Legal lifeline hope for victims of endowment mis-selling

ENDOWMENT policyholders who are worried they have left it too late to complain if they think they were victims of mis-selling may have been thrown a lifeline.

Following an approach from legal representatives of the Glasgow-based Endowment Compensation Centre (ECC), Scottish life insurers may take a more "sympathetic" approach to policyholders who have been time-barred from making claims.

Gerry Diamond, founder and managing director of ECC, has challenged insurance companies, including Standard Life, Scottish Life and Scottish Widows, on their barring of complaints after three years - in line with Financial Services Authority (FSA) guidelines - when Scots Law allows complaints to be made within five years.

It is estimated that 400,000 Scots could have been mis-sold endowment mortgages and ECC is currently processing more than 5,000 compensation claims in Scotland. Recent figures from the FSA show that the average shortfall - the amount by which policies are missing expectations - is £7,200.

Diamond said people aggrieved by possible mis-selling are being told about the three-year time limit but are not clearly advised they have a right to take court action for up to five years if their contract is with a Scottish insurer.

The letter sent in December to the major providers of endowment policies governed by Scots Law asked them to rectify policies and procedures to ensure consumers were not misled over the three-year time limit.

Diamond said: "Under Scots Law, any Scottish life company should give policyholders five years to make a claim. The FSA rule is more stringent than Scots Law and imposes a time limit of three years for making a complaint of mis-selling."

Diamond insists Scots law "trumps" the FSA regulations. He said:

"It should be clearly communicated to all policyholders that they have five years and not three years to make a claim."

ECC has received written responses from four major insurers: Scottish Life, Standard Life, Scottish Widows and Alba Life. It said none of them denied the legal time limit for claims in Scotland was five years and not three. But this does not mean they will automatically consider claims up to a period of five years as they say they are governed by the FSA, which stipulates the three-year period.

Diamond said Scottish Life had stated that in the event of a claim from a policyholder in the period between three and five years, it would look at the claim "sympathetically".

Alasdair Buchanan, a spokesman for Scottish Life, said: "One of the points that we'd certainly consider if asked would be whether it was relevant that a particular contract was written under the law of Scotland or of England. The fact that we'd consider these points doesn't mean we wouldn't time bar an actual case. Just because someone is living in Scotland, or because the contract is written under the law of Scotland, doesn't automatically mean we'd use a five-year time bar.

"This approach is, we believe, entirely consistent with FSA guidance and requirements for dealing with endowment complaints and, in particular, the time-barring of complaints and the principles of treating customers fairly."

Standard Life said the three year rule on handling complaints comes from the FSA, by which it is governed. People can take their claim to a court beyond that period.

Scottish Widows takes the same approach, saying it is acting under FSA rules. It added customers have the right to complain to the Financial Ombudsman Service, a free dispute resolution service.