FSA reports “mixed performance” in with-profits review
by Gill Montia
The Financial Services Authority (FSA) has published the findings of its review of with-profits funds, which looked specifically at how senior managers have implemented FSA rules on treating policyholders fairly.
The regulator has reported a “mixed performance” with a significant number of firms “not adequately demonstrating” the practices it expects from a well-run with-profits business.
The two main areas of concern are:
Ineffective governance of with-profit funds, especially in how independent challenge is provided by firms’ with-profits committees, which means that policyholders’ interests may not be properly protected.
Significant weaknesses in the quality of consumer literature – the FSA is not satisfied that all firms are doing enough to ensure that policyholders receive sufficiently comprehensive, timely and clear information to help them understand their policies.
Firms that have fallen short have been told to take action quickly to improve their operations and two have been referred to the FSA’s enforcement division for further investigation.
The review may also result in a strengthening of some of the rules around with-profits, and the FSA will set out any proposed changes in a consultation paper by the end of the year.
FSA insurance sector director, Ken Hogg, says: “We expect all firms to raise their game in this area, not just the firms that we reviewed.”
In undertaking the review, the FSA conducted in-depth visits to 17 firms, representing 80% of assets in with-profits funds, between September 2009 and February 2010.