It’s at this stage that I could really indulge myself, and explain in great detail every wrong-doing, and every forgery I saw being carried out, and all the bad advice that was given to the clients, and worse still the way the Co. deliberately misled the workforce over the way these policies were constructed, and by the salesperson explaining the policies the way they were taught by the Co. instructors. Of course, in the end it was the client who lost money.
The best way to explain it is to give a few examples. The first is the small, collectable policies that I first started selling when my job was knocking doors, and introducing new clients to theCo.
The Table 14, as it was called, was a cheap, collectable endowment policy, that could be taken over a period of between 10 and 20 years, but we were told that it didn’t matter to the client because even if they took it out on a 20 year term, they could still mature it after 10 years, and the sales force were encouraged to sell it on the 20 year term because the longer the term the bigger the commission.
Naturally, the client would not receive as much of a pay-out on a 10 year term as they would on a 20 year term, because they would not have paid as much into the policy, which makes perfect sense. Or does it?
The truth is, it’s not until you examine things further, and find out the things you, as the client, were never told, and that I, as the salesman, were never told, that you realise it was a rip off, for instance when you take out a policy there are two types of units: Capital and Accumulation.
The Capital units are generally purchased over the first two years, and bear all the charges making them worth less than the Accumulation unit, which actively produce profit, which is then added to the sum assured on the policy, and once added cannot be withdrawn, it all sounds good, doesn’t it?
But once again, upon examination, they were designed and formulated to penalise the poorer members of society, and hopefully the explanation of that statement will be easily understood when I attempt to explain it like this:
These types of policy were originally designed for the working classes, who may not have a bank account, hence the door step collection. But the policy was a very cunning way of penalising the less well off, just by promoting that they should be sold on a 20 year term.
What was the benefit to theCo.and what was the loss to the client? The first is this:
If you had a ten year policy, and after ten years decided that you didn’t need the money at that time so you extend the policy, then the benefit to the client would have been that upon that extension the Co. would convert the first two years capitol units into accumulation units, giving them a bigger sum immediately, and of course that also meant that the extended period would have produced a bigger maturity because they would be paying less in charges. There was also another little bit of a twist that was never mentioned, that penalised the poorer people, and the best way for me is to explain it is as though you are a client, and you have purchased a policy on the twenty year term, and after paying it, for example, for five years, you then found you couldn’t afford it any longer, and decided to take an early surrender value; which was a very common thing to happen.
The money you would receive would be less the penalty charges for not keeping your side of the bargain, and keeping it running for the time you said you were going to, which means that on that twenty year term, there would be a fifteen years penalty to pay, and you would receive less as a pay out than you had paid into the policy.
But if you had taken it on a ten year term, then the penalty would have been a five year penalty, and you would have received at least your money back, or even a little bit more. So, in essence, these policies should never have been designed and sold on any other than a ten year term. TheCo. used stealth to pick the pockets of the most ‘needy’.
The next example of a policy that was designed to deceive clients was the ‘Accelerated Investment Mortgage Plan’ called the AIMP. This is a type of policy that you will likely be aware of. It was called a ‘Unit Linked Endowment Mortgage Policy’, and was explained like this: If you were in ‘The Unitised with Profits Fund’ an annual bonus would be added to the ‘guaranteed sum assured’. This fund is specially designed for the less speculative client, to protect him from the volatility of the market. Other funds like ‘The Managed Fund’ could produce greater returns, but these returns could not be guaranteed. Meaning, if for example, you had found a £50,000 house you wanted to buy, and you needed a policy that also gave you the chance of receiving a large lump sum return after your mortgage was paid, then the ‘Endowment’ was the policy for you. But as you are probably aware, this wasn’t the case. Why? Because the Insurers all of a sudden said that nothing was guaranteed, because the policy is unit-linked, and they started telling people this was the fault of unscrupulous sales persons, and that you should take your complaint to the FSA what a joke and a lie!
Once again let me explain as simplistically as possible:
Firstly, in the words of the insurance company that I was involved with: They stated, “Our understanding of the Endowment, is a policy were a sum assured is selected by the client, at the inception of the policy, and is guaranteed to be paid out at a specific date in the future, or, upon the death of the life assured.”
And that is exactly right, that is what an endowment policy is, and what we the sales force was led to believe it was.
It was also explained that as we showed the prospective clients who displayed an interest in purchasing a policy of this type, what we called ‘sales aides’, e.g. a maturity of an equivalent term endowment policy, with the same sum assured as the potential client needed, and over a twenty five year term showed a maturity value of £125,000-00, that the difference between the £50,000 and the £125,000 could not be guaranteed.