue to send to the Financial Ombudsman Service (FOS), and the insurers which sold endowments. They state that up to half of the red warning letters do not identify the deadline.
Martin Ryan, the firm's compliance and regulation officer, is quoted as saying:
"In 50 per cent of cases there don't appear to be valid time bars..There seem to have been a lot of incorrect red letters going out - specifically not drawing the attention of the client to take action or setting no date by which action had to be taken."
Some insurers, ever mindful of their obligations to themselves, are using time bars as a blanket reason not to examine complaints sent to them.
The FSA will hold a meeting of industry bodies, this Friday, to discuss proposals on endowment compensation. It is expected to present research on how claims have been handled, which is believed to cast financial advisers and insurers in a poor light.
It is very clear that the life assurance industry is "closing ranks" on this issue, and will do everything it can to avoid facing the unpalatable truth that it has sold a product that was not fit for purpose.
Endowment polices, that are meant to pay off mortgages, do not work.
It is as simple as that.
As such the life assurance companies should underwrite them.
The life assurance companies whilst trying to bury their heads, and the heads of their policy holders, in the sand over this disgrace will face rather rude shock.
Raymond Donn, senior partner of law firm Donns in Manchester, is quoted as saying:
"We intend to challenge the time bars when the insurance companies start invoking them next year. A lot of people who have mortgages don't know if there is going to be a shortfall."
Martin Ryan, of Beresfords, believes that the industry will try to avoid precedents being set in court.
"At the moment we are talking of industry-imposed time bars..But if a judge got into it, a can of worms could open up for the industry. It would be the first time a judge ran the rule over it. And the industry could find that, in some areas, they might not be able to use time bars at all."
The life assurance industry is learning, whether it likes it or not, that reputations are hard to earn, but easy to squander.
It seems that the "dear old" life assurance companies, who manage the underperforming and useless endowment polices that are held by over 8 million people, are not content with the damage that these products have done to their reputations.
As if to further dig the knife deeper into this self inflicted wound, some of them are not spelling out clearly enough the time bar deadline on their "red warning letters".
That is at least the view of solicitors Beresfords, from Doncaster, who say that many "red letters" are failing to give adequate warning to policy holders about the time deadline for complaining.
Beresfords is preparing a report on the time limit issue to send to the Financial Ombudsman Service (FOS), and the insurers which sold endowments. They state that up to half of the red warning letters do not identify the deadline.
Martin Ryan, the firm's compliance and regulation officer, is quoted as saying:
"In 50 per cent of cases there don't appear to be valid time bars..There seem to have been a lot of incorrect red letters going out - specifically not drawing the attention of the client to take action or setting no date by which action had to be taken."
Some insurers, ever mindful of their obligations to themselves, are using time bars as a blanket reason not to examine complaints sent to them.
The FSA will hold a meeting of industry bodies, this Friday, to discuss proposals on endowment compensation. It is expected to present research on how claims have been handled, which is believed to cast financial advisers and insurers in a poor light.
It is very clear that the life assurance industry is "closing ranks" on this issue, and will do everything it can to avoid facing the unpalatable truth that it has sold a product that was not fit for purpose.
Endowment polices, that are meant to pay off mortgages, do not work.
It is as simple as that.
As such the life assurance companies should underwrite them.
The life assurance companies whilst trying to bury their heads, and the heads of their policy holders, in the sand over this disgrace will face rather rude shock.
Raymond Donn, senior partner of law firm Donns in Manchester, is quoted as saying:
"We intend to challenge the time bars when the insurance companies start invoking them next year. A lot of people who have mortgages don't know if there is going to be a shortfall."
Martin Ryan, of Beresfords, believes that the industry will try to avoid precedents being set in court.
"At the moment we are talking of industry-imposed time bars..But if a judge got into it, a can of worms could open up for the industry. It would be the first time a judge ran the rule over it. And the industry could find that, in some areas, they might not be able to use time bars at all."
The life assurance industry is learning, whether it likes it or not, that reputations are hard to earn, but easy to squander.
Thursday, June 30, 2005
Endowment Complaints Quadruple
Endowment Complaints Quadruple
The number of claims being made by people who hold useless and underperforming endowment policies, has risen dramatically.
The Financial Ombudsman Service (FOS) has said that it received 70,000 new complaints about endowment mortgages last year.
That is four times as many as it received three years ago.
The FOS expect that the level of complaints will increase; as people received re-projection letters, which will warn them that their policies are going to fail.
Walter Merricks, chief ombudsman, is quoted as saying:
"The number [of disputes] we can expect to receive in the current year will largely be determined by how financial services firms meet the new regulatory requirements on so-called re-projection letters."
The FOS noted that the Financial Services Authority (FSA) had found evidence of serious shortcomings, by some firms, in the handling of endowment complaints.
As noted before, people should be going to jail for this.
The number of claims being made by people who hold useless and underperforming endowment policies, has risen dramatically.
The Financial Ombudsman Service (FOS) has said that it received 70,000 new complaints about endowment mortgages last year.
