Endowment claims stack up

By Paul Lewis
BBC Radio 4's Money Box

The FSA gives firms only a limited time to deal with complaints

The insurance industry is in danger of being overwhelmed by the number of people complaining they have been mis-sold a mortgage linked to an endowment.

The Financial Services Authority has given more than a dozen insurance companies extensions to the time they can take to resolve complaints.

They include some of the biggest names in the industry such as Abbey Life, Barclays, Norwich Union, Allied Dunbar, Eagle Star and Legal & General.

Rules set down by the FSA state that complaints have to be resolved within eight weeks, or the customer can refer their case directly to the Financial Ombudsman Service who can order compensation.

But the FSA has now extended that period for at least a dozen insurers, in some cases doubling it to 16 weeks.

One Legal & General customer contacted the BBC's Money Box programme after seeing her complaint still stuck in the system after more than 10 months.

Caroline Hayton from Surrey was frustrated with delays at Legal & General so went to the Ombudsman, where her case still languishes.

We are doing everything we can to speed the process up Stephen Sklaroff, ABI

"I initially complained to Legal & General in December, almost a year ago. And having had several responses saying they were going to deal with it, I still had not heard anything more.

"So in May I took my complaint to the Ombudsman. Here I am now in late October with no resolution. I do feel very frustrated.

"After having gone through all the procedures one is required to and still not to have any outcome, where does one go? There does not seem to be any recourse."

Compensation

Legal & General has admitted there are delays and has apologised to people in Caroline's position.

The Association of British Insurers also admits it is taking longer to deal with complaints. Its Deputy Director General Stephen Sklaroff told Money Box:

"We know that some customers are having to wait longer than they would like and we regret that.

We have certainly got a great deal more complaints than we had projected at the beginning of the year Walter Merricks, Chief Financial Ombudsman

"We are doing everything we can to speed the process up. It does not help and can cause delay later if a case has not been worked through effectively and properly.

"The important thing is to get it as right as possible, to get all the information marshalled to get the thing in a good state to be dealt with quickly and efficiently."

The industry has dealt with 295,000 complaints, of which 60% have been upheld and received compensation of £307 million.

Many of the rejected complaints end up with the Ombudsman.

Walter Merricks, the Chief Financial Ombudsman said his service was not being overwhelmed, but admitted there were some delays.

"We have certainly got a great deal more complaints than we had projected at the beginning of the year.

"At that time we thought we would get about 20,000 complaints about mortgage endowments and it looks as if we will get about 50,000.

"These complaints do have to be dealt with carefully, and we have taken on a lot more staff.

"We hope people will be prepared to be patient so we can make sure they can be dealt with appropriately."

The Financial Ombudsman has already more than doubled its staff to 680 and expects to employ 760 by April 2004.

BBC Radio 4's Money Box was broadcast on Saturday, 18 October, 2003 at 12:04 BST.