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Royal & Sun Alliance fined £950k for endowment mis-selling

27 March 2003 / by None
The city watchdog has fined the insurer Royal & Sun Alliance £950,000 for the mis-selling of endowment mortgages.

The Financial Services Authority's (FSA's) fine is the fifth it has made for the mis-selling of endowment mortgages and the amount is the third largest levied.

During the 1980's endowment policies were seen as a good way of paying off mortgages. But, salespeople of the policies failed to explain the risks that investments may not cover the cost of the mortgage when the policy matured, leaving investors short.

The FSA found that Royal & Sun Alliance had failed to monitor the suitability of its sales of endowment mortgages and customers who had been sold a policy between 29 April 1988 and January 2000 would receive redress where appropriate.

Carol Sergeant, managing director for regulatory processes and risk at the FSA, commented, "We place great emphasis on the importance of adequate sales systems. It is the firms responsibility to ensure these systems are in place."

"The serious nature of R&SA's failings, and the size and nature of the firm meant a significant number of its customers have been exposed to actual or potential loss."

Peter Hanby, Royal & Sun Alliance's UK Director, Life, stated, "The fine and the actions announced today relate to past shortcomings which we very much regret. Royal & Sun Alliance has been working hard and cooperated fully with the FSA over the corrective action we are taking. Anyone with a legitimate complaint will receive the appropriate redress."

In a statement to the Stock Exchange, Royal & Sun Alliance announced that it was contacting the 35,000 customers who had been sold a policy during the period to inform them of their right to complain.

The company announced that it has set aside reserves of £11 million in its 2002 accounts for redress payments. In addition, Royal & Sun Alliance has already reviewed a further 2,000 short term mortgage endowment policies and offered redress totalling £5.6 million to the appropriate policyholders.