That is four times as many as it received three years ago.
The FOS expect that the level of complaints will increase; as people received re-projection letters, which will warn them that their policies are going to fail.
Walter Merricks, chief ombudsman, is quoted as saying:
"The number [of disputes] we can expect to receive in the current year will largely be determined by how financial services firms meet the new regulatory requirements on so-called re-projection letters."
The FOS noted that the Financial Services Authority (FSA) had found evidence of serious shortcomings, by some firms, in the handling of endowment complaints.
As noted before, people should be going to jail for this.
Tuesday, May 10, 2005
Money For Old Rope
Money For Old Rope
The third party complaint handlers, that do the work that endowment complainees are well able to do themselves, managed to rake in £12M in fees last year.
These companies can charge up to 50% of the compensation awarded, just for filling in the same paperwork that the endowment policy holder should complete himself.
This "easy money" scheme is now being put under pressure by the life assurance companies.
Prudential and Norwich Union have stopped paying compensation for endowment mis-selling to unregulated claims-handling firms.
The Prudential will no longer pay compensation directly to these firms. Instead it will send payments to their clients, who can chose whether or not to pay the intermediary. Norwich Union is understood to have taken a similar stand.
Consumers claiming they were mis-sold an endowment policy by the direct sales forces of the Prudential and Norwich Union are instead being urged to go directly to them.
The third party complaint handlers, that do the work that endowment complainees are well able to do themselves, managed to rake in £12M in fees last year.
These companies can charge up to 50% of the compensation awarded, just for filling in the same paperwork that the endowment policy holder should complete himself.
This "easy money" scheme is now being put under pressure by the life assurance companies.
Prudential and Norwich Union have stopped paying compensation for endowment mis-selling to unregulated claims-handling firms.
The Prudential will no longer pay compensation directly to these firms. Instead it will send payments to their clients, who can chose whether or not to pay the intermediary. Norwich Union is understood to have taken a similar stand.
Consumers claiming they were mis-sold an endowment policy by the direct sales forces of the Prudential and Norwich Union are instead being urged to go directly to them.
Sunday, April 10, 2005
The Gestation Period of An elephant
The Gestation Period of An Elephant
Taking, what I can only describe as, the gestation period of an elephant; my "professional" claims handling firm has finally come back to me on the complaint that I raised around a year ago, in relation to the mis-selling of my first endowment policy.
They state that they have received notification from my policy provider that it was sold to me by an IFA, they knew this already, and "due to the current rate of success in this type of complaint (it was sold pre 1988) we do not feel that we can help you".
This response, in a nut shell, shows you why complaint handling firms are in general a waste of space.
In effect the service that they are really only prepared to offer is that of filling in paperwork, that you could well do yourself, and raise the matter with the life assurance provider and the FOS.
They are then happy to take 30% of any compensation that you receive, for their "endevours" on your behalf.
The bottom line is that you can save yourself this 30% fee, by doing precisely the same work for yourself.
The only way that they can conceivably add value is where you have already taken these actions yourself, and got nowhere, just as I did.
Unfortunately, as we can see, they are not prepared to help.
I am of course more than happy to hear from any complaint handling company that would actually like to do some real work to earn its fee.
Taking, what I can only describe as, the gestation period of an elephant; my "professional" claims handling firm has finally come back to me on the complaint that I raised around a year ago, in relation to the mis-selling of my first endowment policy.
They state that they have received notification from my policy provider that it was sold to me by an IFA, they knew this already, and "due to the current rate of success in this type of complaint (it was sold pre 1988) we do not feel that we can help you".
This response, in a nut shell, shows you why complaint handling firms are in general a waste of space.
In effect the service that they are really only prepared to offer is that of filling in paperwork, that you could well do yourself, and raise the matter with the life assurance provider and the FOS.
They are then happy to take 30% of any compensation that you receive, for their "endevours" on your behalf.
The bottom line is that you can save yourself this 30% fee, by doing precisely the same work for yourself.
The only way that they can conceivably add value is where you have already taken these actions yourself, and got nowhere, just as I did.
Unfortunately, as we can see, they are not prepared to help.
I am of course more than happy to hear from any complaint handling company that would actually like to do some real work to earn its fee.
Monday, December 02, 2002
I received a note from one of my visitors yesterday which, in my opinion, is a good example of the issues and problems facing the poor endowment holder. I have attached extracts of the emails between myself and my visitor.
1 Dec "Hi Ken
Just to let you know I heard from the Ombudsman last Friday saying they can do nothing for me. My policies were 1986 and 1987.
I also had a policy from 1990 which I accepted a settlement on a couple of years ago. I did not proceed with a complaint about the earlier policies because I did not realise I could take these to the Ombudsman then.
I worked my way through "the major building society's" (editorial change) complaint procedure and after receiving the final letter from them I contacted the Ombudsman in April.
They wrote to me in July saying I was out of time. I wrote back explaining I had followed the procedure and had my final letter telling me I could go to the Ombudsman.
