Mortgage intermediaries are worried clients may be topping up premiums on failing endowment policies without taking advice.
The news came as the Consumers’ Association slammed life insurers for trying to encourage borrowers to invest further in their products, while announcing they were under-performing.
The CA said people receiving red warning letters from some of the industry’s biggest names are being invited to contact a self-styled ‘help line.’
Louise Hanson, spokeswoman for the CA, said: ‘We have seen letters from companies which include the information and advice they are meant to, but then say things such as: ‘If you require an illustration of the premium required to put you back on target, ring this customer helpline.”
Stuart Wilson, mortgage development director at Inter Alliance, said: ‘The problem is that if a client does not take independent advice, and review their entire mortgage strategy, not just endowments, then they could throw good money after bad. It is likely these letters will result in some people not taking independent advice, and we all know that can lead to the wrong decision.’
The CA claims to have seen letters from; Legal & General, Friends Provident, Lloyds TSB, Clerical Medical, Barclays, Abbey Life, Woolwich, Eagle Star and Norwich Union.
‘It is appalling people have been receiving these letters which the Financial Services Authority (FSA) said were meant as neutral information to help people understand what was going on. Including these additional terms clearly encourages people to top up their endowments. This should not be an opportunity for the companies to sell more of their products,’ said Hanson.
However, Emma Grange, spokeswoman for the Association of British Insurers, said: ‘All the letters comply with the mortgage endowment code and all recommend independent advice. The FSA has said these letters represent customer service and we agree.’
On a more positive note, Liverpool Victoria has reiterated its February 2000 guarantee that the maturity value of its 6,500 members’ mortgage endowment policies will be at least equal to the policy’s death benefit, and will therefore meet the mortgage amount covered.