Frustration over endowment claims
To advise, or not to advise? That is the question that rather too many major financial institutions fail to apply with sufficient rigour, according to the Financial Services Authority
MPs in the All Party Parliamentary Group on Insurance and Financial Services were trying to establish how far the problems with the selling of payment protection insurance extended, when recently visiting Financial Services Authority representatives admitted they were uncomfortable with the number of financial institutions that were 'confused' about the difference between advised and non-advised sales.
The FSA stopped short of accusing firms of deliberately exploiting confusion. It has, however, told several banks and building societies that they must be clear on when customers can and cannot be advised and by whom. Several MPs aired concerns about sales-driven targets for selling PPI and household insurance, forcing staff to ignore guidelines. "The remuneration of sales staff could have provided an undue incentive to sell these products", suggested the FSA's retail markets boss, Clive Briault.
Specifically in relation to PPI, the FSA is pursuing these concerns and is re-visiting a lot of firms to see if they have cleaned up their act.
This will be very welcome in the broking market, where many have been concerned that they face unfair competition from large institutions that are not as careful with the FSA rulebook as they should be. It certainly seems that the FSA and MPs share these worries.
The other issue that came up was the long running endowment mis-selling saga. MPs were shocked when the FSA reported that around 40% of claims were being handled by claims management firms. This is despite the FSA and insurers stressing that the complaints service is free and the rates of compensation non-negotiable. The shocking part of this is that these firms are charging around 25% for doing nothing that the policyholder could not do themselves. It is totally unethical and a disgrace that one scandal is being overlaid with another, effectively robbing policyholders of their rightful compensation.
The FSA is frustrated at this situation as there are no regulations to prevent this happening. This is the heart of the regulatory vacuum that the Compensation Bill is meant to be addressing - a very large stable door that will be shut only when the heavily laden horse has bolted.
David Worsfold, Secretary, All Party Group on Insurance and Financial Services
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