28th Mar 2014 15:33
LONDON (Alliance News) - A top UK regulator Friday said it will Monday publish its new business plan to provide a "picture of the key priorities and areas of work for the year ahead," and confirmed that it will not investigate historic sales practices for legacy life insurance customers amidst fears of a fresh mis-selling scandal.
The life insurance sector was Friday left reeling after The Telegraph newspaper reported that the Financial Conduct Authority had plans to launch an inquiry into 30 million policies sold by insurance companies from the 1970s to the turn of the Millennium.
The FCA confirmed the review in a statement Friday afternoon, and gave further guidance on its plans, adding that it will publish details of its key priorities for the year ahead when it publishes its Business Plan on Monday.
"We are not planning to individually review 30 million policies, nor do we intend to look at removing exit fees from those policies providing they were compliant at the time," the FCA said in a statement.
A spokesperson told Alliance News earlier in the day that the review will include pensions, endowments, investment bonds and life insurance products.
The FCA said that it will be reviewing a "representative sample of firms who we expect to look at whether they are treating their customers fairly."
Shares in Legal & General were Friday quoted at 204.4- pence, down 3.8%, while Resolution shares fell by 7.2% to 296.08 pence. Prior to the FCA's statement, Legal & General shares had fallen as low as 193.00 pence, while Resolution's had fallen has low as 266.6 pence. At the time of writing the top three fallers on the FTSE 100 were life insurers.
The Telegraph had quoted Clive Adamson, the director of supervision at the FCA, as saying, "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."
The FCA said later, "This is not a review of the sales practices for these legacy customers and we are not looking at applying current standards retrospectively - for example on exit charges."
The regulator said it will look at how people in closed life books are being treated.
"These accounts have been closed for many years in some cases, but there are still valid issues to be looked at around the question of the service that consumers receive in relation to those accounts," the FCA said.
The regulator said it will try to uncover whether customers are getting the right information and service, as well as whether their investments are appropriate.
The review will begin in the summer, with the regulator set to approach firms over how it can be undertaken.
"As a forward looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action. No conclusions have been reached as work has not started," the FCA said in a statement.
The statement came after FTSE 100 life insurer Legal & General issued a statement calling for the regulator to bring forward the publication of its Business Plan in light of Friday's "disorderly market."
In a research note, largely discussing the potential impact of the review on Lloyds Banking Group PLC, prior to the FCA's statement, Investec analyst Ian Gordon cautioned that "many are fearful of a fresh mis-selling scandal."
This is the second time in just under two weeks that the UK life sector has been dealt a blow, after Chancellor of the Exchequer George Osborne left annuities providers reeling when he used his 2014 Budget to unveil proposals to give people more flexibility over how they manage their pension pots. Osborne said people will no longer be forced to buy annuities at retirement.
By Samuel Agini; [email protected]; @samuelagini
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