The FSA is warning life insurers that they may not be recognising all potential with-profits liabilities, particularly for older products.
The regulator has written to the chief executives of all life insurers and friendly societies about its review of processes, systems and controls for with-profits insurance contracts.
The letter highlights two main concerns – that some firms have no legal procedures in place for the development of product or marketing literature and worries over the adequacy of record-keeping.
The FSA says the absence of legal procedures for product and marketing literature can lead to inconsistencies between different pieces of literature. It is calling on firms to review their procedures for managing legal risk to ensure they are appropriate.
The letter also reveals concerns that firms may be frustrated in assessing long-term obligations because they do not keep adequate records or make sufficient checks. The FSA says this issue may not be confined to with-profits products.
Sector leader, insurance, David Strachan writes: “We have concerns that firms may not be recognising all their potential liabilities, particularly for older products. We are also concerned that firms may no longer even have copies of original documentation for some of these products.”
The FSA says it will check in due course to see if firms have addressed any weaknesses in areas highlighted in the letter.
Royal London head of corporate affairs Gareth Evans says: “Delivering on what the FSA has asked for could be onerous, particularly for companies which have acquired a number of other businesses and have a lot of historical accounts.”