Endowment misselling is a phenomenon that takes place when some sort of endowment is sold to a client without providing that client with all the information required to make an informed decision about the purchase. 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 understood to aid with paying off home mortgages. There are a number of ways to engage in endowment misselling and create a situation in which customers do not actually have the benefits they presumed to be included in the terms of the insurance agreement.
One of the more common examples of how endowment misselling comes about is the misrepresentation of what the endowment insurance does and does not provide in the way of protection. With this scenario, guarantees were made that were not necessarily reflected in the terms and conditions found in the insurance contract. The discrepancies are only found later one, sometimes when the homeowner seeks to file a claim and finds it is rejected.
Another situation in which endowment misselling occurs is failing to advise the customer that other financial products are available that would accomplish similar ends. Here, the situation rests on the failure of the seller to help the customer understand his or her options in better detail, making it easier to compare different products and finally choose one that is likely to provide the desired scope of coverage.
Endowment misselling may also be present in situations in which a lender makes securing the endowment insurance a necessity in order to obtain the mortgage financing. This can go hand in hand with the action of not informing the customer of other options that would work just as well. In this scenario, the customer is likely to move ahead and purchase the insurance, thinking that there is no other way to obtain the mortgage.
The basics of endowment misselling all track back to the failure of the seller to properly inform the buyer of why the coverage is needed, what it provides, and what other options may be available. At times, the misselling may take place because agents and other sellers themselves may be misinformed, leading to them passing on incomplete or inaccurate information to their customers. At other times, the misselling occurs due to a deliberate attempt to omit data that the customer requires in order to make a decision. With either situation, the customer ultimately pays the price, sometimes to the point of not only losing money on the premiums paid for coverage that is more or less worthless to them, but also possibly even putting their ability to finish paying the mortgage commitment in jeopardy.
