Policy sale option urged

INSURANCE companies are being asked to consider telling policyholders that they can sell their endowment policies on the open market if they no longer need them, rather than surrender them for less.

The Insurance Ombudsman's Bureau, the industry's watchdog, is known to have contacted at least one company to ask whether this information could be provided to inquirers.

The IOB's move followed a complaint from the insurer's client who surrendered a part- paid policy back to the company and then found he could have got more by selling it.

Paul Tobias, a senior assistant at the IOB, said: 'We would not be in a position to do too much about about it, because a company is not obliged to give information about other companies.

'But we are generally in favour of greater information being given to the consumer about all aspects of a product.'

People who surrender their policies a few years after taking them out can get back less than they paid in. Even 15 or 20 years into a 25-year policy, the amount returned to investors can still be very low.

A number of specialist firms are offering to buy some of these policies from investors for an average of 12 per cent more than their surrender values. The policies are then kept going and provide an eventual lump-sum payment for the buyer. David Beale, a partner in Beale Dobie, a firm that trades in the market, said: 'We have been talking to a number of companies to ask them to tell people that they can also sell their policies.'

'We think it is only fair that people should be given this additional choice, even if companies are not actually obliged to do so.'

Bill Robertson, product marketing manager at Scottish Amicable, said his company did give clients a list of potential buyers for their policies if they asked for it.

But he defended Scottish Amicable's decision not to give this information out automatically: 'Generally, what we want to do is discourage people from giving up their policies at all.

'We are also wary of encouraging the people who buy our clients' policies from sources other than us, because although the ultimate performance is down to us, we cannot control the value at which they are sold.'

Standard Life said: 'When people contact us to surrender, we do send out details of the options that are available to them from us.

'We tell them that there may be other options and suggest that they contact their independent financial adviser to discuss this.'