Equitable Life policyholders to get more support for compensation
Beleaguered Equitable Life victims will get new support from the formation of The Justice for Equitable Life Policyholders Parliamentary Group. This is an all-party group of 20 MP’s who believe the Government is wrong not to compensate policyholders affected when Equitable Life nearly collapsed in 2000. The Government has said it will only compensate those policyholders facing financial hardship.Last year the Parliamentary Ombudsman found a number of instances of injustice to policyholders as a result of maladministration. She also found there had been “serial regulatory failure”. The Governments’ response to this was to offer compensation only to those policyholders who have “suffered a disproportionate impact as a result of the relevant maladministration”. However it would not pay compensation in the way suggested by the Parliamentary Ombudsman, leaving a huge number of policyholders without compensation.
Now a report by the Public Administration Select Committee has been published damning the Governments’ response to the Ombudsman. While accepting the Governments’ position on compensation may be a legally valid one they believe “most people would consider it to be a morally unacceptable one”. Government had reasoned that Parliament concluded financial regulators shouldn’t be liable for financial loss. The Committee felt this was “introduced late in the day in a way that we find to be shabby, constitutionally dubious and procedurally improper”.
The Committee is critical of the proposed process for payments to policyholders as it is too complex and will therefore be slow and difficult for those involved. Their report also highlights a number of factors that are unaccounted for and concludes the process represents “a basic failure on the part of the Government to understand the problem which its scheme is supposed to address”. The delays already suffered by policyholders look set to continue and thankfully the Committee recognised the distress such delays cause. They proposed that a timetable for the scheme needs to be made available as soon as possible.
The Ombudsman had made it clear to the Committee that the Government response was unsatisfactory, while the Equitable Members’ Action Group said it was “totally unacceptable”. Charles Thomson, Chief Executive of Equitable Life, felt the Government response was “wholly inadequate”. Ombudsman, Ann Abraham, has written to MP’s saying that a full remedy will not be forthcoming for the injustice suffered as a result of maladministration and that she intends to produce a further report.
While policyholders may be encouraged by this latest support they also faced more bad new with the announcement of the Equitable Life preliminary results. Already suffering as a result of being closed to new business, last year assets fell by 33 percent from from £621 million to £414 million. Although the Society believes its financial position is sound it’s concerned about the effects on policyholders of “run off”. The with profits fund suffered an investment loss of 7.7 percent and when combined with this years policy value cuts means earlier gains are wiped out.
The cost of the 3.5 percent annual return guarantee also rose significantly, nearly doubling from £442 million to £814 million. This was mainly a result of falling Government bond yields and the decreases made in policy values. The guarantee continues to be a thorn in the side of Equitable Life and calculating its cost is uncertain as this depends on “future economic conditions, policyholder actions (such as early or late retirement and surrenders) and mortality”.
Despite the numerous difficulties facing the Society and its policyholders Chief Executive, Charles Thomson, believes that good management will lead them through challenging financial conditions. He said they would “continue to look for the best outcomes for our policyholders and we are making progress with our negotiations for a long term administration agreement which will offer expense security for the future”.
Related documents
Justice denied? The Government’s response to the Ombudsman’s report on Equitable Life (PDF file 608KB, 96 pages) Public Administration Select Committee views on the Government’s response to the Parliamentary Ombudsman’s report on Equitable Life.
The Prudential Regulation of the Equitable Life Assurance Society (PDF file 418KB, 56 pages) Government’s response to the Report of the Parliamentary Ombudsman’s Investigation.
Justice delayed: The Ombudsman’s report on Equitable Life (PDF file 351KB, 52 pages)
