Endowment Mis-selling

dunstonh

The simplest answer on a mis-sold endowment was to insist that the insurer paid out the full value on maturity and get them to cover the shortfall then. Not just after a stockmarket crash using a flawed projection process.

The life companies could have budgeted for it over the long term and many shortfalls would potentially have ceased or been reduced. Consumer confidence would have been less hit as the policy then does what it was told it would do.

It isnt really worth regulating these claims companies now as endowment claims will be working their way out of the system within a couple of years and they will be looking at the next area (VCTs, Equity release, "unlocking" pensions). Any attempt to regulate them would take that long. However, including them within the FSA would have made sense. They are after all advising people on the suitability of an endowment contract. In theory, if you do that, you need to be authorised.

EdInvestor

The simplest answer on a mis-sold endowment was to insist that the insurer paid out the full value on maturity and get them to cover the shortfall then. Not just after a stockmarket crash using a flawed projection process.The life companies could have budgeted for it over the long term and many shortfalls would potentially have ceased or been reduced. Consumer confidence would have been less hit as the policy then does what it was told it would do.


They tried that.Remember the so-called "endowment promise" as offered by Standard Life an Norwich Union? Didn't work.Apart from the fact that the policies themselves are flawed (as Compo says), the FSA has now required the companies to reserve properly for their guarantees.You're not allowed to punt the guarantee money on the stockmarket any more. :rolleyes:

This is obviously sensible in that a guarantee should be a guarantee (no more Equitables please) but it does mean lower returns.There's no such thing as a free lunch.

If the insurers had said to people when interest rates came down that their policies would need topping up because returns would be lower in the low interest rate/ low inflation environmnet, it might have worked.But every one was a bit carried away by the tech boom then, weren't they? Would anyone have believed them?

Compensationitis

I see where you are coming from Editor but the regulator had (and still has) TOTAL control over what a provider or adviser could say or do.

That's why they tried to wriggle out of prescriptive growth rates last year.

They really don't have a chuffing clue what they are doing, on average commission accounts for 3% of investment but COMPLIANCE with the rules costs 9%, these rules can them be overturned at any time in the future if it suits political expediency so what is the point of it all?

In the meantime the 'consumer' is taken for a mug and left holding a can of worms.

dunstonh

They tried that.Remember the so-called "endowment promise" as offered by Standard Life an Norwich Union? Didn't work.Apart from the fact that the policies themselves are flawed (as Compo says),

That was a marketing gimmick. If it was regulator enforced, then it would have been a better approach.

EdInvestor

That was a marketing gimmick. If it was regulator enforced, then it would have been a better approach.


Sad to say, by the time the FSA got around to enforcing it, the management had lost 80% of the company's capital and if it had been enforced, Standard life would have gone under, like Equitable. Things were that bad.

Improving now though, new management looks like they're getting a grip :)Generally the whole With profits fiasco in the life industry defies belief when you take a close look at it. Wings, prayers, backs of fag packets and sheer incompetence spring to mind...

scottishlizzie

Compensationitis wrote:

Why don't you set up your own ambulance chasing firm Liz?

I don't want to make a big business out of it at the moment. I'm happy to do a few cases now and then.

And, speaking only for myself, I'm not advertising. I'm offering to help fellow MSErs with some free advice as is the intention of this website. That's how it works as far as I'm concerned.

dunstonh

Editor wrote:

That was a marketing gimmick. If it was regulator enforced, then it would have been a better approach.


Sad to say, by the time the FSA got around to enforcing it, the management had lost 80% of the company's capital and if it had been enforced, Standard life would have gone under, like Equitable. Things were that bad.

Improving now though, new management looks like they're getting a grip :)Generally the whole With profits fiasco in the life industry defies belief when you take a close look at it. Wings, prayers, backs of fag packets and sheer incompetence spring to mind...

What i was referring to though was not these marketing gimmicks but missold policies. Rather than make the compensation payout now, they should have delayed it until maturity and then the payout could be made, if there was still a shortfall.