A House of Commons Treasury Select Committee looking into endowments has identified a catalogue of failings by the insurance industry.

A report by the committee said there were failings in the way the products were sold, in how assets were managed and in how people were kept informed about their investments.

Their report said the insurance industry was "locked in an unacceptable culture", which had worsened problems for many policyholders.

£40 billion shortfall

The committee estimated that collectively, endowment holders will face a shortfall of nearly £40 billion between the maturity value of their policies and the mortgages they have to pay off.

The average shortfall across policies is estimated at £5,500.

The MPs said many policyholders on lower incomes were now left in an "advice vacuum", not knowing which way to turn and said some people may be forced into selling their home if they fail to act, with elderly and vulnerable people particularly at risk.

Only 6% of policyholders have so far claimed compensation for miss-selling. About 80% of endowment mortgages are now likely to miss their target, estimates the industry.

The committee slammed the industry saying that advice that was given was widely distrusted and frequently found to be unsatisfactory by consumers, the industry had failed to inform consumers about what was happening to their savings as investment returns tumbled.

The MPs called for immediate action by the City regulator and the industry. In particular, it wants the existing time limits on complaints to be extended, and better basic financial advice made available to people facing shortfalls.