Late Endowment payout by Provider

Redin

Hello,
My father in law received a letter from his provider stating that they had neglected to payout on a mortgage endowment policy from Oct 2009, which my father in law had stopped paying premiums on 10 years ago. This was not due to change of address just an admin error.
The letter included an apology and a cheque for £11500, and stated that the cheque rectified the error made. There was no further detail, on contacting them the original payout was £10000 with £1500 added (base rate + 1%).

My questions are:
- Is this an appropriate sum in recompense considering the excessive length of time it took to make payment?
- is there a case for an endowment mis sale? My father in law does not understand what an endowment is, that it is invested in the stock market or the consequences of surrendering early?

Thank you for any advice,
Many thanks,

Keep_pedalling

You can forget mis selling, 35 years ago, when the policy was probably taken out, endowment mortgages were common and popular, and now he can’t remember even having the policy so has no chance of providing evidence that it was an inappropriate product for him.

Presumably he switched to a repayment mortgage at some point, so now has a rather nice unexpected windfall.

As for compensation, I don’t really know. There are 2 parties at fault here, the insurance company, and your father for his poor memory. Surely he had been receiving annual statements on the policy prior to 2009.

Old_Lifer

Your father-in-law had an endowment which matured in 2009, at which point the premiums naturally ceased. We should not automatically assume this was taken out 25 years before 2009, as an endowment mortgage would be taken out for any term from 10 years to 40+ years but most lenders would not go beyond 30 years.


A Life Office would usually write to the policyholder 4-6 weeks before maturity with documentation for completion. Did he not complete this? Indeed, did he not receive this? Where the signed documentation is not returned, the Life Office will usually issue a reminder. Did he not receive a reminder?


1.) Did he not notice that the annual statements which he had been receiving ceased after 2009?


2.) Did he not notice when the premiums he had been paying for years suddenly ceased in 2009?



3.) Most policyholders would eagerly look forward to a maturing endowment, especially a large mortgage -related payout. Was he not looking forward to receiving a large sum in 2009?


4.) More important than anything listed above, did not the mortgage provider write in 2009 asking about repaying the mortgage?


The amount of interest for late payment appears fairly normal.


I cannot comment on any possible mis-selling. Other Forum members with experience of today's compensation culture may perhaps wish to comment. I notice that Kp above has already been kind enough to comment on this.

SonOf

Didn't you post the same question a little while back on a different login? If not, then someone has virtually the same issue which is unusual.

- Is this an appropriate sum in recompense considering the excessive length of time it took to make payment?

Nothing wrong with base plus 1.

- is there a case for an endowment mis sale?

Nothing you have said suggests there is. Why would you ask us without telling us why think it was?

My father in law does not understand what an endowment is, that it is invested in the stock market or the consequences of surrendering early?

He didn't surrender it early. So, hypothetical scenarios are not something you can complain about.

Redin

Thank you ‘keep pedalling’, ‘old lifer’ and ‘son of’ for your comments.
They have helped crystallise my thoughts on this.
Regarding my 1st question on endowment mis-sale- these policies were indeed popular 30+ years ago, mainly due to the large commissions that could be earnt by advisers selling them. Unfortunately, a large number of endowments were mis-sold as the clients attitude to risk, the mechanics of the policy (with profits investment in stock markets) and the consequences of surrendering early were never established.
Given that the onus is not on the client to prove missale but for the company selling the policy to prove that it is suitable for the client- this led to a large number of endowment mis-selling claims in the early 2000s. These claims were mostly successful because the application forms (fact finds) establishing the customers suitability for a product required minimal information, and did not evidence the clients wishes or financial position to support the sale of the endowment.

Turning back to my father in laws situation, I could request all the supporting documentation (including application form), which the company would have to make available. I suspect that the application form is 1 page and does not support the sale, there would be a claim. The sticking point is the time limit on endowment mis sale claims- 6 yrs from first taking out the policy, or 3 yrs from when the claimant should have reasonably realised the policy was unsuitable. So that’s a no-go I think.

Regarding my 2nd question, the responsibility over late payment and recompense. The onus is on the provider to administrate the policy and pay timely, they have a duty of care to the client. The client is required to pay the premiums timely and that is all, not chase payout.
My father in law stopped paying the premiums because he had received a windfall to pay off his mortgage and did not require the policy anymore. He did not realise by doing this there would a) be any value in the policy to still payout, or b) he was losing money by not continuing to pay the premiums, as up to 75% of the final value of the policy is in the final terminal bonus. This points to a mis-sale to me, right there.
Due to an admin error/ negligence my father in law has not been paid money owed to him for 10 years, even though he didn’t realise this and pursue it. If the shoe was on the other foot, and money was owed over that period of time to a finance company, I think that significantly more than 1.5% pa interest would be demanded in payback!

My enthusiasm in pursuing this claim is mainly due to the manner in which the company have acted- in sending a 2 sentence letter implying the cheque could be cancelled, short on detail and explanation in the hope that a 75 yr old man would be confused, ask no further questions and take the money. That to me is not treating the customer fairly!

Again, Thank you for coming back to me and taking the time to respond.

Keep_pedalling

I don’t think you have a hope in hell with this as it would fall at the first hurdle by being time barred, and in any case he would only get compensation if taking out the policy has caused him a financial loss, has it?

