The endowment misery goes from bad to worse

Endowment mortgage victims could collect around £12bn in compensation from insurers. But so far only 200,000 of the estimated 5m - one in 25 - who could claim, have.

Now the Consumers Association is targeting the other 4.8m with a website that makes writing complaints just a matter of filling in basic details and ticking boxes with a "letter generator".

Around four out of five homebuyers are now at risk of a shortfall. Even before the latest stock market falls, insurers were warning that the great majority of customers were either in the "red" - where 8% or more annual growth is needed to pay off the loan - or amber, which requires 6% to 8% yearly increases. Britain's biggest in surer, Norwich Union, revealed that 75% of its 1.3m endowment policies could fail to hit targets.

At firms such as Eagle Star and Allied Dunbar, the figure is nearly 80%.

Many insurers, led by Legal & General, have refused to disclose figures leading to fears that their customers will face even bigger problems. But three companies have offered some guarantees - Norwich Union and Standard Life say they will pay off the mortgage in full providing annual returns average 6% or more. And Liverpool Victoria offers an unconditional guarantee that maturity values will at least equal the loan.

Some people will have to find just a few hundred pounds. But others could miss out by tens of thousands despite original promises of a tax free lump sum on top of paying off the loan.

Telephonist Lynne Wearon from Beckenham, Kent, was persuaded to buy an endowment from Woolwich Life when she took out a £54,000 Woolwich mortgage in 1994.

Two years ago, she was warned of an £8,000 shortfall. But earlier this year, the Woolwich told her it would produce £26,000 less than she needs. "It's a 25-year loan so our premiums will total around £25,500 at £85 a month," she says. But since the last shortfall letter, the market slumped so the potential problem could be even greater. The Consumers Association says poor investment performance and a big shortfall forecast are not enough in themselves to gain compensation. Customers have to show they were "mis-sold". It estimates that some 5m households have potential cases with 61% of endowment mortgage customers being told the policy "would definitely" or "was guaranteed" to pay off their mortgage.

"We want consumers to get even with insurance companies. Our endowmentaction is a free way to do this. There is absolutely nothing to lose," says Consumers Association director Sheila McKechnie.

It sets out the reasons which could generate a complaint. These include: other options for repayment were not discussed, you were not told the end result was dependent on risks in the stock market, the adviser did not explain the endowment is a long-term investment which could be worth little if cashed early, you were promised the policy would pay more than the mortgage amount, they did not carry out a proper factfind, the adviser "churned" the policy - persuading the homebuyer to cancel a prior policy to take out a new one which gave a commission, the policy lasted until past the holder's retirement age.

Consumers who complain do not have to prove mis-selling "beyond all reasonable doubt" but just on the "balance of probability".

It may be worth trying the line: "Why would I have put my home loan on the stock market when I took no risks elsewhere?"

The Consumers Association warns that some policyholders could be fooled by the insurer's "defence" lines.

One is that homeowners need not worry because the value of most properties has soared.

"This is also rubbish," says Ms McKechnie. "It is a smokescreen for a group of people whose high upfront costs have caused major upsets for millions."