Insurers get endowment warning

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The Independent Online

Life insurers have been formally warned by the City regulator to respond to complaints over endowment mis-selling within two months or face fines.

The Financial Services Authority wrote to four major insurers last week to inform them that it will strictly enforce an eight-week deadline for dealing with complaints from individuals who feel they were mis-sold endowment policies.

The four - Legal & General, Norwich Union, Zurich Life and HBOS, the owner of Clerical Medical - were among insurers granted extensions to the eight-week rule last year after they were unable to cope with a flood of complaints.

The falls seen in the stock market in recent years had led to a growing number of customers receiving "red" letters from their insurers to tell them that their endowment policies would fall short.

The insurers had successfully lobbied the FSA for some leeway in dealing with the complaints, arguing that it would take time to train enough people to respond to customer concerns in this complex area.

The extensions that the FSA allowed are still available to the four insurers involved but are due to expire at the end of April. The FSA has now told the companies that no new extension will be available.

A spokesman for the FSA said: "We will not hesitate to use our enforcement powers. We will be... checking on these companies' performance."

Up to 70 per cent of endowment policies will not pay off the mortgages they were intended to cover, leaving more than 6 million savers up to £50bn out of pocket, the chief executives of some of the UK's largest insurers admitted to MPs last week.

The heads of Standard Life, Prudential, Aviva, Legal & General and Royal & SunAlliance informed the Treasury Select Committee that their customers were seeing average shortfalls on their policies of between £3,400 and £7,000.