Nearly nine out of 10 of Norwich Union’s mortgage endowment policyholders will get red warning letters after the firm decided to scrap amber.
The company says 89.5 per cent of its mortgage endowments carry a high risk that they will not pay off the loan compared with 72 per cent in the previous year.
The increase is due to NU’s decision to recategorise amber letters, carrying a significant risk of the shortfall, to high-risk red letters.
Last year’s figures showed 72 per cent of endowments in the red zone, 21 per cent in the amber sector and 7 per cent green.
NU senior actuary David Riddington says the company had collected evidence suggesting that the amber letters were not triggering policyholders into seriously considering their options and a simple red/green system makes the process more transparent.
He says the decision to scrap amber letters was made after consultation with the FSA and says he is unaware of any other provider operating a twocolour system.
NU has 750,000 mortgage endowment policyholders, with 155,000 of them were time-barred last year.
Riddington says: “We think this move provides far greater clarity to the consumer. Evidence suggests that when people received an amber letter they were less likely to think through the implications of the warning. This was a concern to us and we decided that amber letters were not enough.”
Baronworth director Colin Jackson says: “This is a ridiculous move that will make the process far more opaque than transparent.
“It will scare consumers into complaining when there may be no need to, raise the workload of the Financial Ombudsman Service and force more advisers to pay case fees when there has been no missale.”