The PIA's figures on life and pension policy persistency rates show that far too many are being sold inappropriately.
The figures show that, overall, an alarming 25 per cent of regular-premium policies lapse within three years.
The regulator has warned life companies that it will crack down on those who fail to improve.
IFAs' persistency rates were better than their comp any rep rivals, with 91.1 per cent of regular-premium personal pensions sold by IFAs in 1995 still in force a year later compared with 85.5 per cent of policies sold by salesforces. But the PIA is warning that IFAs could also face sanctions if they do not come up to scratch.
Persistency rates for IFA-sold policies beat company reps on regular-premium endowments, life policies and personal pensions and single-premium life policies. Company reps only beat IFAs on single-premium pensions.
The PIA says improved training and competence has meant that persistency rates are higher than in previous years but the figures are still not good enough.
Those who do not improve will find the regulator's eyes trained even more keenly on them. Penalties available to the PIA include forcing comp anies to review business and retrain staff.
PIA head of press and public relations Sarah Modlock says persistency figures are taken into account when assessing a business and poor performers all need to improve.
"If there is a low persistency rate and no sign of improvement, then we want to know why, we want to discover why and the PIA will pay close attention to poor performers," she says.
But some life offices have questioned the figures' validity, particularly those which deal with consumers on low incomes who tend to change jobs regularly.
Guardian Financial Services is likely to be feeling particularly aggrieved – its one-year pension policy persistency rate for 1995 is just 76.2 per cent.
After two years, policies sold in 1994 had a persistency rate of 65.6 per cent and, after three years for policies sold in 1993, the rate is 55.2 per cent. But Guardian blames these figures on a computer error.
Employee benefits communications manager Russ Brady says: "There was an error on the computer system and it was picked up very late at the time of submission. This error is in the process of being corrected and we hope revised figures will be available in the next week or so.
"We feel the figures are worse than the reality. When they are released, through if they are better then we will substantiate the figures."
Britannic Assurance also performed poorly. Compared with a direct salesforce average of 86.5 per cent for regular-premium personal pensions, Britannic's persistency rate for 1995 policies is just 76.7 per cent.
For the two years from 1993, it is 63.1 per cent and for the three years for 1993, just 56.4 per cent compared with industry averages of 74.6 and 66.3 per cent respectively.
But chief executive Brian Shaw says the company's rates may look worse than they really are because of its flexible premiums.
"I'm obviously aware of the situation and it caused some concern but one of the features of our contract that is it is totally flexible in allowing premium holidays. A customer can, if they want, cease paying and that flexibility leads to more discontinuities in our persistency figures," he says.
He also claims many of the company's customers are on low incomes. They tend to change or lose jobs often or enter into company pension schemes.
Britannic research, carried out on its policyholders who had lapsed over the past two years, shows that 28.5 per cent moved into company pension schemes and 37 per cent were on premium holiday because of unemployment.
Modlock says companies cannot simply use the excuse of having low-income clients or premium holidays to exp lain poor persistency rates.
She says: "Other people do the same type of things and it would affect them too if that were the case. The PIA says that, unless there are exceptional reasons, there really is no excuse for poor persistency."
She says customers taking premium holidays would count as lapsed policies in the figures but adds: "Lots of firms do premium holidays and it really would not be an excuse for any one firm."
The validity of the figures has also been questioned because one of the biggest life offices, Prudential, did not have to submit complete figures.
It supplied the PIA with overall figures but gave no breakdown, unlike other life offices which are forced to.
Pru spokesman Kevin Russell says that , because the company is regulated by FSA, the PIA report would not be the right forum for its figures to be published.
In fact, the Pru need not give any figures at all. An FSA spokesman says: "We don't have any powers to make them publish their figures."
Elliott Bayley consultant Tony Laverick welcomes the IFA figures but he says: "There is still room for improvement for IFAs as well. They should be on 100 per cent especially on products such as endowments."