Dunbar fined £725,000 formis-selling endowments

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The Independent Online

Allied Dunbar Assurance, part of Zurich Financial Services, was yesterday fined £725,000 by the Financial Services Authority for mis-selling mortgage endowment policies to 1,000 customers between May 2001 and April 2003. This is the fifth-largest fine for endowment mis-selling, led by the £2m penalty Royal Scottish Assurance incurred.

Allied Dunbar Assurance, part of Zurich Financial Services, was yesterday fined £725,000 by the Financial Services Authority for mis-selling mortgage endowment policies to 1,000 customers between May 2001 and April 2003. This is the fifth-largest fine for endowment mis-selling, led by the £2m penalty Royal Scottish Assurance incurred.

Among other failings, the FSA found Dunbar gave "disproportionate weight" to sales advisers' versions of events relating to a complaint, and assumed that the very fact a customer already had an investment was sufficient evidence that he or she understood risk. Dunbar also failed to give clear instructions to complaint-handling staff about the types of evidence they should consider.

However, the company cooperated fully with the FSA investigation, has now introduced new complaints-handling procedures and is voluntarily reviewing complaints dating back to January 2000. That review should be complete by the end of next month. All customers affected have been advised about the review.

Dunbar stopped selling endowment policies in November 2001. It has told nearly nine in 10 of its holders their policy may not be worth enough to pay off their mortgage.

Ray Greenshields, the chief executive at the time, said the decision to stop sales had been because of "declining customer demand". Soon afterwards Mr Greenshields left to join Barclays, where he is now managing director of investment management. A Dunbar statement said: "We very much regret that the failings occurred, as handling complaints fairly is of great importance to us. During the time when the procedural failings existed, we declined about 1,000 complaints, out of a total portfolio of almost 300,000, and the Financial Ombudsman Service supported our decision in a significant majority of the cases referred to it. We have taken this issue very seriously and will strive to provide responsive customer service going forward."

Nearly 100,000 of the company's policies lapsed through surrender or failure to keep up payments.

Andrew Procter, the FSA's enforcement director, said: "The fair treatment of customers does not begin and end at the point of clinching a sale. It applies to all aspects of the relationship between firm and customer, including the fair handling of a customer complaint. Where firms do not deliver the required standards and fail to treat their customers fairly, we will intervene."

The FSA found that important parts of the Dunbar's guidance issued to its staff on the operation of its complaint-handling procedures was inadequate. In a number of the cases examined by the FSA, complaint handlers had conducted poor-quality investigations and there was "a failure to gather sufficient evidence to make a fair assessment of both the consumer's attitude to the risk and the suitability of the sale".

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