Norwich Union Reverses Stance on Endowment Policy Time Limits

Strategic Insights -

Norwich Union, the UK arm of Aviva, has changed its position on imposing time limits for customers to complain about mis-sold endowment policies. Despite previously stating it would not impose such limits, the company has announced plans to write to 1.1 million mortgage endowment customers to inform them they will only have a year to complain. This move comes as the Financial Services Authority (FSA) updates its rules, requiring companies to tell customers the final date by which they can make complaints.

Key Takeaways:

  • Norwich Union will impose a one-year time limit for customers to complain about mis-sold endowment policies, despite previously stating it would not do so.
  • The company will write to 1.1 million mortgage endowment customers to inform them of the new time limit.
  • The move comes as the FSA updates its rules, requiring companies to tell customers the final date by which they can make complaints.
  • Under FSA rules, endowment customers have to complain within three years of receiving the first "red" letter from their endowment company or within six months of getting a second red or amber letter.
  • Approximately 700,000 out of 8.5 million mortgage endowment policyholders may be prevented from gaining compensation due to time limits on making complaints.
  • Royal & Sun Alliance and Friends Provident have also applied time limits, while Legal & General, Prudential, and Standard Life have not.
  • Norwich Union has received nearly 34,000 complaints about potential endowment mis-selling, of which half had received compensation, and continues to receive around 2,000 complaints a month.
  • The potential cost to homebuyers of the endowments crisis is estimated to be £40 billion, with a large percentage of policies potentially having been mis-sold.

Statistics:

  • 1.1 million:

+ Number of mortgage endowment customers to whom Norwich Union will be writing to inform them of the new time limit.

  • 34,000:

+ Number of complaints about potential endowment mis-selling received by Norwich Union.

  • 50%:

+ Percentage of complaints received by Norwich Union that had resulted in compensation being paid.

  • 2,000:

+ Number of complaints received by Norwich Union per month.

  • £40 billion:

+ Estimated potential cost to homebuyers of the endowments crisis.

  • 8.5 million:

+ Number of mortgage endowment policyholders.

  • 700,000:

+ Number of policyholders who may be prevented from gaining compensation due to time limits on making complaints.

Sources:

  • Norwich Union (date not specified)
  • Financial Services Authority (date not specified)
  • Treasury (July 2009)
  • Commons Treasury Committee (March 2009)