Named and Shamed
The Financial Services Authority (FSA) is to be forced to name and shame the 12 endowment mortgage providers which misused Lautro projections in setting premiums.
Their misuse of the Lautro projections meant that customers were given unrealistically high maturity figures.
The FSA have been forced into the embarrassing climbdown by the Information Commissioner's Office, which has upheld a freedom of information request to name the 12 firms.
It is estimated that several hundred thousand policies could be affected by this ruling.
The FSA had stubbornly refused to name the firms, claiming that it would affect future informal reviews, damage market confidence and infringe the providers' rights. Proving once again that the FSA is an ineffectual body, that does not stand up for the consumer when faced with a conflict of interest.
The FSA conducted an informal mortgage endowment review in 2001 which found that between 1988 and 1994, 12 providers used standard Lautro charges to set premiums without informing consumers that their actual charges were higher. This meant consumers would need to pay higher premiums to meet their expected maturity figures.
The FSA said that the providers had "breached a contractual warranty and/or of material pre-contractual misrepresentation in the sale of endowment mortgages".
The FSA has been of little help to the victims of the endowment scandal. One has to ask, what is the point of the FSA?
Monday, August 20, 2007
Tuesday, August 14, 2007
Making Money on Endowments
Making Money on Endowments
The Telegraph has a good article explaining how it is possible, if you are well briefed and prepared to take the risk, to make money on endowments by investing in Teps (Traded Endowment Policies).
There is also a novel bonus, if you get the right policy, of earning a nice little lump sum if the original owner of the policy dies.
Quite:
"Life insurance is sold as part of an endowment policy; when a Tep is sold on, that insurance still covers the person who initially held the policy. But any payment made as a result of that individual's death will be paid into the Tep, says Modray.
It is not necessarily a palatable way of making returns, but a "deed of assignment" when the policy is sold will ensure that the money is added to the fund if the original policyholder dies."
The lesson here is that there is always a way to make money; if you are brave, lucky and well advised.
The Telegraph has a good article explaining how it is possible, if you are well briefed and prepared to take the risk, to make money on endowments by investing in Teps (Traded Endowment Policies).
There is also a novel bonus, if you get the right policy, of earning a nice little lump sum if the original owner of the policy dies.
Quite:
"Life insurance is sold as part of an endowment policy; when a Tep is sold on, that insurance still covers the person who initially held the policy. But any payment made as a result of that individual's death will be paid into the Tep, says Modray.
It is not necessarily a palatable way of making returns, but a "deed of assignment" when the policy is sold will ensure that the money is added to the fund if the original policyholder dies."
The lesson here is that there is always a way to make money; if you are brave, lucky and well advised.
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.
Friday, August 03, 2007
A Slice of The Pie
A Slice of The Pie
Standard Life has promised its two million policyholders a windfall payout from its £1.3BN orphan fund pot, surplus cash held in its with-profits fund.
Standard Life said that it would pay the cash to qualifying policyholders as their policies matured, rather than paying out one lump sum to all its customers in one go.
The orphaned assets are pots of surplus cash that inflate insurers' solvency figures.
Aviva, parent company of Norwich Union, will divide its £4BN orphan assets between shareholders and policyholders and Prudential is also considering what to do with its pot of surplus assets, worth £9BN.
A Standard Life spokesman told The Times:
"When other insurers, such as AXA, distributed their orphan assets, they made a one-off payment to all policyholders.
We are taking a different approach and are giving enhanced payouts when a policy reaches maturity, or when it is surrendered or transferred.
We are doing this because we want to retain some of this cash cushion over the life of our policies, some of which have decades to run."
This approach means that investors will be forced to keep their policies until maturity, if they wish to receive their share of the pot.
Standard Life has promised its two million policyholders a windfall payout from its £1.3BN orphan fund pot, surplus cash held in its with-profits fund.
Standard Life said that it would pay the cash to qualifying policyholders as their policies matured, rather than paying out one lump sum to all its customers in one go.
The orphaned assets are pots of surplus cash that inflate insurers' solvency figures.
Aviva, parent company of Norwich Union, will divide its £4BN orphan assets between shareholders and policyholders and Prudential is also considering what to do with its pot of surplus assets, worth £9BN.
A Standard Life spokesman told The Times:
"When other insurers, such as AXA, distributed their orphan assets, they made a one-off payment to all policyholders.
We are taking a different approach and are giving enhanced payouts when a policy reaches maturity, or when it is surrendered or transferred.
We are doing this because we want to retain some of this cash cushion over the life of our policies, some of which have decades to run."
This approach means that investors will be forced to keep their policies until maturity, if they wish to receive their share of the pot.
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!
Friday, July 20, 2007
The Cost of The Endowment Scandal
The Cost of The Endowment Scandal
The endowment mortgage scandal continues to ratchet up costs.
The Financial Services Compensation Scheme (FSCS) said that it handled 31,260 claims during the year to the end of March 2007, 21% more than during the previous 12 months.
FSCS said that 90% of the new claims it received related to endowment mortgages, with people unable to claim compensation for being mis-sold one of the mortgages because the firm or intermediary they bought it from had wound up.
Around 50% of those who complained about their endowment received compensation, getting an average of £1,900 each.
Overall the FSCS paid out £149M in compensation, around £66M of which related to claims about general insurance, with the rest going to claims over endowments, personal pensions and other investment issues.
