FSA director John Tiner has criticised life insurance companies for overpaying bonuses on with-profits policies, claiming this raises consumer expectations and could be unsustainable.
Speaking at a CII Breakthrough lecture last week, Tiner said he is “worried about the expectations of policyholders”.
Tiner has been given the job of implementing the recommendations of the Baird report into the FSA's handling of Equitable Life.
He has dubbed this the Tiner Project.
He questioned whether current levels of asset shares being paid on with-profits policy bonuses were sustainable. Tiner said: “Distribution to with-profits policyholders has been well above their asset shares.
“Providers have distributed about 110 per cent of asset shares through the 1990s. The question for life offices is, is that sustainable, and if not how does it affect their marketing of products.”
He said life companies will have to improve the transparency of with-profits funds and after N2 will be required to publish more detailed free-asset ratio returns and performance data, disclose internal records of asset allocations within funds and make returns for 2001 available online by the end of April 2002.
Tiner said terminology in the insurance industry is a minefield and he wants to make it clearer.
He said the approach to regulating the insurance ind-ustry has been relatively distant but N2 will make it more “productive and challenging” with management becoming more accountable.
Scottish Mutual pensions development director Leslie Gray says: “We need to be clear that publishing details of asset shares will not put information into the hands of analysts who will make buy, sell or hold recommendations on those funds.”