The Endowment Diary

The Endowment Diary

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The Endowment Mis-selling Debacle - one of the UK's worst financial scandals

Sunday, October 24, 2004

From Bad to Worse

"The insurance industry needs to take a long, hard look at itself ... there is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers."

Not my words, but those of Eliot Spitzer, New York's attorney general; talking about the probity of the United States insurance industry.

He has launched a law suit, which will have ramifications for our own well loved insurance industry. He accuses the US insurance industry of corruption, and anti competitive practices.

The FSA is monitoring Spitzer's progress.

The crux of Spitzer's case rests on contingent commissions, that is commissions paid on top of normal commissions for selling insurance policies. The UK insurance industry is fretting, because it knows that there are contingent commissions paid in the UK as well.

It is a pity that the FSA needs to wait for the US to take the lead, in exposing corruption and dishonesty.

The fallout from this lawsuit adds to the worries surrounding the insurance industry; which were heightened this week, by the announcement from the Prudential that they needed £1BN to shore up their finances.

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