Treasury Select Committee chairman and Labour MP, John McFall, said: “The industry has an obsession with sales, which is driven by commission.”
Currently, eight out of ten policyholders face a cumulative shortfall worth £40 billion and the report also suggested that 50 to 60 per cent of policyholders believed they had been mis-sold their policies.
The committee called for urgent action from the government, the FSA and the insurance industry to change the culture that led to these multiple failures. The Financial Services Consumer Panel endorsed the committee’s findings.
And far from fading away, the problems associated with endowment mortgages were likely to intensify until 2013, said the report.
McFall said: “There needs to be more positive engagement from the industry than we have seen so far in tackling the problems created by endowment shortfalls.”
Meanwhile, Allied Dunbar Assurance has become the sixth firm to receive a fine – £725,000 - for its poor handling of mortgage endowment complaints between January 2000 and April 2003. Another 19 firms have been instructed by the FSA to ‘review’ their mortgage endowment sales.
Andrew Procter, director of enforcement at the FSA, said: “The fair treatment of customers does not begin and end at the point of clinching a sale. It applies to all aspects of the relationship between firm and customer including the fair handling of a customer complaint. Where firms do not deliver the required standards and fail to treat their customers fairly we will intervene.”
