Endowment payout could be yours

All is not lost if a provider refuses you compensation for a shortfall, writes James Daley

Anew breed of ambulance chasers is stalking the financial scene, aiming to take advantage of policyholders hoping for compensation over mis-sold endowments.

Anew breed of ambulance chasers is stalking the financial scene, aiming to take advantage of policyholders hoping for compensation over mis-sold endowments.

Regular readers of personal finance pages over the past few years could not have failed to miss news of the mortgage endowment mis-selling scandal, which has left thousands of people with insufficient funds to pay off their home loans.

It is currently estimated that about three in five of the 8.5m endowment mortgages still held by UK homeowners are likely to fall short of their target on maturity, leaving many of these people to make up the shortfall from savings or remortgage. Worse still, many customers were never warned of the risk that their endowment might not return enough to pay off their loan. After encouragement from the Financial Services Authority (FSA) and the Financial Ombudsman Scheme (FOS), which deals with complaints once they have been rejected by the endowment provider, insurers have agreed to compensate those who unfairly lost out.

So far, more than 430,000 customers have been paid collective compensation of almost £700m. However, in context of the estimated £40bn collective shortfall and the potential 5 million customers who may have been mis-sold, it is likely that there are still thousands, if not millions, of policyholders who have yet to apply for compensation they are entitled to.

Enter the latest breed of financial services ambulance chasers - a raft of organisations who have set themselves up with the sole intention of taking a cut of the potential billions in unclaimed compensation.

These claims-handling companies claim they can take the hassle out of getting the compensation you're entitled to - in return for a share of the booty if they are successful.But the reality is that they remove very little of the hassle and often take exorbitantly large percentage fees for the service.

David Cresswell, a spokesman for FOS, says the problem with complaints-handling agencies is that they go against the central principle of awarding compensation. "The object of mortgage endowment compensation is to put you back in the position you would have been in had you not taken out the endowment. But if you use a claims-handling agency, you cannot be put back in that position. We're not opposed to these organisations, as long as consumers are aware of the facts and exactly what they are getting for their money."

The agencies argue that had they not approached many of their clients, they would never have been aware of their right to compensation. Ian Allison, claims manager for Brunel Franklin, says: "Many clients tell us they were unaware of their rights to claim and they would not want the inconvenience and uncertainty of handling a claim themselves."

Where this is the case, complaints-handlers provide a useful service. With the FSA stepping up its educational campaign on endowments and implementing rules to ensure insurers tell customers about the time they have left to complain, it is possible these clients would have eventually decide to claim by themselves.

Furthermore, the boast by many agencies that they have a higher success rate than those who claim independently is tenuous, to say the least. There are no statistics to show the success rate of mis-selling claimants. However, the FOS says that it is no more likely to rule in favour of a complaint handled by an agent than an individual. In fact, the FOS is more likely to be wary of claims-handler cases, as the agents will be trained to provide answers which they know the FOS may be looking for.

Another central plank of the compensation agencies' sales pitch is their claim that they make the process hassle-free. Unfortunately customers still have to answers many complex questions and supply all the same paperwork that they would have had to had they decided to complain themselves.

Mr Allison adds: "An individual may choose to claim themselves. However, our experience strongly suggests that the chances of a successful claim and a fast payout may then be significantly reduced. Our fees are explained upfront and we have numerous letters of support and thanks from clients praising us for the speed and effectiveness of our service." If the thought of handing your complaint over to someone else still appeals, Brunel Franklin can be contacted on 0870 835 8351. Scores of similar organisations can be tracked down by simply typing the word "endowment" into a web search engine, such as Google.

If you still have an endowment mortgage, check out the FSA's free factsheet "Your Endowment Mortgage - have you acted yet?", available at www.fsa.gov.uk/consumer/pdfs/endowment_acted.pdf. If your endowment is predicted to produce a shortfall, you have strong grounds for compensation. If you are rejected after making a complaint, you can take it to the Financial Ombudsman Service who will review your case.

For more information visit www.fos.org.uk/faq/mortgage.htm The FOS upholds about 50 per cent of all cases it reviews, so there is a good chance of receiving compensation even if your provider turned you down.