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Calls to regulate endowment mortgage complaint industry

Date: Mon, 22 Nov 04 Analysis

The UK's largest insurance company, Norwich Union, wants third-party endowment mortgage complaint handlers to be regulated in order to protect consumers.

Norwich Union claims these companies often target those living on estates built in the late 1980s and early 1990s, when endowment mortgages were a popular product.

Although the statutory complaints procedure is free, Norwich Union claims it is receiving nearly 18 per cent of complaints from third-party complaint handlers, up from four per cent at the start of 2004.

However, the insurer is concerned that many of these companies are not acting in the interests of the customer and that many people are losing out on a significant portion of compensation.

Mike Urmston, chief actuary at Norwich Union, told the Daily Telegraph: "Customers may also not realise that up to a quarter of their compensation, and in some cases up to a half, can be swallowed up in fees or charges if they go down the third-party claim route."

In the 1980s millions of consumers were sold endowment mortgages, which they were told would mature and pay off their mortgages - and probably deliver a surplus.

The under-performance of the stock market since then means that many people are left with a shortfall between the value of their loan and the amount their endowment policy will pay out. If this risk was not fully explained (as was the case in an estimated 80 per cent of cases at one point), consumers are entitled to compensation from the institution that sold them the policy.

Applying for compensation for an under-performing endowment mortgage can often be as simple as calling the policy provider or writing a single letter. However, an increasing number of firms, many advertising on television, are offering to complain on consumers' behalf and then taking a percentage of any settlement resulting.

Norwich Union wants companies to be regulated by the Financial Services Authority and a system of strict deadlines for handling complaints to be introduced.

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Endsleigh Insurance Services Limited is authorised and regulated by the Financial Services Authority. This can be checked on the FSA Register by visiting its web site at www.fsa.gov.uk/register.
Endsleigh Insurance Services Limited. Company No: 856706 registered in England at Shurdington Road, Cheltenham Spa, Gloucestershire GL51 4UE.