Personal Finance: 'FSA Too Scared to Take on Insurance Industry'

The Birmingham Post (England), June 1, 2002 | Go to article overview

Personal Finance: 'FSA Too Scared to Take on Insurance Industry'


Byline: John Cranage

Personal Finance Editor City watchdog the Financial Services Authority (FSA) was accused this week of fudging a much-needed shake up of with-profits funds.

The organisation was scared to take on insurance industry 'dinosaurs' over with-profits, which are at the heart of the growing problem of mortgage endowment policies that have left millions of householders facing the prospect of being unable to pay off their loans, the Consumers' Association (CA) claimed.

With-profit companies have been at the heart of every major financial scandal for the past 20 years and the FSA's proposals would do little to prevent them from happening again, the (CA) said.

The FSA on Wednesday announced what it called 'a wide-ranging programme of actions to improve the governance and transparency' of with-profits funds. The proposals are aimed at giving investors a better understanding of how the funds are run and improving their confidence that they are being treated fairly.

One way would be to make firms set up with-profits fund committees to ensure that the interests of policyholders are safeguarded.

There is also need for better access to clearer and comparable information on the health of funds and their ability to meet discretionary payments such as terminal bonuses, the FSA said.

Details of the proposals have been wrapped up in a document that will now go out to the insurance industry for consultations.

The FSA's with-profits review is separate to the wide-ranging investigation by Ron Sandler, the former head of Lloyd's of London, into medium and long-term savings products.

FSA chairman Sir Howard Davies said on Wednesday that there is still a need for a form of long-term saving that offers better returns than deposit accounts combined with some protection from stock market volability.

With-profits are supposed to offer the latter by smoothing out returns on funds' investments over good and bad years. …

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