Thousands may get payout for endowment mis-selling
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Your support makes all the difference.THOUSANDS OF homeowners were yesterday told by an investment watchdog they could be entitled to compensation if insurance companies mis-sold them endowment policies.
Tony Holland, the Personal Investment Authority Ombudsman, said anyone who bought an endowment mortgage but was not told of the possible risks could be entitled to all their money back. Britain's biggest insurance companies are already braced for more than half a million inquires from endowment policy holders worried that they policies will not grow fast enough to meet their home loans.
Yesterday Mr Holland added fuel to the controversy over endowment mortgages when he said: "It's intrinsically more risky than having a capital repayment mortgage. If it's not explained to them [endowment policy holders], there may have been a mis-sale, which could give rise to compensation. And the compensation is effectively the recovery of premiums paid plus interest."
The crucial word "compensation" could herald the beginnings of years of endowment wars and possibly mass compensation.
It could leave Mr Holland inundated with compensation seekers at a time when policy holders have been receiving letters from their life insurance companies saying that a top-up to their policy is required to the tune of pounds 15-pounds 25 a month.
The biggest companies, such as Standard Life, Scottish Amicable, Royal Sun Alliance and the Prudential, along with financial advisers, fear that comments by regulators and insurance experts will stoke up expectations of compensation for borrowers claiming they were mis-sold policies.
A report by the Faculty and Institute of Actuaries on the future of endowment mortgages, published on Wednesday, has also added to the row.
Its chairman, John Jenkins, said it was clear that, for most people, a repayment mortgage was the most suitable choice and that an endowment was not competitive against it in most cases. This was the industry itself tolling the death-knell of the already unfavoured endowment.
Andrew Bedford, of Financial Options Group, whose advisers process 100 mortgages a month, said: "Ten, 15 years ago, endowment policies made sense. But to reassure policy holders, many life offices have policies which are currently performing around 10 per cent in excess of their projected value."
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