Leading consultancy KPMG is urging life offices to provide with-profits
customers specific details of how bonus policies are calculated in a bid to
to restore confidence.
In the wake of the FSA's with-profits review and Equitable Life slashing
its bonuses, KPMG says customers need to make an informed choice about
their appetite for risk.
There is still a future for with-profits, says KPMG, but consumers must be
kept informed if they are going to trust the life office with their
The easiest way to achieve this objective is for life offices to define
and publish the bases they use in calculating the amounts policyholders
The consultancy says these would include details of how the investment
returns will be smoothed, how expenses will be charged to the policy, the
basis for providing lock-in guarantees and any circumstances in which
surrender penalties will be levied and how any penalties will be arrived at.
KPMG head of actuarial services Seamus Creedon says if with-profits
policyholders are provided with improved individual contractual rights,
there is no need to give them rights of representation or to have a
designated actuary look after their interests.
Creedon says: “In the past, regulatory protection has been directed at
policyholders as a class. But, as the Equitable Life case has shown, it is
quite possible for individual policyholders to lose out to other