Pru pledge over endowments

INSURANCE giant Prudential has vowed not to go back on its word and put time limits on customers wanting to complain about mis-sold endowments.

The move will heap more pressure on its fierce rival, Norwich Union-owner Aviva, which sparked controversy by announcing it would impose a final deadline of one year on customers already warned that they face a shortfall, just a month after promising not to.

Prudential UK chief executive Mark Wood today said he could not understand the reason for the U-turn. He indicated that Aviva's action would do little to help bolster confidence in a market already desperate to win back customers and close a savings gap experts put at close to £27bn.

'I think in any industry, with any product, if you say you are going to continue to do one thing and then do another it's not a comfortable position to be in,' he said.

'People only think about a shortfall when they come to repaying the mortgage, they are still going to complain even if they have been warned and I think they are justified in doing so.

'We estimate that only 6% of our policyholders have been in touch with us to complain about mis-selling and our view is there must be more than that number who want to.'

Under Financial Services Authority guidance, endowment customers have to complain within three years of receiving the first 'red' letter from their provider warning of a likely shortfall on their plan.

In July, the Commons Treasury Select Committee revealed that 700,000 of 8.5m mortgage endowment policyholders may not be able to gain compensation because of time limits they simply were not aware of.

Life insurers met the FSA at a summit two months ago over the endowment crisis and Prudential, Legal & General and Standard Life have so far waived their right to hit customers with a time-bar.

Wood said Prudential customers with mortgage endowments maturing this year and next wouldn't face a shortfall and that the group believes the crisis could take five to six years to peak.

He added: 'We feel we continue to want people to buy products from us, and that it makes sense not to ban people from making a complaint to us. We have a responsibility to look at it.'

Earlier this year Treasury Select Committee MPs severely criticised the heads of the biggest life insurers over the endowments crisis and demanded a risk-rating on policies in the future.

Aviva chief executive Richard Harvey admitted in May that companies had been 'caught out' by consumers' lack of understanding that endowments were linked to the performance of the stock market.

Yesterday Aviva said it was fairer to impose a time-limit on all customers rather than having an 'open-ended' complaints system.