Time limit for endowment gripes

Millions of homeowners are facing endowment shortfalls

Life insurer Norwich Union has said it is to introduce a time limit on mis-selling complaints from its 1.1 million endowment customers.

Policyholders will have to lodge an endowment mis-selling complaint within three years of being told that they are heading for a shortfall.

Customers will be sent a warning of the time limit when they have one year of the three-year period left.

Norwich Union also said the time limit will not come into effect until 2005.

Red letters

It is estimated that up to 3.5 million UK households face endowment shortfalls of more than £5,000.

An open-ended complaints system where people could complain up to 15 years into the future about a policy sold 10 years ago is simply unfair Mike Urmston, Norwich Union

Many borrowers were told their endowments were guaranteed to pay off their mortgages, but some of those promises have fallen well short.

Consumer groups are concerned that many people are ignoring warnings about their endowment - and are also unaware they may be eligible to claim compensation for mis-selling.

The general rule is that people must complain within three years of receiving their first "red letter" - outlining a likely shortfall - from their insurance company or lender.

Under industry rules insurers are allowed to ignore complaints made after the time bar comes into play.

Norwich Union has said that it is introducing a time bar to prevent endowment policyholders from making mis-selling claims far into the future.

"An open-ended complaints system where people could complain up to 15 years into the future about a policy sold 10 years ago is simply unfair to other with-profit policyholders and could lead to compensation for the wrong reasons," Mike Urmston, Norwich Union chief actuary, said.

The insurer added that it was keen to resolve genuine mis-selling cases but would not compensate endowment policyholders purely on the grounds that their investment has underperformed.

Norwich Union will give individual customers 12 months notice that a time bar will come into play, twice the period recommended by the Financial Services Authority (FSA).