Ombudsman wrote back saying they would send my letter to "the major building society" (editorial change). When I had heard nothing for 2 months I e-mailed them at the beginning of November. Apparently "the major building society" (editorial change) reply was lost in the post!
The Ombudsman suggests I was out of time and should have sent the complaint in 2 years ago. They also say they believe I was only worried about the falling value. They did not see my complaint as mis-selling. I have been told I can take them to court but I am retired for Gods sake! How do I pay for that!
I will just have to put it down to experience.
All the very best with your claim....."
my reply 1 Dec "....What a disgrace! I must admit I am expecting the Ombudsman to reject my claim against B as this was pre 1988. It is not clear, to me anyway, as to which body you are then meant to take your complaint.
I will cross that bridge when I come to it...."
2 Dec to me "...Hi Ken Its my understanding that if the ombudsman rejects a claim the only step then is to take the endowment company to court. I believe the small claims court has a limit of £5000 and I would suspect most people's endowments are greater than that. Most little people would be unable to take on the big firms, they wouldn't have the endowments in the first place if they had that sort of finance..... I shall continue to watch you site with interest. All the best...."
My reply..."I am not entirely certain about what options there are after the Ombudsman. I take your point about the costs (and let us not forget the stress) of going to court, it seems to be a catch 22 situation.
Re your specific case wrt endowments purchased prior to 1988, I think the Consumer Association website has the address of another body; which they imply (though not very clearly) may deal with these. I think, if memory serves, it is called the Financial Services Compensation Scheme.
As an alternative, you could try the technique of shaming the firms into doing something by writing to eg The Times, the Consumers' Association and BBC's Watchdog (the latter have a website through which you can submit your complaint, www.bbc.co.uk/watchdog I think). However, there are certainly better things to be doing with one's life!......
You may enjoy reading my articles on corporate governance and leadership, on "In Your Face", as a distraction from this. Maybe the Boards of our endowment companies should read them as well!..."
I would very much appreciate clarification from anyone out there in cyberspace as to whom one is meant to complain to about endowments sold pre 1988, if both the sales comapny and Ombudsman reject the claim. I know that The Consumers' Association are watching this site, please coud you guys clarify this?
1 Dec "Hi Ken
Just to let you know I heard from the Ombudsman last Friday saying they can do nothing for me. My policies were 1986 and 1987.
I also had a policy from 1990 which I accepted a settlement on a couple of years ago. I did not proceed with a complaint about the earlier policies because I did not realise I could take these to the Ombudsman then.
I worked my way through "the major building society's" (editorial change) complaint procedure and after receiving the final letter from them I contacted the Ombudsman in April.
They wrote to me in July saying I was out of time. I wrote back explaining I had followed the procedure and had my final letter telling me I could go to the Ombudsman.
Ombudsman wrote back saying they would send my letter to "the major building society" (editorial change). When I had heard nothing for 2 months I e-mailed them at the beginning of November. Apparently "the major building society" (editorial change) reply was lost in the post!
The Ombudsman suggests I was out of time and should have sent the complaint in 2 years ago. They also say they believe I was only worried about the falling value. They did not see my complaint as mis-selling. I have been told I can take them to court but I am retired for Gods sake! How do I pay for that!
I will just have to put it down to experience.
All the very best with your claim....."
my reply 1 Dec "....What a disgrace! I must admit I am expecting the Ombudsman to reject my claim against B as this was pre 1988. It is not clear, to me anyway, as to which body you are then meant to take your complaint.
I will cross that bridge when I come to it...."
2 Dec to me "...Hi Ken Its my understanding that if the ombudsman rejects a claim the only step then is to take the endowment company to court. I believe the small claims court has a limit of £5000 and I would suspect most people's endowments are greater than that. Most little people would be unable to take on the big firms, they wouldn't have the endowments in the first place if they had that sort of finance..... I shall continue to watch you site with interest. All the best...."
My reply..."I am not entirely certain about what options there are after the Ombudsman. I take your point about the costs (and let us not forget the stress) of going to court, it seems to be a catch 22 situation.
Re your specific case wrt endowments purchased prior to 1988, I think the Consumer Association website has the address of another body; which they imply (though not very clearly) may deal with these. I think, if memory serves, it is called the Financial Services Compensation Scheme.
As an alternative, you could try the technique of shaming the firms into doing something by writing to eg The Times, the Consumers' Association and BBC's Watchdog (the latter have a website through which you can submit your complaint, www.bbc.co.uk/watchdog I think). However, there are certainly better things to be doing with one's life!......
You may enjoy reading my articles on corporate governance and leadership, on "In Your Face", as a distraction from this. Maybe the Boards of our endowment companies should read them as well!..."
I would very much appreciate clarification from anyone out there in cyberspace as to whom one is meant to complain to about endowments sold pre 1988, if both the sales comapny and Ombudsman reject the claim. I know that The Consumers' Association are watching this site, please coud you guys clarify this?
Subscribe to:
Posts (Atom)