Now that the dust has settled over the problem of Standard Life's solvency, one thing stands out very clearly.
There is no question that the FSA is absolutely doing the right thing in imposing a new, tougher and more transparent accounting regime on the life companies.
As long ago as the 1980s, a report by one of the major firms of accountants into the life insurance industry called for a new Insurance Companies Act.
It pointed out that no two insurance companies reported their accounts on the same basis so it was impossible to tell how a company measured up against its competitors.
Even worse, many companies did not report their figures on the same basis from year to year so there was no comparison to determine how well or badly the business was doing.
The report concluded that life companies' accounts were no better than smoke signals.
The worry is that in the short term, the upset over
Standard Life will dent even further savers' fragile confidence in the life companies, already battered by the Equitable Life debacle.
A run on Standard Life would be a disaster – not just for the company but for the industry as a whole.
But if the companies do not like the new tougher regime, they have only themselves to blame. For too long, they have sought to pull the wool over the eyes of the regulators while the regulators have been too timid in dealing with the problem often because they believed that any action would precipitate the very disaster they sought to avoid.
The Department of Trade and Industry, then the life industry regulator, knew as early as 1998 the extent of the problem at Equitable Life yet it allowed the company to continue to write new business until 2000.
It effectively let Equitable trade while insolvent. Hopefully, the regulator will sort out the accounting side of life companies but there is still much to do. It is about time that the Treasury reviewed the tax breaks which life companies enjoy which have enabled them to pay little or no tax while rounding up the lion's share of long-term retail savings.
New rules can make savers' money safer. But it will take more than an accounting revolution to change the attitude of the industry. For far too long, the life companies have seen customers as a necessary evil – lambs to be fleeced as often as possible.
The disdain with which they treat their customers is legendary, widespread and perpetuated from generation to generation of managers.
The Consumers' Association and the Office of Fair
Trading must start to use their powers effectively to bring class actions against those institutions which abuse their positions.
A huge proportion of life and pension products would never survive a challenge under the Unfair Terms in Consumer Contracts legislation. But still the companies get away with massive penalties for withdrawals, front-end charges for services yet to be rendered and fee increases entirely at the managers' discretion, with little or no indication of how they are calculated or in what circumstances they can be imposed.
The FSA must mount a blitz on life companies' admin which in many cases is appalling. If a life company takes five weeks to answer a simple query, as some do, what confidence can investors have that the amount they get as a payout on their savings is correct?
It is not so long ago that the Insurance Ombudsman, now merged into the Financial Ombudsman Service, became so frustrated with the life offices that he was moved to complain in his annual report that if the companies could not be bothered to reply to letters from his office, they could hardly be surprised when he came down on the side of consumers.
But you can't make an omelette without cracking eggs. If the upshot of the new accounting regulations is that some companies go to the wall or are forced into shotgun marriages, so be it.
There are far too many small life companies anyway and consolidation will be good both for the industry and investors, if the result is fewer, but stronger and more efficient institutions.