Around 23,000 Irish homeowners have a projected shortfall of €89 million on outstanding endowment mortgages, an average shortfall of €3,825 each, according to a survey of financial institutions by the Irish Financial Services Regulatory Authority.
Liam O'Reilly, the financial regulator's outgoing chief executive, said yesterday that a total of 47,759 endowment policies had not yet reached maturity and that 23,264 of these were still linked to outstanding mortgages.
On endowment mortgages, homeowners only repay the interest owing on the loan and then pay monthly premiums to an insurance company in the expectation that at the end of the term, the policy will generate a lump sum that will clear the mortgage and even leave a surplus.
However, a downturn in investment markets meant that the projected maturity value of endowment policies sold here in the late 1980s and early 1990s typically fell short of the mortgage owed.
Mr O'Reilly told the Joint Oireachtas Committee on Finance and Public Service that the projected shortfall for homeowners seeking to use their policy to repay a mortgage was €89 million over the next 15 years.
A further 24,495 people have repaid the related mortgage but have retained their policy. When these are included, the total potential shortfall increases to €182 million, or €3,810 per policy.
Endowment mortgages led to a major financial scandal in the UK, where around five million people are thought to have been the victims of mis-selling.
Mr O'Reilly said the level of endowment policy sales had been around 16 times greater on a per capita basis in the UK than here.
But whereas thousands of British consumers have received compensation for mis-selling, only a handful of complaints about endowment mortgages have been upheld here, the financial ombudsman, Joe Meade, told the Oireachtas committee.
A total of 280 complaints have been made to Mr Meade and the voluntary ombudsman schemes that preceded the establishment of his office in April 2005.
Mr Meade said two of these complaints had been upheld and a further 19 settled. Some 62 cases are still under investigation.
But it is likely that most complaints will be rejected because his office cannot investigate incidents that occurred more than six years prior to the date of the complaint.
This prevents complaints on the grounds that the consumer was told on the date of sale that the endowment policy was guaranteed to clear their mortgage.
Even if the time limits did not apply, financial institutions here, unlike their UK counterparts, were not obliged to keep records on how products were sold in the early 1990s, making it difficult to prove mis-selling practices.
Mr Meade said he would investigate if shortfalls on projected maturities amounted to a breach of contract, as long as complaints were made within six years of maturity.
Life assurance companies have now agreed to issue annual policy updates to all endowment customers from this April. The statement will include information on the options available to them in relation to shortfalls, including potential avenues of complaint.
