Britain's leading insurance companies are set to escape punishment for illegal sales tactics employed by their advisers in the 1990s, even though many of their former staff are now coming forward to admit to having broken the law.
The number of mortgage borrowers with endowment-linked mortgages who have lost the chance to complain about mis-selling has now passed one million, despite admissions by sales advisers that they routinely breached financial regulations in order to sell policies.
Under rules implemented two years ago by the Financial Services Authority (FSA), borrowers whose endowments are now unlikely to repay their mortgages in full must complain within strict time limits if they believe they were wrongly sold the policies. The time bars prevent watchdogs investigating complaints even in instances where sales advisers now admit they mis-sold policies.
Save & Spend has spoken to three former endowment- policy sales advisers, employed by three different life insurers. Each alleges they were told to sell endowment policies using practices that clearly broke industry rules.
One of these advisers, who still lives in Wigan, where he worked for a leading insurer between 1993 and 1995, says: "Looking back, I'm disgusted with what we did - I see people I used to deal with and I pray they don't hold me to account."
The adviser says he was routinely told to mislead customers using past-performance figures, which would be exaggerated. "I was under intense pressure to produce results at any cost," he says. "We were selling endowments to people for whom they were clearly not suitable."
Similarly, a former sales adviser at another well-known insurer says she was repeatedly ordered to stress that an endowment policy was guaranteed to pay off the customer's mortgage. "I was always told to tell customers that the policy would repay the mortgage at the end of the term," she says. "I believe I gave the wrong advice to many hundreds of customers."
The third adviser, who worked for a separate company in the early Nineties, was convinced by his employer to sell endowments to several close relations, including his wife. "She already had an existing endowment with another company which she had to take a large loss on when she bought my policy," he said.
Ian Allison, claims director of Brunel Franklin, which makes compensation claims on behalf of borrowers, said the allegations represented the tip of the iceberg. The company has recently written to the Financial Ombudsman Service detailing 20 illegal selling practices it believes were in widespread use amongst leading endowment providers throughout the Nineties. They include forging client signatures, backdating paperwork, telling customers an endowment was compulsory, refusing to deal with complaints and failing to give clients illustrations of how a policy might perform.
"The biggest scandal of all for us is that many of these allegations will never be investigated because borrowers' cases have now been time barred," Allison says. "This sort of mis-selling was so widespread that we feel time bars must be lifted so that it can be properly looked into."
Under the current time-bar rules, endowment providers are under no obligation to investigate accusations that their staff have broken the law, even if they still employ the same advisers.
Walter Merricks, chief executive of the Financial Ombudsman Service, has already told regulators to expect a backlash from consumers denied the chance to complain. "Time-barred endowment complaints may look open and shut but their emotional content may be more explosive," he said last month.
A spokesman for the Ombudsman says the service has no choice but to apply time bars where companies had met their obligations about keeping customers informed of the complaints procedure. A spokesman for the FSA says the regulator will investigate accusations of mis-selling, but that individual time bars will still apply.
How the rules on time bars work
* All mis-selling claims must first be made to the company responsible for selling the endowment in the first place. Borrowers unhappy with the response have six months to take their case to the Ombudsman.
* Endowment mortgage holders have three years to file a claim from the time they became aware - or ought to have become aware - that they might have grounds for complaint.
* The starting point for this countdown is usually the date on which borrowers first received a letter from their endowment provider warning that there was a high risk of the policy falling short of its original target amount.
* Since 1 June 2004, companies have only been allowed to time bar complaints if the three-year deadline has passed and they have given the borrower six months' notice of the claims deadline.
* Some claims may have been time-barred several years ago, because until June 2004, the Financial Services Authority did not require endowment companies to give borrowers notice of the deadline by which complaints should be made.
* If a claim is time-barred, the company is under no obligation to investigate the complaint. Nor will the case be investigated by the Financial Ombudsman Service.