FSA fines Royal & Sun Â£950,000 for mis-selling of endowments
Royal & SunAlliance yesterday faced another setback in the form of a £950,000 fine from the City watchdog for mis-selling mortgage endowment policies.
The beleagured company, which has been selling off assets in the past 18 months to try to bolster its balance sheet, has also had to set aside £11m to compensate up to 35,000 customers who took out an endowment mortgage between 1997 and 1999.
The fine, the third largest handed down by the Financial Services Authority for mis-selling endowments, reflected the "seriousness of RSA's contraventions," the regulatorsaid.
The insurer has also fallen foul of the FSA for selling personal pensions to individuals who would have done better to stay in company pension schemes. The company had to pay £325,000 in fines and costs in 1998 as part of the FSA's pension review.
The FSA said the latest fine related to the fact that its sales advisers did not make sure customers' circumstances were properly suited to taking out endowments.
The watchdog also found evidence that the company did not in all cases ensure that people who opted for a short-term endowment realised that they would have to make higher repayments in order to cover the cost of their home loan.
Endowments have come to be seen as a very unpopular method of paying off mortgages and many thousands of policies taken on in the 1990s are not on track to cover home loans.
The FSA has begun a review of the way endowments were sold. The regulator has made clear that under-performance alone is not evidence of mis-selling.
But the body has come down strongly on a number of companies that it felt did not take enough trouble to warn customers about the risks of endowments, which were invested in the stock market.
The FSA handed out a £2m penalty to Royal Bank of Scotland, the biggest fine so far. Lloyds TSB has had to hand over £1m for problems at its subsidiary Abbey Life.
RSA said in a statement: "The fine relates to past shortcomings, which we very much regret. Anyone with a legitimate complaint will receive the appropriate redress."
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