The Devious Tricks of Life Assurance Companies and Banks
It seems that the life assurance companies and banks that sold us our useless and underperforming endowment policies, are doing their very best to avoid paying compensation.
That is at least the view of the Financial Ombudsman Service (FOS).
It seems that our "professional friends" in the life assurance companies and banks are ignoring guidelines, set down 3 years ago, as to how to handle endowment complaints.
The FOS will receive 70000 complaints this year, relating to endowment policies; in 2003 the FOS received 50000, and in 2002 they received 15000.
Needless to say, as I warned on this site over a year ago, the sheer volume of the complaints means that the FOS is having trouble processing them.
Delays of over a year are now standard, and indeed the FOS is having to "farm out" the processing to third parties.
One of the little "tricks" employed by the banks and life assurance companies, according to the FOS, is to make the complainant wait for 8 weeks before responding.
Apparently, the "professionals" believe that if they ignore the problem it will simply go away, like a bad dream.
My message to the banks and life assurance companies is simple:
-The problem won't go away
-The problem will get worse
-People are becoming angry
-Grow up, stop avoiding the issue and address the problem.
Friday, October 29, 2004
Thursday, October 28, 2004
Secret Commission Payments II
In view of the issues raised in the article "Secret Commission Payments", posted on the 19th of October, I have decided to write to my endowment company; asking them for details of all commission payments made on my two endowment policies.
I will update this site, with their response.
In view of the issues raised in the article "Secret Commission Payments", posted on the 19th of October, I have decided to write to my endowment company; asking them for details of all commission payments made on my two endowment policies.
I will update this site, with their response.
Tuesday, October 26, 2004
Judgement Day
A survey, recently undertaken by Abbey, has revealed the true extent of the mortgage crisis that will engulf the UK.
It seems that over 1 million homeowners with interest only mortgages, many of whom who have endowment polices, have not put together any plan for paying off their mortgages.
The housing market, and consequently the economy, will take a hard knock if these issues are not addressed.
A survey, recently undertaken by Abbey, has revealed the true extent of the mortgage crisis that will engulf the UK.
It seems that over 1 million homeowners with interest only mortgages, many of whom who have endowment polices, have not put together any plan for paying off their mortgages.
The housing market, and consequently the economy, will take a hard knock if these issues are not addressed.
Sunday, October 24, 2004
From Bad to Worse
"The insurance industry needs to take a long, hard look at itself ... there is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers."
Not my words, but those of Eliot Spitzer, New York's attorney general; talking about the probity of the United States insurance industry.
He has launched a law suit, which will have ramifications for our own well loved insurance industry. He accuses the US insurance industry of corruption, and anti competitive practices.
The FSA is monitoring Spitzer's progress.
The crux of Spitzer's case rests on contingent commissions, that is commissions paid on top of normal commissions for selling insurance policies. The UK insurance industry is fretting, because it knows that there are contingent commissions paid in the UK as well.
It is a pity that the FSA needs to wait for the US to take the lead, in exposing corruption and dishonesty.
The fallout from this lawsuit adds to the worries surrounding the insurance industry; which were heightened this week, by the announcement from the Prudential that they needed £1BN to shore up their finances.
"The insurance industry needs to take a long, hard look at itself ... there is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers."
Not my words, but those of Eliot Spitzer, New York's attorney general; talking about the probity of the United States insurance industry.
He has launched a law suit, which will have ramifications for our own well loved insurance industry. He accuses the US insurance industry of corruption, and anti competitive practices.
The FSA is monitoring Spitzer's progress.
The crux of Spitzer's case rests on contingent commissions, that is commissions paid on top of normal commissions for selling insurance policies. The UK insurance industry is fretting, because it knows that there are contingent commissions paid in the UK as well.
It is a pity that the FSA needs to wait for the US to take the lead, in exposing corruption and dishonesty.
The fallout from this lawsuit adds to the worries surrounding the insurance industry; which were heightened this week, by the announcement from the Prudential that they needed £1BN to shore up their finances.
