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FSA consults on banning use of surplus to pay compensation

The FSA has published a consultation paper proposing to stop insurance companies from using the inherited estates of with-profits funds to pay compensation for mis-selling.

FSA rules currently allow firms to pay redress from inherited estates but after re-examination of these rules it concluded that the current rules may not lead to the fair treatment of policyholders.

FSA rules already require firms to consider whether they have an excess surplus in a with-profits fund that should be distributed to policyholders.

The consultation will close on 3 September 2008 and a policy statement giving feedback on the consultation is due to be published before the end of the year.

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