The practice of endowment misselling reared its ugly head in the late 1980s; unfortunately, the effects wouldn’t truly be seen for a decade, as many hopeful investors saw their investments come up woefully short, due entirely to agents and companies that misrepresented the true value of the bond. Does the general public have a right to be indignant over misselling by banks and insurance agents, in the same way as they would over a blatant purse-snatcher? After all, consider the name of the alleged crime, itself: “misselling”. It’s as if to suggest the fraud is an accident, or an attempt to deflect blame away from the more powerful party in all financial transactions. For a better perspective, consider the Fraud Act of 2006, which was put in place in part to place tighter reins on the dubious endowment policies sold by many investment agents in the last century:
The Fraud Act (2006):
Section 1 – this amendment to the preexisting law heralds the first of four that will help us truly see all of the things that misselling entail. It creates a new offence of securities fraud and introduces the three possible ways of committing it (i.e. the three ways governed specifically by this Act). Sections 2, 3, 4 will state these ways explicitly.
Section 2 – False representation. This entails essentially disguising the true nature and expectation of a certain kind of security, in favor of another kind. It’s like trying to sell a whole life insurance policy as equivalent to an endowment.
Section 3 – Withholding information when it is legally binding to share this with the investor. That pretty much sums up where it all really went wrong during the endowment mortgage shortfall crises in the UK before the turn of the century. No one told the investors that they wouldn’t have enough money to cover the mortgages by the time of policy maturity, even though licensed insurance agents would know things like this readily.
Section 4 – Abuse of position. Seems a bit superfluous, given the first two.
Since all of the above continue to be broken today by numerous insurance agents, as evidenced by the PPI – payment protection insurance – misselling cases this very year (2010-2011), one wonders if this continual flaunting of the law will ever be dealt with. Perhaps the people need to hit them where it hurts, and stop buying life insurance. A seemingly drastic move that would obviously be debilitating to some… but I, for one, can recall a time when the human race got along just fine without it.
Christina Thomas knows what it’s like to experience endowment misselling, as a close family member nearly lost her house when the matured bond fell far short of the mortgage. She encourages you to research thoroughly the credentials of an insurance agent selling endowments.
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