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Resolution crashes 10% on insurance policy investigation

by David Campbell on Mar 28, 2014 at 09:11

Resolution crashes 10% on insurance policy investigation

Resolution tumbled more than 10% in early trading amid a sharp slump in the value of the insurance sector following the announcement of an investigation into historical life and pensions policies.

St James Place was among those hit, sliding 3.07%. Aviva fell 6.1%, L&G dropped 4.37%, Standard Life fell 2.8% and Prudential 1.55%.

The sell-off followed a Daily Telegraph report that the Financial Conduct Authority is to investigate the terms of 30 million insurance policies written between the 1970s and the 2000s.

The investigation, due to begin this summer, will probe the ongoing terms of pensions, endowments, investment bonds and life insurance, historically sold with high commission payments to advisers.

It will focus on the ‘zombie’ funds of closed life business – the area in which Resolution has successfully built an ongoing insurance business through consolidation.

The announcement is the second major hit to the insurance sector in as many weeks, following the liberalisation of pensions annuities announced in the Budget. The FTSE 350 Insurance sector has fallen more than 8% since mid-March, versus a marginal gain by the FTSE 100 over the same period. 

'We want to find out how closed-book products are being serviced by insurance companies, as we are concerned insurers are allocating an unfair amount of overheads to historic funds,' FCA director of supervision Clive Adamson told the Telegraph.

'As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal. As part of the review we will collect information to establish whether we need to intervene on exit charges.'

2 comments so far. Why not have your say?

Grahame Goodyer

Mar 28, 2014 at 09:59

Clearly the FCA are running out of work to do. I regularly need historic policy information when dealing with unsuitable advice going back over the last 10 to 15 years and it surprises me how little information life and pension companies still retain. In many cases there is no need for them to hold on to policy data if the policy has paid out and is now cancelled. What will this review achieve?

The bad eggs of the industry who only sold the plans that maximised commission, most of whom are now defunct, are long gone. So who does the FCA believe this is going to benefit?

The cost of the review will far out way any benefit that it will conclude is due, and to whom will they pay this compensation. Many of the policy holders are now dead!

By all means review the policies of the last 10 years to see if there was any real abuse, but back to 1970? FCA get real.

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Badders

Mar 28, 2014 at 12:47

This is going to take years and keep a lot of regulators in clover for a long time. Allocate overheads? Look at Phoenix, hit the hardest - all it has is closed funds so what's the beef?

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