Mis Sold Endowment Policy

Endowment Mortgage Policy Misselling history. For further clarification contact us and one of our advisers will conduct a FREE REVIEW, before advising on the most suitable way forward for submitting your Mis Sold Endowment Policy Misselling Claim.

Endowment Mortgage Policy Misselling.

Endowment Shortfall History

Full Premium Policy

In the Sixties and Seventies this shortfall problem did not exist. With profit endowment policies were sold as "full Premium Policies and indeed with the higher premiums being levied the target amount was indeed guaranteed over the duration of 25 years.

Low Cost / Start Premium Policy

During the late Seventies when the competition pressure being put on insurance companies to reduce the endowment cost was very intense. It was decided to produce the "lower cost premium" with profit endowment policies which required at least 6% growth per year to meet the target amount and which had no Guarantees (Some "Low Start" Policies required up to 8% growth per year to meet the target amount again without any Guarantees.)

Policy Risk

By 1988 the vast majority of new mortgages were linked to insurance policies and at that time it appeared as though the investment would, in many cases, not only pay off the capital, but also leave a good surplus for the customer to spend.

The fund into which you paid your monthly premiums was designed to grow by having the premiums invested by the insurance company predominately on the high risk stocks and shares markets. However the stock market failed to live up to expectations resulting in potential shortfalls that would not in many cases even repay the amount that the customer had paid in instalments let alone repay the mortgage borrowing.. If the Endowment policy does not grow at the rate anticipated then there will not be sufficient to pay off the loan and of course there will be no lump sum.

There was in fact many years when growth stayed stagnant and the last five years have produced generally negative growth. The majority of policies sold since 1985 have a surrender value of less than the total premiums paid. The effect of this is that of over 8 million of these UK policies (over 80%) are not on target to reach the anticipated sum at maturity, therefore millions of mortgage loans will not be fully repaid at the end of the term of the mortgage loan.

The quick sale of these insurance based plans to people who were either not told the risks, or were unsuited to the policy, has given rise to many people being confused and in financial difficulty. By the end of 2003 the Financial Services Authority (FSA) and consumer groups began to collate evidence which all pointed to a lack of adequate information or advice given out to people when they bought their insurance policy.

This endowment mis selling has made banks rethink their lending schemes and change the way they assess a potential borrowers' financial position. These issues have become a predominant factor in changing customer standards relating to financial services industry in the UK.