IFAs are calling for providers to compensate endowment policyholders
facing shortfalls because they used assumed charges lower than actual
charges to calculate illustrations given at outset.
But some providers believe the responsibility lies with the regulator
which they say forced them to use this method of working out illustrations
IFAs are increasing the pressure to force providers to follow the example
set by Clerical Medical, which is compensating policyholders who had their
policies illustrated using assumed charges.
LM Kellands IFA Mike Yeatman says: “There is a moral obligation on
providers to make up the difference caused by charges being higher than
However, life offices argue that they were not allowed to use actual
Winterthur Life actuarial technical manager Andy Dillie says: “In my
personal view, the onus is on the regulator.”
Windsor Life wrote to clients explaining Lautro's instruction to use an
assumed charging structure, which is one factor affecting current projected
maturity value rates. It says it is in discussions with the FSA about what
action it can take, including making up projected shortfalls generated by
using assumed charges.
The FSA confirms it is looking at how policies are priced as part of its
Riach IFA Bob Riach says: “Providers have to take responsibility unless
this was made clear to clients. But more responsibility lies with Lautro.”