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FOUR of the biggest life insurers have been warned to speed up their handling of mortgage endowment mis-selling complaints or face massive fines from the City regulator. The financial giants have until the end of April to remedy the situation.
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The tough stance by the Financial Services Authority follows last Tuesday's dressing down of insurance bosses by John McFall, chairman of the powerful Treasury Select Committee, over widespread endowment mis-selling and the failure by the industry to clean up its act.
Experts believe up to 5m homeowners were mis-sold endowments by insurance salesmen and financial advisers in the Eighties.
The four targeted by the FSA are Legal & General, Norwich Union, Zurich Life and HBoS, owner of Clerical Medical. On Friday, the FSA fired off stinging letters to the bosses - David Prosser, Richard Harvey, Lawrence Churchill and James Crosby.
The letters said that the regulator would 'not hesitate to take enforcement action' from the beginning of May if the companies continued to fail to deal with endowment complaints promptly.
FSA rules demand that insurers take no longer than eight weeks to deal with individual endowment complaints. But last year, because some insurers were deluged, the regulator granted them extensions. Now, the FSA has decided enough is enough and that all waivers will expire from May with fines to follow if the four do not comply.
An FSA insider told us: 'The intention of the letter is to draw a line in the sand and make it clear that we've given them enough time to get systems and staff in place to deal with the increased volume of complaints they are receiving.
'The veiled threat is - look what happened to Friends Provident when we examined its complaints handling.'
The FSA stamped hard on Friends Provident just before Christmas, imposing a £675,000 fine on the insurer for a 'biased' approach to complaints.
On Friday, Friends chief executive Keith Satchell, below, courted controversy by urging McFall and the committee to stop targeting life insurers and help companies 'get the nation saving'.
The Consumers' Association welcomed the FSA's tough stance.
'We've heard too many stories from consumers waiting months for complaints to be processed,' it said.
'Insurers have had to deal with higher levels of complaints for well over a year so have had plenty of time to get their house in order. After all, they invested plenty of money and people in flogging these products. It's time they applied similar resources to complaints. We'll be watching to ensure the FSA fines them if they delay after April.'
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