FSA affirms guidance over industry use of surplus cash
The Financial Services Authority (FSA) has come out in support of plans by a number of insurance companies to use some of the industry’s £16 billion surplus to support their businesses.
The move could mean that millions of policyholders will lose out on cash windfalls.
The UK insurance sector has been developing plans to release the surplus cash that builds up in life insurance companies’ with-profits funds.
In the case of Norwich Union, Clare Spottiswoode, is acting as advocate for up to a million policyholders with an interest in the company’s £5.4 billion surplus.
Ms Spottiswoode has recently been advised by the FSA that it will not be revising its guidance to insurers on surplus cash, and she is arguing that this will unfairly benefits shareholders.
The guidance allows companies to use the money to subsidise new business, offset some tax charges and pay claims relating to policies that have been mis-sold.
According to Which?, the consumer group that has also been active on the part of policyholders, legal action is being considered to protect policyholders’ interests.
Which? is “calling on the insurers to act with integrity, rather than to try to exploit weak FSA rules to grab as much as they can”.
The FSA has said it will consult further on insurers’ right to use surplus funds to settle successful claims for cases of mis-selling.
Category: Insurance News, Norwich Union Insurance News
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