Home income plans were widely promoted in the late 1980s as a way of boosting the income of elderly people whose wealth was tied up in their home. The plans typically involved investors remortgaging their homes and putting the proceeds into an insurance bond. In theory, money from the bond would cover the mortgage and provide an income for the investor.
However, insurance salesmen often failed to make their clients aware of the risks. These were brought into the open by high interest rates, falling house prices and poor investment returns. Many elderly investors were unable to keep up with their mortgage payments and faced losing their homes.
GRE has already paid out pounds 7m to investors who faced financial problems after taking out home income plans through InterCity Associates, a GRE agent. However, the Ombudsman was highly critical of these 'inadequate' payments because the compensation took no account of mortgage interest costs, legal fees or the distress that investors had suffered.
The investors have been given new hope by GRE's agreement 10 days ago to accept a review of its compensation settlements. The insurer allowed the Ombudsman to write to the surviving 460 home income clients of InterCity.
Investors could receive much more than GRE has provided so far. Including the return of the original bond investments, it has paid an average of pounds 17,500 each to 400 home income plan investors. The Ombudsman's average award in home income cases is pounds 55,000, and he has recommended one settlement of pounds 108,000.
Peter Tyldesley, an assistant to the Ombudsman, said GRE deserved a lot of credit for its change of heart. The insurer is even allowing the Ombudsman to reconsider cases where the investor accepted GRE's original offer after taking legal advice.
The Insurance Ombudsman Bureau, 135 Park St, London SE1 9EA. Tel: 071-928 4488.Reuse content