The costs will continue to mount.
The endowment mortgage scandal continues to ratchet up costs.
The Financial Services Compensation Scheme (FSCS) said that it handled 31,260 claims during the year to the end of March 2007, 21% more than during the previous 12 months.
FSCS said that 90% of the new claims it received related to endowment mortgages, with people unable to claim compensation for being mis-sold one of the mortgages because the firm or intermediary they bought it from had wound up.
Around 50% of those who complained about their endowment received compensation, getting an average of £1,900 each.
Overall the FSCS paid out £149M in compensation, around £66M of which related to claims about general insurance, with the rest going to claims over endowments, personal pensions and other investment issues.
The costs will continue to mount.
Monday, July 16, 2007
Bad Management and Inept Regulation
Bad Management and Inept Regulation
A recent article in the Daily Telegraph about the ongoing endowment scandal, hits the nail firmly on the head when it comes to the question as to why these useless products have performed so badly.
Answer:
-Bad management from the insurance companies
-High costs levied by the insurance companies for their bad management
-Inept regulation from the FSA, forcing the insurance companies to invest in under performing assets.
No wonder the hapless endowment policy holders feel that they have been screwed!
A recent article in the Daily Telegraph about the ongoing endowment scandal, hits the nail firmly on the head when it comes to the question as to why these useless products have performed so badly.
Answer:
-Bad management from the insurance companies
-High costs levied by the insurance companies for their bad management
-Inept regulation from the FSA, forcing the insurance companies to invest in under performing assets.
No wonder the hapless endowment policy holders feel that they have been screwed!
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".
Monday, June 18, 2007
Norwich Union's Inherited Estate
Norwich Union's Inherited Estate
Norwich Union with-profits policyholders are demanding cash rather than extra bonuses, when the insurer comes to distribute its £5BN inherited estate.
Inherited estate being money in a with-profits fund that is surplus to requirements.
Norwich Union is currently in the process of deciding how to distribute its fund fairly to its 1.1 million policyholders. Prudential is also doing the same wrt its 4 million with-profits policyholders.
Former gas regulator, Clare Spottiswoode, has been appointed to represent the interests of Norwich's with-profits policyholders.
Those affected are in two of its with-profits funds, the old Commercial Union fund and the old General Accident fund. Those in the Norwich Union and Provident Mutual funds will not get anything, because they got windfalls when the insurer joined the stock market ten years ago.
Mrs Spottiswoode has held roadshows across the country to canvass the views of policyholders, and has also commissioned a survey of their views. The results of the roadshows and surveys show that twice as many policyholders would prefer to have cash in hand, rather than extra bonuses.
Clearly the long suffering policy holders have lost faith in the concept of endowment mortgages.
Who can blame them?
Norwich Union with-profits policyholders are demanding cash rather than extra bonuses, when the insurer comes to distribute its £5BN inherited estate.
Inherited estate being money in a with-profits fund that is surplus to requirements.
Norwich Union is currently in the process of deciding how to distribute its fund fairly to its 1.1 million policyholders. Prudential is also doing the same wrt its 4 million with-profits policyholders.
Former gas regulator, Clare Spottiswoode, has been appointed to represent the interests of Norwich's with-profits policyholders.
Those affected are in two of its with-profits funds, the old Commercial Union fund and the old General Accident fund. Those in the Norwich Union and Provident Mutual funds will not get anything, because they got windfalls when the insurer joined the stock market ten years ago.
Mrs Spottiswoode has held roadshows across the country to canvass the views of policyholders, and has also commissioned a survey of their views. The results of the roadshows and surveys show that twice as many policyholders would prefer to have cash in hand, rather than extra bonuses.
Clearly the long suffering policy holders have lost faith in the concept of endowment mortgages.
Who can blame them?
Tuesday, May 29, 2007
Standard Life Ignore Policy Holders
Standard Life Ignore Policy Holders
Standard Life treated their endowment policy holders with contempt today, at its first annual general meeting.
Standard Life faced repeated calls to specify the aggregate level of the shortfall on endowment policies, which they refused to reveal.
Sandy Crombie, the Group CEO, admitted that shortfalls on endowments exceeded the staggering figure of £1.3BN that the insurer had identified in its now-closed Heritage with profits fund.
However, the company didn't make any firm pledge to calculate the overall shortfalls faced by policyholders.
Seemingly the expectations of policy holders are, in the words of outgoing chairman Brian Stewart "unreasonable".
Crombie added:
"We cannot generate money that is not there. We are trying exceptionally hard to make sure the fund continues to perform for those who are invested in it."
Hardly much comfort for the hapless policy holders.
Why not come clean with them?
Standard Life treated their endowment policy holders with contempt today, at its first annual general meeting.
Standard Life faced repeated calls to specify the aggregate level of the shortfall on endowment policies, which they refused to reveal.
Sandy Crombie, the Group CEO, admitted that shortfalls on endowments exceeded the staggering figure of £1.3BN that the insurer had identified in its now-closed Heritage with profits fund.
However, the company didn't make any firm pledge to calculate the overall shortfalls faced by policyholders.
Seemingly the expectations of policy holders are, in the words of outgoing chairman Brian Stewart "unreasonable".
Crombie added:
"We cannot generate money that is not there. We are trying exceptionally hard to make sure the fund continues to perform for those who are invested in it."
Hardly much comfort for the hapless policy holders.
Why not come clean with them?
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