Friday, October 22, 2004
Standard Life Celebrates in Style
Standard Life celebrated breaking their £10BN target for mortgage sales, by giving their staff 1000 bottles of champagne (total costs £15K).
You will recall that Standard Life recently reneged on it promise to underwrite its endowment policies; it is expected that over 500K of its customers face endowment misery, as their policies fail to meet their targets.
I doubt that they will be cracking open bottles of champagne.
Nice bit of PR guys!
Standard Life celebrated breaking their £10BN target for mortgage sales, by giving their staff 1000 bottles of champagne (total costs £15K).
You will recall that Standard Life recently reneged on it promise to underwrite its endowment policies; it is expected that over 500K of its customers face endowment misery, as their policies fail to meet their targets.
I doubt that they will be cracking open bottles of champagne.
Nice bit of PR guys!
Wednesday, October 20, 2004
FOS Gets Tough
It seems that the Financial Ombudsman Service (FOS) is now thoroughly fed up with the tactics used by the life assurance companies, in trying to evade paying for their lousy underperforming endowment polices that 8 million UK households are saddled with.
The FOS has warned the life assurers that they will face large fines if they don't clean up their act.
The FOS is reportedly to be of the opinion that some endowment providers routinely rejected complaints, that they knew would be upheld if they were referred to the FOS.
I understand that at the end of March 2004, life assurance companies had handled 452,201 endowment complaints while the FOS had dealt with around 125,000.
Large fines are all very well and good, but the life assurance companies are wealthy enough to weather those; and indeed will probably just pass the costs on to the hapless policy holders.
What is needed is for the life assurance companies to underwrite these underperforming, poorly designed, polices.
It seems that the Financial Ombudsman Service (FOS) is now thoroughly fed up with the tactics used by the life assurance companies, in trying to evade paying for their lousy underperforming endowment polices that 8 million UK households are saddled with.
The FOS has warned the life assurers that they will face large fines if they don't clean up their act.
The FOS is reportedly to be of the opinion that some endowment providers routinely rejected complaints, that they knew would be upheld if they were referred to the FOS.
I understand that at the end of March 2004, life assurance companies had handled 452,201 endowment complaints while the FOS had dealt with around 125,000.
Large fines are all very well and good, but the life assurance companies are wealthy enough to weather those; and indeed will probably just pass the costs on to the hapless policy holders.
What is needed is for the life assurance companies to underwrite these underperforming, poorly designed, polices.
Tuesday, October 19, 2004
Secret Commission Payments
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
I received this email today, from someone who has made a very interesting discovery about the commission payments being made "secretly" from his endowment policy.
It seems that, despite the fact the policy was sold to him back in the 80's, commissions of 2.5% are still being deducted annually from his policy; and paid to the IFA that sold him the policy.
Even more startling, is the fact that he could have cancelled these payments at anytime; had the life assurance company that runs his endowment policy bothered to tell him of their existence.
However, as his life assurance company puts it:
"..The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.."
The 2.5% could well make a very significant difference to the maturity value of the policy.
In my view this is a very serious issue. The action of the life assurance company; in not telling him of these commission payments, and his right to cancel them, is scandalous to say the least.
I would be interested to hear from anyone else who has encountered this issue.
The text of the email is reproduced in full below, the name of the life assurance company has been withheld for the time being.
"..I have an endowment policy with ** (edited) that I acquired in March
1988. I recently had cause to telephone that organisation to ask why I
had not received any annual bonus statements for a couple of years. The
representative that fielded my call told me that statements had been
issued. I inquired as to where they had been sent and was given an address
that was a complete mystery to me, having never resided anywhere remotely
close to that location.
The representative explained that this must be the address of a firm who
were acting as my financial advisor. I said that I didn't have a financial
advisor and what on earth was he talking about? He explained to me that
normally a copy of the annual bonus statement is sent to the policy
holder's financial advisor at the same time as the original is sent to the
policy holder. He added that in my case, for some strange reason, my
address details had been overwritten with those of my "financial advisor"
and that consequently the original had been sent to them whilst I had
received nothing.
