United Friendly Insurance plc & Refuge Assurance plc fined 700,000

Savings Endowments

The fines result from breaches of PIA Rules relating to sales of with-profits endowment savings policies.

The firms are carrying out a business review of their historical endowment savings policies and will provide compensation where customers have lost out. This review currently covers the period 1 August 1997 to 21 July 1998.

Mortgage Endowments

The firms have decided that, in addition to reviewing endowment savings policies, they will also be pro-actively reviewing the sales of their mortgage-related endowment policies to see whether consumers are due any compensation in this area. This review also currently covers the period 1 August 1997 to 21 July 1998.

Compensation totalling approximately 31 million is expected to be offered to more than 30,000 investors in relation to this historical review of both savings endowments and mortgage endowments.

PIA investigations found that in relation to selling practices the firms had:

• Failed in some instances to have regard to the suitability of advice. In particular they had failed to:

• take account of the customers stated savings objective;
  
• ensure that the contract was affordable to the customer; and
  
• establish that the customer needed the contract.

• Failed to keep sufficient customer records to show that the recommendations made were suitable.

• Failed to ensure that customers received a clear written explanation as to why their recommendation was appropriate.

PIA investigations found that in relation to the firms organisation and control of their internal affairs the firms had:

• Failed to maintain an adequate system of compliance control and failed to monitor adequately the conduct of their staff.

• Failed to ensure that consumers complaints had been promptly and adequately investigated.

Unitedfriendly has been part of the Royal London Group since April 2000. PIA acknowledges that Unitedfriendly and Royal London Group have committed themselves to a radical and thorough overhaul of Unitedfriendlys business. In so doing Unitedfriendly and Royal London Group are co-operating fully and willingly with PIA.

Notes for editors

1. United Friendly Insurance Plc and Refuge Assurance Plc are based at Refuge House, Alderley Road, Wilmslow, Cheshire, SK9 1PF.

2. On 1 August 1997 United Friendly Insurance Plc and Refuge Assurance Plc formed a single marketing group known as United Assurance Group. This group is not regulated by the PIA.

   When these firms joined together to comprise a single marketing group, they shared the same systems and processes for marketing the same products. Additionally they shared the same compliance and complaints handling function.

   The firms, although forming part of the same marketing group and sharing internal functions, have continued to be separately registered with the PIA.

3. Royal London Group acquired United Friendly Insurance Plc and Refuge Assurance Plc in April 2000 and they formally merged to become part of the Royal London Marketing Group from 1 January 2001.

4. The firms were ordered to pay PIAs costs totalling 23,800.
5. Those consumers who have policies that fall into the review and who may be due compensation will be contacted by letter and, where appropriate, compensated by United Friendly Insurance Plc and Refuge Assurance Plc by the end of 2001.

   The firms are providing a Helpline which consumers may contact on 01625 605 908. The Helpline will be open from 8.00am to 6.00pm Monday to Friday and from 9.00am to 5.00pm on Saturday and Sunday. Investors can also write to Customer Relations, United Friendly, Refuge House, Alderley Road, Wilmslow, Cheshire, SK9 1PF.

6. Investors concerned or affected may contact the FSA Consumer Helpline on 0300 500 5000 although United Friendly Insurance Plc and Refuge Assurance Plc will be contacting those consumers affected, as detailed in Note 5.

7. A savings endowment is used for a specific savings objective whilst a mortgage- related endowment is used with the aim of repaying a mortgage at the date of maturity of the policy.