Winterthur Life has been found guilty of endowment mortgage mis-selling and fined £500,000, after an...
Winterthur Life has been found guilty of endowment mortgage mis-selling and fined £500,000, after an investigation by the Financial Services Authority discovered a computerised questionnaire system recommended products which were unsuitable for consumers.
Around £10,000 customers are now expected to get a cut of the £10m being set aside for redress payments, and policyholders are now being contacted by Winterthur to inform them of the mis-selling errors.
The FSA has also warned more firms found to have mis-sold endowment mortgages will be exposed soon.
Winterthur says it pulled out of the endowment market in July 2000 because of slowing sales, however, all customers - including those who have since surrendered policies - who bought endowment mortgages between March 1998 and December 1999 are being approached to establish the extent of mis-selling.
The vast majority of Winterthur's endowment customers will not be affected by the breaches, nor will Winterthur customers with a Colonial endowment policy, says Clifton Melvin, CEO of Winterthur Life.
"We very much regret that this has happened and our first aim is to make sure that none of our policy holders are financially disadvantaged as a result of this. The matter related to a limited number of endowment policies bought between March 1998 and December 1999. Anyone who bought a Winterthur policy outside those dates is not affected by this issue."
According to FSA investigations, Winterthur had failed to ensure procedures were in place to ensure suitable recommendations were made.
In particular, a computerised point of sale system, called Winteract, which was used by Winterthur's advisers between March 1998 and December 1999 to generate recommendations for customers allowed advisers to recommend mortgage endowment policies where they were not suitable for customers.
A computerised questionnaire, known as the 'Attitude Survey', was designed to ascertain a customer's attitude to risk, however, it was discovered advisers could override the Winteract system.
As well as grading other areas of importance, those customers who had stated the "certainty of the loan being repaid at the end of the term" was "very important" were sold a mortgage endowment policy, however, the FSA investigation concludes a repayment mortgage would have been a suitable recommendation.
'Reason Why' letters tended to deal with the reasons why other products had not been recommended, rather than explaining why the chosen product had been recommended, continues the FSA.
It was also stated in the 'Reason Why' letter that the recommended product did not meet repayment priorities, but other priorities had been accepted instead.
While this is the first serious endowment miselling fine, the FSA has already warned several more are expected.
Carol Sergeant, Managing Director for Regulatory Processes and Risk at the FSA, says:
"This is further delivery on our commitment to deal effectively with endowment mis-selling. We are also dealing with a number of other firms where mis-selling has been identified to ensure that consumers receive proper redress, so further announcements can be expected.
"Where consumers have suffered loss we want to see firms act quickly and decisively to put things right. The level of fine here reflects the fact that Winterthur has dealt with this problem quickly, openly and co-operatively."
A dedicated help-line has been established for
Winterthur customers on free-phone 0800 138 0290.
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