I repeated my statement that I did not have a financial advisor and asked
who exactly were this firm. After a little searching through my file the
representative explained that this was a firm that had taken over another
firm who were at the time also acting as my "advisor". That second firm's
name I did recall, just about. It was the company that had originally sold
me my endowment policy all those years ago.
I told the representative that at no time during the last 16 years had I
any contact with either of those firms, except during the time of the
policy sale back in March 1988. I then asked what possible reason could
there be for sending copies of my bonus statements to parties with whom I
had no ongoing relationship. I was told that whilst I may not have any
direct relationship, ** (edited) was paying out a commission each month
to the firm currently acting as my "advisor". I asked how much was the
commission and was told 2.5%. I was then told not to worry as this was not
coming out of my monthly premium. I then explained to the representative
that I was ultimately bearing the cost as the effect of the commission was
to reduce the available funds from which ** (edited) could declare a
bonus to policy holders. The representative agreed.
I said that I was aware that when an endowment policy is sold the firm
brokering the deal receives a lump sum commission payment. However, I said
that I was not aware that an ongoing commission is payable on each and
every premium until maturity. Nor was I aware that the entitlement to that
commission could be purchased by another firm. I asked whether the firms
were contractually entitled to this ongoing commission and was told that
they were not! I then asked what needed to happen for the commission not
to be paid. I was informed that all that needed to happen was for me to
tell ** (edited), in writing, that I wanted the payments to stop. I said
I would be writing immediately.
I then said to the representative that I was willing to wager that a
sizeable majority of policy holders were similarly unaware that such
ongoing commission charges were being paid. I also commented that the sum
total of these charges would amount to a significant sum ....a sum that
could surely have a material impact on the size of the bonus declared. I
put it to the representative that it would surely be in the best interests
of all policy holders for ** (edited) to immediately stop all ongoing
commission payments. The representative said that whilst he conceded that
it would be in the interest of policy holders it would not be in the
interest of ** (edited) since the company required the firms of advisors,
brokers etc to provide it with a continual stream of new business.
I shall be writing to ** (edited) instructing that all ongoing commission
payments in respect of my policy cease immediately. I shall further be
stating that:
1. I was unaware that such payments were being made;
2. ** (edited) had not made me aware that I had the right to terminate
such payments;
3. The corollary of the fact that only I can terminate these payments is
that only I should be able to authorise the payments in the first place.
Needless to say, I did not give my consent to the payments;
4. Notwithstanding 3. above, if ongoing commission was not a contractual
entitlement then it should not have been paid out in the first place.
As a consequence of 1 to 4 above, I shall be demanding that the value of
the commission paid (plus compound growth thereon) be added to the
cumulative total of my reversionary bonuses.
I should be very interested to learn whether other policy holders are
similarly unaware of the existence of the ongoing commission payments and
that they have the right to terminate them...."
Sunday, October 17, 2004
I wrote to the Treasury Select Committee a while ago, alerting them to the existence of this site.
I received a reply on Friday.
Here is an extract of the reply, received from the Senior Clerk to the Treasury Select Committee:
"....I have made your comments, together with the address of your endowment diary, available to all members of the Committee..."
Could be interesting.
I received a reply on Friday.
Here is an extract of the reply, received from the Senior Clerk to the Treasury Select Committee:
"....I have made your comments, together with the address of your endowment diary, available to all members of the Committee..."
Could be interesting.
Wednesday, October 13, 2004
Diversionary Tactics
It is reported that Legal and General (L&G) brought in a "memory expert" yesterday, to support their case against the £1M fine imposed on them by the Financial Services Authority (FSA).
The expert noted that customers' memories were likely to be distorted over the passage of time.
L&G are trying to undermine the customer survey, that was used by the FSA in their case against L&G for endowment mis-selling.
L&G allege that the survey of 152 customers was not large enough, and that the recollections of those questioned must be called into question.
Let us not get sidetracked by these courtroom games.
The real issue here is that people bought these useless polices, in the expectation that they would pay off the mortgage.
