Polis23 - Illegale beleggingsfondsen

Winterthur Life UK Ltd (Winterthur) has been fined 500,000, plus 57,000 costs, for breaches which resulted in the mis-selling of mortgage endowment policies. Around 10,000 customers may be affected and the firm has set aside approximately 10 million for redress.
The firm is using external consultants to carry out a review of mortgage endowment policies, sold between March 1998 and December 1999, to establish more precisely the extent of any mis-selling. Winterthur withdrew from the endowment market in July 2000. The firm is in the process of contacting those policyholders affected. Redress will be offered where appropriate, including to those policyholders who have surrendered their policies.
Carol Sergeant, Managing Director for Regulatory Processes and Risk at the FSA, said:

"This is further delivery on our commitment to deal effectively with endowment mis-selling. We are also dealing with a number of other firms where mis-selling has been identified to ensure that consumers receive proper redress, so further announcements can be expected."
"Where consumers have suffered loss we want to see firms act quickly and decisively to put things right. The level of fine here reflects the fact that Winterthur has dealt with this problem quickly, openly and co-operatively."

• The firm set up a computerised point of sale system, called Winteract, which was used by Winterthur’s advisers between March 1998 and December 1999 to generate recommendations for customers. The system allowed advisers to recommend mortgage endowment policies where they were not suitable for customers. In particular:
• The Winteract process included the completion of a computerised questionnaire, known as the ‘Attitude Survey’, designed to ascertain a customer’s attitude to risk.

Within this questionnaire, customers had to grade six statements according to their importance to them. The Winteract system then produced an overall score and the type of mortgage recommended would depend on that score.
The system allowed customers who had stated the "certainty of the loan being repaid at the end of the term" was "very important" to be sold a mortgage endowment policy.
Given these customers’ responses to this question, they should not have been recommended an investment product. A repayment mortgage would have been a suitable recommendation for them.

The firm failed to ensure that customers were provided with a clear written explanation of the reasons why a recommendation had been made. In particular:

• ‘Reason Why Letters’ issued were long and dealt with the reasons why other products had not been recommended, rather than explaining why the chosen product had been recommended.
• Where a customer had stated that certainty of repayment of the mortgage was a priority, the letters contained a standard statement that the product recommended did not offer these benefits but that priority had been given to other customer priorities. The Letters did not explain why this had been done.

The firm failed to monitor adherence to the Winteract system, on which it relied, in order to ensure suitable recommendations and failed to maintain adequate systems of internal control. In particular:

• Checklists used by a centralised checking unit, as part of the firm’s quality control process, did not give specific consideration to whether the product recommended was suitable for the customer, taking into account their response to questions relating to their attitude to risk.
• The advisers had the ability to override the Winteract system and there was no evidence of a requirement for the centralised checking unit to ensure that the recommendation made by the adviser was consistent with that of the Winteract system.
• The firm failed to conduct adequate quality assurance checks on the staff carrying out the checking of advisers’ business.

FSA/PN/124/2001
25/09/2001