Endowment policy procedures attacked
Alan Lakey, partner at Highclere Financial Services, said re-projection letters have led to a flurry of consumer complaints and a mis-selling scandal because of the perceived shortfall of many policies. He slammed the methods used by lenders in making re-projection shortfalls and said lenders should not be allowed to make endowment shortfall promises when calculating re-projections.
He said: “The FSA’s rulebook allows lenders plenty of scope to invent the current value of the policy, such as using the current value of the policy to serve as the base figure for the re-projected maturity values. It’s in the interests of policyholders, advisers and the insurers for re-projections to be fair and honest, without provoking undue alarm or overestimating future growth prospects.”
Further concern within the endowment market was also raised, following the decision of endowment claims company Brunel Franklin to question the time bar rulings. Ian Allison, claims director for BrunelFranklin.com, said: “The conclusion of our review is that there are valid reasons for overturning the existing time bar rules and how they are applied. We could be talking millions of pounds of compensation for members of the public if we are successful.”
Philip Ryley, head of financial services regulation at TLT solicitors said: “It could be bad news for the market. If it is successful the FSA may be forced to put in place a review of past business, and complaints will also not be time barred.”
Brunel Franklin has given the FSA and the Financial Ombudsman Service until 12 June to respond.
An FSA spokesperson said the regulator is working on a response to the letter, which it will send directly to the firm.