Wednesday, February 28, 2007

The Endowment Claims Crisis

Endowment claims hit 10,000 for year

The number of compensation claims relating to mis-sold endowment mortgages has risen to unprecedented levels. The Financial Services Compensation Scheme, which processes claims against firms which are no longer able to meet their liabilities, says it was inundated with 10,000 new claims in the half-year to the end of September - far in excess of the forecast of 7,000 for the full year.
The FSCS now estimates that as many as 22,000 new endowment claims will be received during the full 12 months for 2005-06. Loretta Minghella, chief executive of FSCS admitted that the number of claims submitted was "way beyond our expectations".

However, the rate for endowment claims which are upheld is steady at 39 per cent whilst the average compensation payment per claim has fallen from £2,700 to £2,300 per claim. The FSCS has had to recruit extra staff to handle the avalanche of claims and is outsourcing more to enable it to process higher volumes and to bring claims processing times down.

As many as six million people with endowment mortgages are facing a shortfall that will leave them in financial difficulty. More than one in three (35%) are still uncertain of where to turn to see if they are eligible for compensation, according to new research from endowment claims firm Seeing Red.

While compensation is not on offer simply because an endowment policy has not performed well, people who were not warned about the risks involved when they were sold their investments could qualify.

The research shows that the number of people now affected by the endowment crisis is estimated to be six million, with an average shortfall of £5,800 a policy.

It also revealed that 57% of those questioned said they would like to take action to see if they had been mis-sold the policy and could recover their losses.

However, with more than a third of those questioned claiming they have absolutely no idea of where to turn for help.


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