Speaking at a Treasury Select Committee hearing today policy adviser Dominic Lindley said the FSA was failing in its duty to ensure companies treat customers fairly.
He said the FSA set out in 2003 its key objective was that pay outs to individual policyholders would not be reduced by costs arising by firms failing to meet regulatory obligations.
He said: “Every pound taken out of the inherited estate reduces returns for policyholders so the FSA set out an objective then failed to meet it.”
Lindley said Norwich Union had already used at least £263m from the inherited estate – £180m to pay misselling costs and £83m to top up its staff pension scheme. He said further hundreds of millions of pounds had been taken from the estate to pay for shareholder tax, to the detriment of policyholders. In the Axa case over 50 per cent of the pot was unfairly used according to Lindley, with £400m taken to pay shareholder tax.
He called on the FSA to specify exactly what directors can use the estates for, to limit the discretion they currently have. He added the regulator should make a much more determined stand in favour of policyholders.
FSA chief executive Hector Sants said the regulator’s main concern was to ensure policyholders get a fair deal and claimed it was doing a good job.
He said: “Any suggestion that we’ve not been completely crystal clear that our job is to get a fair deal for policyholders I reject completely.”