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Life insurers face up to bill for mortgage endowment mis-selling

Date: Mon, 07 Jul 03 Analysis

LONDON, UK - The UK savings industry is facing up to the possibility of a multibillion-pound bill for mortgage endowment mis-selling, according to a leading life insurance analyst.

Ned Cazalet, chief executive of Cazalet Consulting, has warned that life insurers have underestimated the scale of the compensation bill to borrowers who were wrongly advised that their endowment-linked loans would pay off their mortgages.

'I think the costs are going to be a lot bigger than people have imagined. We have seen some life offices put aside modest amounts of money just to cope with this; £10 million here, £20 million there. But I think those numbers are peanuts compared to the outcome,' Mr Cazalet told The Times.

'We could be talking about £300 million here, £400 million there, costs running into billions. One wonders whether it might actually be the breaking of one or two players,' he added.

The Consumers' Association recently suggested that as many as five million people had been wrongly told that their endowments 'would definitely' pay off their mortgages.

In addition, the Association of British Insurers found that more than two thirds of mortgage endowments were unlikely to work.

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