These policies are not going to pay off the mortgages. As a result of a combination of:
-Mis-selling
-Passing the entire risk of holding the policy onto the customer, whilst taking a fat commission
-Excessive commission payments
-Diabolical mismanagement of the funds in which the policies are invested
endowment policies are going to dramatically undershoot their targets.
In other words, they are not fit for purpose.
The FSA and the life assurance companies should stop messing around with these diversionary tactics. The issue is simply this, the policies were not fit for purpose; as such the life assurance industry, which has made some very large profits out of creating, selling and "managing" these useless products, must agree to underwrite them.
It is reported that Legal and General (L&G) brought in a "memory expert" yesterday, to support their case against the £1M fine imposed on them by the Financial Services Authority (FSA).
The expert noted that customers' memories were likely to be distorted over the passage of time.
L&G are trying to undermine the customer survey, that was used by the FSA in their case against L&G for endowment mis-selling.
L&G allege that the survey of 152 customers was not large enough, and that the recollections of those questioned must be called into question.
Let us not get sidetracked by these courtroom games.
The real issue here is that people bought these useless polices, in the expectation that they would pay off the mortgage.
These policies are not going to pay off the mortgages. As a result of a combination of:
-Mis-selling
-Passing the entire risk of holding the policy onto the customer, whilst taking a fat commission
-Excessive commission payments
-Diabolical mismanagement of the funds in which the policies are invested
endowment policies are going to dramatically undershoot their targets.
In other words, they are not fit for purpose.
The FSA and the life assurance companies should stop messing around with these diversionary tactics. The issue is simply this, the policies were not fit for purpose; as such the life assurance industry, which has made some very large profits out of creating, selling and "managing" these useless products, must agree to underwrite them.
Tuesday, October 12, 2004
A "Shabby Habit"?
It seems that Abbey National are allegedly not playing fair with endowment complaints, relating to policies sold before 1988.
According to reports, the Abbey National are automatically rejecting out of hand any complaints made about policies sold pre 1988.
This despite the fact that the Financial Ombudsman Service (FOS) has warned them that they must investigate each case.
According to mortgage complaint handlers, such as Endowment Justice and CPH Financial Advisory Services, 100% of complaints are being rejected by a pro forma letter; which claims that Abbey do not have to establish attitudes to risk, or keep records of what was discussed pre 1988.
Over a year ago the FOS warned banks and building societies that mis-selling still can have occurred pre 1988. Our chums in the life assurance industry, despite attempts to obfuscate over this issue, still owe us the hapless owners of these useless policies a duty of care.
Our chums may now find themselves in hot water over this, as the FOS has reported their names to the FSA.
Abbey denies the allegations.
Will anyone who was sold a policy by the Abbey, pre 1988, and who has managed to gain compensation from them please drop me a note.
I am more than happy to back up Abbey's claim!
The bottom line here is, that if you receive a rejection letter from the company that sold you a worthless policy; don't accept it.
Fight back!
It seems that Abbey National are allegedly not playing fair with endowment complaints, relating to policies sold before 1988.
According to reports, the Abbey National are automatically rejecting out of hand any complaints made about policies sold pre 1988.
This despite the fact that the Financial Ombudsman Service (FOS) has warned them that they must investigate each case.
According to mortgage complaint handlers, such as Endowment Justice and CPH Financial Advisory Services, 100% of complaints are being rejected by a pro forma letter; which claims that Abbey do not have to establish attitudes to risk, or keep records of what was discussed pre 1988.
Over a year ago the FOS warned banks and building societies that mis-selling still can have occurred pre 1988. Our chums in the life assurance industry, despite attempts to obfuscate over this issue, still owe us the hapless owners of these useless policies a duty of care.
Our chums may now find themselves in hot water over this, as the FOS has reported their names to the FSA.
Abbey denies the allegations.
Will anyone who was sold a policy by the Abbey, pre 1988, and who has managed to gain compensation from them please drop me a note.
I am more than happy to back up Abbey's claim!
The bottom line here is, that if you receive a rejection letter from the company that sold you a worthless policy; don't accept it.
Fight back!
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