We realised that this was a desperate ploy by those companies to protect the tremendous profitability of "Endowment" contracts. The mystic world of Assurance didn't have to admit to the underlying investments or charges of such policies. Meanwhile the Equity-linked policies were transparent.

Financial institutions are in business to make money many of them employ actuaries to work out future probabilities. However in this changing world those actuaries get it terribly wrong.

Do the companies come out with the truth or do they find some other reason to pacify the public.?

Two recent happenings have shown how Insurance/ Assurance companies have got it so wrong.

The first instance is over endowment policies. For years actuaries worked it out that most policies were only going to run for an average of 7 years. Therefore few were going to last the full term of 25-30 years.

So they decided to create two different types of bonuses. Interim and terminal bonuses were created. The idea being that those people surrendering early would get less and the extra amount withheld from them would be paid as a terminal bonus therefore enhancing the reputation of that company with high returns. 

Those high returns caused by the terminal bonuses were then used to show what high returns people completing their endowment policies had received.  The % of endowment policies reaching maturity was minimal.

This was fine as long as most policies were surrendered within 7 years. 

What the actuaries did not foresee was the growth in the buying and selling of second hand policies. Because this trade grew the terminal bonuses became smaller. Simple and explainable. But do the companies explain it - No.

Yet this writer witnessed a disagreement between a Senior Executive of Scottish Widdows and a leading purchaser of Second Hand policies in 1991. The SW Executive realised what the result would be. But did that stop him allowing past performance being used to sell new endowments?

Instead as seen on a recent Panorama programme they state that the investment returns are not as good as before. How ridiculous during a market boom.
Now we have the same story with motor premiums to go up by 25% because of claims. Why are claims up? Not that there are more accidents. It is because companies have been set up to help the public to maximize their claims and once more thrown the actuaries calculations into chaos.
 A reaction causing a counteraction. .... And those companies are out to make money.

It was like when mutuals were fined by the FSA for breaches of their selling methods. They were fined large amounts. Was it the company who paid those fines ? or were they taken out of policyholders funds?
If they can't pay up promises- what else can they do?

Watch this space on the story of Equitable life. 

So it can be shown that it is always the client who ends up paying. The companies still have to show massive profits for their policy holders.

Where are the media to report the truth? Maybe busy taking advertising revenue from the aforementioned companies.

Endowment mis-selling was not caused by Salesmen - it was caused by Actuaries not realising and acknowledging the advent of second-hand policies. Now they MUST pay for that error.

We, at Drummond & Co, have more than 35 years experience of the workings of those assurance companies and have chronicled their mis-information throughout that period.

We have kept a log on how they operate and the high fines they used to be able to charge on early surrenders. In many cases the higher the penalty the more the terminal bonus. Thus they rarely relied on Stock market results. So why blame Stock market results now? Simply because the truth is not palitable. 

If you believe that you are a loser on your endowment policy then contact us NOW on 0870 199 3871 or  fax on 0870 134 0103 or email info@informedinvestor.co.uk Drummond & Co 16 High Street, Chard, Somerset TA20 1QB CONTACT US CLICK

We have the experience and knowledge to bring the offending companies to justice.
Further ,through the pages of The Informed Investor, we shall keep the public informed on the progress of the legal proceedings and ensure, as we have done fighting NIC mitigation schemes, that people power can combat the strength and wealth of the financial institutions.
Like our NIC system we have created a "fighting" fund to combat the offending companies. So the more of you that join the stronger we all become.

You owe it to you and your family to join.