Standard charges misled endowment mortgagers

by Gill Montia

Story link: Standard charges misled endowment mortgagers

Insurance companies that sold endowment mortgages during the late 1980s and early 1990s could be liable for a proportion of claims totalling £200 million.

Over 200,000 consumers, who took out endowment mortgages at that time, could be eligible to make claims because insurers’ marketing material did not fully illustrate the impact of charges on future policy returns.

According to a report in Money Management magazine, leading companies involved in the controversy include Standard Life, Scottish Amicable (which is owned by Prudential) and Scottish Mutual (owned by Resolution).

During the period in question, endowment mortgage providers were permitted to use so called standard charges in their illustrations of future returns.

These standard charges were the same for all companies whereas in reality the charges applied by many companies were far higher than the standard shown.

As a result, the risk of a shortfall in the maturity value of the endowment mortgage was evident from the outset.

So far, Standard Life is declining to admit any liability because it says that it followed all the requirement of the regulator at the time the mortgages were sold.

However, Clerical Medical, which is owned by HBoS, is reported to have set aside £20m to meet future claims.