Friends Provident fined ?675,000 for mishandling complaints

Friends Provident has been fined ?675,000 for failing to deal effectively with complaints about mortgage endowment the Financial Services Authority (FSA) said today.

The life insurance company received 21,788 mortgage endowment complaints between the opening in March 2000 of its dedicated complaints handling team, and February 2003. During that time, around 5,500 customers with genuine complaints had their claims rejected. The FSA said this had happened because the complaints procedures in place were "inherently not fair" and "biased against customers".

Failings in the company's system included "a readiness to dismiss consumers' evidence when it was not supported by documentary proof" and "an assumption that a pre-existing endowment, or other investment held at the time of sale, was sufficient evidence that the customer had an understanding of the risk associated with the product".

Andrew Proctor, director of enforcement at the FSA, said: "Firms should be under no illusion as to the standards expected in relation to complaints handling. We will not tolerate poor systems which expose consumers to the risk that genuine complaints, which may deserve compensation, are rejected unfairly."

"Friends Provident and its senior management failed to respond in an effective and timely manner to FSA guidance and to correct problems found in its systems when it had responsibility to ensure its practices are fair, and we will continue to monitor firms' complaints handling."

Friends Provident said it regretted what had happened and that once the issue was identified, in February 2003, the company redesigned its processes to deal with endowment complaints. The company said it would voluntarily re-examine complaints that were rejected during the period when procedures were faulty.