View more on these topics

FSA says others could charge like Standard

The FSA has warned that other insurers may be forced to charge policyholders for guarantees in the same way that Standard Life is proposing to do.

The warning comes as the regulator made public a response to Liberal Democrat Treasury spokesman Vincent Cable.

Cable had written to FSA chief executive John Tiner, questioning whether the FSA had recommended Standard Life to demutualise, following recent announcements by the life office that it will conduct a strategic review and will no longer include the benefits of mutuality in its future projections.

In its response, the FSA states that while it has no view on the merits of mutuality one way or the other, it does add to consumer choice but can leave fewer options for capital-raising.

The open letter to Cable goes on to say it may be that “a number” of other insurers will adopt charges on guarantees as Standard is proposing, saying it believes that it is essential that capital is held to back guarantees. It says companies in other sectors of financial services already price such costs into products.

The FSA says: “Many life insurers, especially those heavily involved in selling smoothed with-profits policies, need considerable capital to back their business and a mutual has a different and sometimes more limited range of choice as to how to respond to any capital shortfall.”

Cable says: “At first sight, this does spell the end of the mutuality sector. What does worry me is that the directors may be promoting demutualisation. On one side, Standard has the FSA pushing it towards demutualising but the City indicating it should move in the other direction, with Moody&#39s and Standard & Poor&#39s downgrading it.”

Scottish Widows head of industry relations George Andrew says: “We are not looking to adopt the same charging approach. We operate on the basis that amounts are reserved in years when guarantees are not biting for years when they are.”

Recommended

MLIM chief Jones leaves company

Merrill Lynch Investment Managers head of UK retail Michael Jones is leaving the group this week, with MLIM refusing to comment on the reasons for his departure. Jones, who has been with MLIM for six years, is being replaced by marketing director Richard Royds, who joined the group in 1997 following its acquisition of Mercury […]

Friends retain raising standards quality mark

Friends Provident have been re-credited under the Raising Standards quality mark by the PPIAB — an independent assessment body. PPIAB chief executive John Cox says: “The sustained commitment of Friends Provident and other accredited brands means more and more customers are enjoying the benefits of well presented documents, higher quality service and fair treatment.” Friends […]

Deloitte & Touche gets record £750k fine for compliance failures

Deloitte & Touche Wealth Management has been hit with the biggest-ever fine for an IFA – £750,000 – for serious compliance failures, including missing pension review deadlines by as much as four-and-a-half years. The FSA has described DTWM&#39s compliance failings as systemic, continuing over a long period and resulting from a wholly unacceptable approach to […]

Marlborough Stirling appoints new chief executive

Marlborough Stirling has appointed Mike O&#39Leary as chief executive. He takes over from Huw Evans who reverts to his previous role of chairman. O&#39Leary previously served on the board of Misys plc from 1986 to 2000 and was chief executive of its financial services division between 1990 and 1997 and its US healthcare division from […]

UK policy: Kate Moss and short-termism

“Nothing tastes as good as skinny feels,” said supermodel Kate Moss, who is not often credited for her insights into policy making. Perhaps she should be. In politics, as in matters of diet, the course of action that is the best over the long term is often not the most desirable course of action in the short term. Add the instant gratification of the democratic electoral cycle and, instead of good policy making, you sometimes get the equivalent to a midnight binge in front of the fridge.

Read more


Important information

Investment risks

The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment