Endowment misselling is when customers are sold endowment insurance without being given all the necessary information. This can happen through misrepresentation of what the insurance provides, failure to inform customers of other options, or requiring insurance to obtain mortgage financing. The seller’s failure to adequately inform the buyer can lead to customers losing money and potentially jeopardizing their ability to pay their mortgage.
Endowment misselling is a phenomenon that occurs when some sort of endowment is sold to a customer without providing that customer with all the information necessary to make an informed purchase decision. The term is widely used in nations that provide for the sale of what is known as endowment insurance, a type of insurance protection that is intended to help repay home mortgages. There are several ways to engage in endowment misselling and create a situation where customers do not actually have the benefits that are assumed to be included in the terms of the insurance contract.
One of the most common examples of how endowment misselling occurs is the misrepresentation of what endowment insurance does and doesn’t provide in terms of protection. With this scenario, guarantees were issued that did not necessarily correspond to the terms and conditions of the insurance contract. Discrepancies are only found later, sometimes when the homeowner tries to file a claim and finds it denied.
Another situation where endowment failure occurs is failure to notify the customer of the availability of other financial products that would serve similar purposes. In this case, the situation is based on the seller’s inability to help the customer understand his options in more detail, making it easier to compare different products and ultimately choose one that can provide the desired scope of coverage.
Endowment misselling can also be present in situations where a lender requires the assurance of endowment insurance to obtain mortgage financing. This can go hand in hand with not informing the customer of other options that would work just as well. In this scenario, the customer is likely to go ahead and buy the insurance, thinking there is no other way to get the mortgage.
The basis of endowment misselling goes back to the seller’s failure to adequately inform the buyer why coverage is needed, what it provides, and what other options may be available. Sometimes, misselling can happen because agents and other salespeople themselves may be misinformed, leading them to pass on incomplete or inaccurate information to their customers. Other times, misselling occurs due to a deliberate attempt to omit data that the customer requires to make a decision. In both situations, the customer ultimately pays the price, sometimes to the point of not only losing money on premiums paid for coverage that is more or less worthless to him, but also possibly jeopardizing his ability to finish pay the mortgage commitment.
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