COMPLAINTS about endowment mortgages are flooding into the Financial Ombudsman Service at a record 1,300 a week, it said yesterday, and the deluge could intensify.

Walter Merricks, the chief ombudsman, is braced for more complaints as insurers write to millions of policyholders informing them of worsening shortfalls this year.

Complaints, he said, could also be boosted by new rules obliging insurers to spell out the deadline by when complaints have to be lodged.

“These letters could result in significant increases in the numbers of consumers contacting their endowment provider — and in some bulges in complaint volumes,” Mr Merricks said.

The service has struggled to cope with the soaring volume of endowment complaints. These have grown from 9,000 in 2000-01 to 13,600 in 2002-03 and 69,700 in 2004-05.

The typical wait for an adjudication has lengthened by about a month over the past year and now stands at six to nine months.

The ombudsman has already complained to the Financial Services Authority (FSA) about the complaint-handling procedures of some life assurers, which sometimes only take complaints seriously once the customer has demanded a formal ombudsman inquiry. In the case of some companies, the ombudsman was upholding as many as 90 per cent of complaints — a strong indication of deliberate foot-dragging by the industry.

There had been patchy signs of improvement since the FSA reprimanded the industry in January, the ombudsman said.

Millions of homeowners face endowment shortfalls because of lower than expected investment returns. The smoothing process and more conservative expectations mean that projected shortfalls are continuing to rise despite the rally in shares.

Overall, the ombudsman received a record 110,963 complaints for adjudication in the course of the year, up 13 per cent. Stripping out endowment problems, however, complaints were down by 10 per cent.

Complaints about other packaged investment products fell markedly, partly a sign that the precipice bonds scandal is now well in the past. Complaints about pensions and motor insurance were down too.

Other products produced a growing volume of complaints, including current accounts, buildings insurance, credit cards, travel insurance, savings accounts, unsecured loans, cheque clearing, cash machines, income protection insurance, critical illness cover and stockbroking.

The service’s income grew from £41 million to £44 million. It narrowly missed its productivity target of resolving 4.5 cases per adjudicator per week. Staff numbers have grown from 350 five years ago to 950.