New mis-selling time limits

NEW rules will force companies to tell clients of the time limits that restrict their ability to claim compensation for failing endowment policies.

From today, policyholders will have three years to complain after they get their first red letter warning them that their policy may not pay out the expected amount at the end of the term.

The new rules, issued by the Financial Services Authority, say that companies must tell policyholders how long they have to complain about possible mis-selling - at least six months before they are barred from taking such action.

There is growing evidence that many people do not have any idea how long they have - and the FSA is concerned to ensure that no one misses out simply because they weren't told.

FSA director Anna Bradley said: 'We are applying these measures straight away to ensure that consumers who believe they were mis-sold their endowment policies are clear about the date their right to complain runs out and to address concerns that some consumers could unwittingly lose the opportunity to claim compensation.

'The change is just one part of a package of measures that we are working on with the industry to improve the regular information provided to consumers about their endowment policy.'

Some firms are not imposing time limits on endowment complaints received.

The revised rules relate to the time limits for consumers to refer mortgage endowment complaints to the Financial Ombudsman Service.

By 31 March, 452,201 complaints had been made about endowment mis-selling, the FSA said.

About £1bn has been paid or set aside by companies as compensation for endowment mis-selling, according to the industry's regulator.

Not all companies are processing claims efficiently, however.

Legal & General promises to pay within 28 days. But the insurance giant is mired in a backlog of payments to customers facing shortfalls on endowment mortgages. Many, anxious to use compensation payouts to cut their home loans, have been waiting for more than three months.

The insurer - at loggerheads with the Financial Services Authority over a £1.1m fine for endowment mis-selling - starts the 28-day pledge from the day a customer accepts an offer of compensation.

But This Is Money has evidence that many policyholders are waiting much longer, despite the fact that other leading insurers are settling in five days and sometimes in two.