Had your FIL had that £100k sitting in s nice safe savings account for the last 10 years it would have been earning a pathetic amount of interest so has made no loss there either.

Cancelling the policy was entirely his decision, and I really find it incredible that he thought it worthless especially as he should have been getting regular statements.

Old_Lifer

Late payment of a maturity is a problem for Life Officies and normally arises where a policyholder has stopped paying years ago and has changed address and not told the Life Office. In this case it seems, there was no change of address and premiums continued to be paid until maturity.


The annual statement would have been a yearly reminder of the existence of the policy and would have shown how the value was growing each year. The final statement statement which would have been issued early 2009 (usually during the period February - May) would perhaps have served as an even stronger reminder, indicating a payout in the next few months.



Despite all this, the policyholder appears to have forgotten about the policy. Did he also forget to sign and return the documentation which would have enabled payment to be made? Did he also forget the reminder which would have been sent?


Has the relative now found all the documentation and this has now finally been completed and returned ?


I have never heard of a Life Office forgetting to pay a maturity.


In my opinion, very little of Post No.5 above makes sense.

Keep_pedalling

Old_Lifer wrote: »

Late payment of a maturity is a problem for Life Officies and normally arises where a policyholder has stopped paying years ago and has changed address and not told the Life Office. In this case it seems, there was no change of address and premiums continued to be paid until maturity.


The annual statement would have been a yearly reminder of the existence of the policy and would have shown how the value was growing each year. The final statement statement which would have been issued early 2009 (usually during the period February - May) would perhaps have served as an even stronger reminder, indicating a payout in the next few months.



Despite all this, the policyholder appears to have forgotten about the policy. Did he also forget to sign and return the documentation which would have enabled payment to be made? Did he also forget the reminder which would have been sent?


Has the relative now found all the documentation and this has now finally been completed and returned ?


I have never heard of a Life Office forgetting to pay a maturity.


In my opinion, very little of Post No.5 above makes sense.

The OP did say his father stopped payment after receiving a windfall so the policy never came to maturity. Any claim against who ever sold the policy to him would be time barred 3 years after the day he stopped paying.

He would probably have been better off letting it run to maturity if the policy was the type that payed a terminal bonus, but that is not the fault of the insurance company that is 100% his fault.

davidmcn

Redin wrote: »

If the shoe was on the other foot, and money was owed over that period of time to a finance company, I think that significantly more than 1.5% pa interest would be demanded in payback!

There's no automatic right to interest just because a payment is being made late, and given interest rates available elsewhere, 1.5% seems reasonable.

As above, I suspect the error/negligence lies more on your FIL's side.

Old_Lifer

Yes Kp you have a point. I understood from the post that he stopped paying 10 years ago in 2009, he may indeed have stopped paying ten years before 2009.


My comments refer to a late maturity payment based on my understanding of the post.

SonOf

Regarding my 1st question on endowment mis-sale- these policies were indeed popular 30+ years ago, mainly due to the large commissions that could be earnt by advisers selling them. Unfortunately, a large number of endowments were mis-sold as the clients attitude to risk, the mechanics of the policy (with profits investment in stock markets) and the consequences of surrendering early were never established.

Yes. Some were missold. The uphold rate on complaints was only around 1 in 4 though. And over 3/4 of endomwents were timebarred from complaint long ago.

Given that the onus is not on the client to prove missale but for the company selling the policy to prove that it is suitable for the client- this led to a large number of endowment mis-selling claims in the early 2000s. These claims were mostly successful because the application forms (fact finds) establishing the customers suitability for a product required minimal information, and did not evidence the clients wishes or financial position to support the sale of the endowment.

They were not mostly successful.

It was a big issue for the period but still saw most complaints rejected.

Turning back to my father in laws situation, I could request all the supporting documentation (including application form), which the company would have to make available. I suspect that the application form is 1 page and does not support the sale, there would be a claim. The sticking point is the time limit on endowment mis sale claims- 6 yrs from first taking out the policy, or 3 yrs from when the claimant should have reasonably realised the policy was unsuitable. So that’s a no-go I think.

The level of documentation will depend on the dates involved. A 1988 policy would have a rather poor audit trail compared to a mid 90s or late 90s one.

I suspect the timebar would apply.

My father in law stopped paying the premiums because he had received a windfall to pay off his mortgage and did not require the policy anymore. He did not realise by doing this there would a) be any value in the policy to still payout, or b) he was losing money by not continuing to pay the premiums, as up to 75% of the final value of the policy is in the final terminal bonus. This points to a mis-sale to me, right there.

That cannot be a missale as it is a not an issue that relates to the sale of the policy.

Providers are not allowed to give advice unless they hold advice permissions and advice is sought. They take instruction from either policyholder or their financial adviser. If your FIL never sought advice, then he cannot complain about advice.

Due to an admin error/ negligence my father in law has not been paid money owed to him for 10 years, even though he didn’t realise this and pursue it. If the shoe was on the other foot, and money was owed over that period of time to a finance company, I think that significantly more than 1.5% pa interest would be demanded in payback!

The normal requirement on late maturities is to pay interest. Not compensation.

If the issue is not linked to a change of address (which is the most common reason for late payments where the insurer was not notified of the change) then often its a small goodwill gesture plus interest.