Don't panic was the headline of a leading national news-paper on January 9. I hope this does not turn out to be the epitaph for Standard Life.
What is going on? Why Standard? Surely if there are issues concerning valuing liabilities and solvency, then this applies to all insurance companies? Why is it that the Standard debate is public?
We need to look back to the origins of our industry. Mutual societies and friendly societies were there to protect their members' interests, money and hopefully give them a reasonable return. The days when terminal bonus would not be quoted by an institution, but with a bit of luck you could manage to get the local inspector to scribble a number on a piece of paper, have been replaced by greed and insensitivity. We all know about smooth returns, putting money aside for a rainy day, but we have had the rainy day.
Is a wider debate not needed concerning the use of client funds for such things as misselling fines and other expenses? The only free lun-ches were those had by the institutions and their agents.
Contracts were promoted on their merits. Whether fully understood or not, they were contracts. If a particular company or contract offered a better return, then naturally it was seen as the better arr-angement. Today, for many reasons, some still to be disclosed, we have the dreadful situation with Equitable Life.
Surely, Standard is not going down the same route on the basis that a minimal guarantee is classed as a free lunch and must now be paid for.
It is no use saying that there is no comparison bet-ween Standard and Equitable Life to the consumer. To our clients, the people who have ploughed money into Standard, the comparisons are all too similar.
Where is the regulator in all this? We all know and expect the regulator to have more muscle following the serious drama of the last few years. Is it not aware of the great concern that is being created in consumer minds and can it not see that in its goal for protection, all that is happening is that clients are turning away?
Mutuality is an ideal. Why can that ideal not be maintained? Is it not possible to change mutuality to enable corporate money-raising to be more easily achieved without the need to demutualise? If demutualisation has to be considered, it is only correct that the board should change but the arrogance of the pronouncements emanating from Standard are frighteningly similar to the pre-collapse statements issued by Equitable directors.
Conspiracy theories abound. Is the publication of this deb-ate a stance by the regulator to show its muscle? Worse, could it be Standard finding a way to blame others for having to consider demutualisation?
One theory I have heard, which might carry weight, is the lack of new with-profits business forcing Standard to alter its position and find a way to save face, again by blaming others.
I truly believe Standard is in a better position than these rumours suggest. How-ever, when will I again be able to promote Standard? What will this lack of new business do to Standard Life's figures? What will happen to Standard?
Consultation paper 207 is entitled, Treating With-Profits Policyholders Fairly. There are many with-profits policyholders today who certainly feel that they have not been treated fairly.
I cannot see how they can be treated fairly and what adviser can generally recommend with-profits for an investment vehicle for new contracts today.
Richard Jacobs is director of Richard Jacons Pensions & Trustee Services