FSA fines Winterthur ?500,000 for mis-selling

The financial services authority yesterday punished Winterthur Life for mis-selling endowment mortgages with a £500,000 fine and an order to pay £10m to customers left out of pocket.

Winterthur Life, part of the Swiss banking group Credit Suisse, has to compensate customers after it failed to meet guidelines on the sale of mortgage policies, the FSA said.

The fines and compensation order is the first move by the FSA against a major insurer for endowment mortgage misselling and is likely to be followed by more severe punishment against rival providers, many with larger numbers of complaints against them.

Up to 10,000 Winterthur customers who were sold mortgage endowment policies between March 1998 and December 1999 are likely to receive compensation payments following the FSA's actions.

A spokesman for Winterthur said the problems arose after the firm offered financial advisers, operating from several estate agency chains, a software package to aid potential mortgage customers.

The firm admitted the software, which was designed to establish a customer's attitude to risk, was flawed and allowed customers to be mis-sold endowment mortgages.

Endowments have been widely criticised as inflexible investment products that pay substantial commissions to financial advisers. They are commonly designed to run for a fixed period of 10 to 25 years. In recent years declining inflation and interest rates has produced poor returns and many firms have been forced to alert customers that the investment will fail to pay off their mortgage.

Carol Sargeant, head of regulation and risk at the FSA, said: "Where consumers have suffered loss we want to see firms act quickly and decisively to put things right. 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."

She added that the level of fine against Winterthur reflected "the fact that it has dealt with this problem quickly, openly and co-operatively".