Wednesday, June 03, 2009

Lost The Plot

Lost The Plot

The FT is suitably scathing about the FSA decision to kowtow to the insurance industry wrt compensation payments for mis-selling endowment policies.

"So FSA has bottled it once again. Faced with pressure from the insurance industry, they have backed away from fully enforcing a ban on using policyholders' money to mis-selling bills.

The decision appeared in document CP 09/09: "Proprietary firms will no longer be able to pay compensation and redress payments from their with-profits funds, where they arise out of events that occur after the rule takes effect. The position in relation to events prior to the effective date will be unchanged."

So any compensation or redress from new mis-selling cannot come from the with profits fund, but for all past misdemeanours they can still raid policyholders' cash.

The Financial Services Consumer Panel describes this as a "backward step" and says that "having uncovered unfairness, the FSA should resolve it".

Predictably, the FSA has allowed intense lobbying from the powerful insurance industry to override consumer fairness. Reading through the comments from respondents in this consultation paper illustrates how many insurance companies are still living in the dark ages.

Some argued that policyholders have no interest or rights in any inherited estate that might exist in with profits funds. Others referred to previous consultation papers without appearing to have noticed that these have been overtaken by clarifications and later statements.

So once again the dinosaurs have outwitted the FSA and consumers will be left to pick up the bill as insurers continue to raid their savings to pay mis-selling bills