Contracting-out conundrum
It is with no pleasure that Money Marketing this week warns of a 2.8bn contracting-out problem which could hit the industry.
Sources tell us that the FSA held a board meeting last week following extensive discussions with insurers about what to do with those who contracted out in the 1980s and 1990s after the pivotal age of 40 for men and 35 for women. Among many possible nasty surprises, insurers may pass on cases where there are perceived problems to IFAs to review though the brunt of those cases should involve directly sold policies. The number of those contracted out who may be due compensation for perceived misselling may be as high as 250,000, the bill as much as 2.8bn.
Once again, the industry’s past could come back to haunt it. MM is very alarmed that the FSA, which say it will not regulate retrospectively, may be about to do just that. There are fears that IFAs and life companies could struggle to defend claims dating back almost 20 years. The endowment crisis – note we do not use the term scandal – to all intents and purposes became an ombudsman-led and claim-chaser-driven review.
In this case, we remain bemused about exactly what regulatory standards applied at the time and how this will now be interpreted. All we can hope is that the FSA stands up to the consumer lobby.
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