Time to assess the insurers nightmare

'Let's keep our fingers crossed for less interesting times ahead'
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The Independent Online

Storms, insurance claims, travel chaos, threatened fuel tax protests, a crucial pre-Budget report leading up to a General Election; the ancient Chinese wished that their enemies "lived in interesting times", and current events in the UK certainly live up to that description.

Storms, insurance claims, travel chaos, threatened fuel tax protests, a crucial pre-Budget report leading up to a General Election; the ancient Chinese wished that their enemies "lived in interesting times", and current events in the UK certainly live up to that description.

First things first. The winds and rain that have caused such damage across the country will leave millions of people wondering how to claim on their insurance. We provide a guide to making a claim on page 3.

Longer term, there are two linked worries about the storms. Firstly, most scientists now accept that such "abnormal weather" is going to become more common because of man-made global warming. This, in turn, promises to raise the level of general insurance premiums. It should also prompt a rethink about building houses and offices in easily flooded areas.

Turning to the Budget, the fuel protesters will be waiting to see whether the Government caves into their demands and cuts fuel duties. Whatever Gordon Brown does, this will be a defining moment for this Government. The full Budget in March may come just weeks before a General Election.

If Mr Brown abolishes stamp duty on share transactions, he will at a stroke improve the lot of the UK private investor. US-style "day trading" has not taken off in this country simply because stamp duty makes it uneconomic. I would not hold my breath, however. The Treasury and the Government both love stamp duty because it is such a cheap and easy source of revenue.

Whatever is announced in the "Green Budget", in an entirely separate move, the Inland Revenue has committed itself to handing back an estimated £300m in over-paid taxes to some four million savers on low incomes. The Taxback campaign, launched by the Revenue this week, aims to encourage savers on low incomes to check if they are eligible to claim back tax that has been automatically taken off their bank and building society interest before they receive it.

A special Taxback Helpline, on 0845 077 6543, has been set up to send people the booklet A guide for people with savings, as well as the forms they need to claim back tax and to register to receive their interest without tax deducted in future. The Inland Revenue website www.inlandrevenue.gov.uk/taxback also provides information and includes some worked examples.

Three cheers for the Revenue, then. But no cheers for Axa, the insurance giant. On Thursday it was ordered to pay the legal costs of a policyholders' challenge to the plan for shareholders to retain most of Axa's £1.7bn "orphan assets".

The High Court decided that Axa should pay the costs of Stuart MacWhirter, supported by the Consumers' Association and over 1,400 other policyholders. The stakes are high. British insurers are sitting on an estimated £20bn in surplus assets which have built up over the last century through unclaimed policies or their conservative payout policies. Nobody knows who these orphan assets belong to, and a court decision is needed.

There is yet another announcement due at the same time as the pre-Budget report. A Government-sponsored body, led by Paul Myners, is expected to propose that pension funds should be allowed to invest more in high-risk, high reward equities. Myners is likely to urge the scrapping of the Minimum Funding Requirement (MFR), the rule brought in after the Maxwell pension scandal to guarantee that companies can cover their investment risks.

Meanwhile, let's keep our fingers crossed for less interesting times ahead.

John Willcock is personal finance editor of The Independent

* j.willcock@independent.co.uk

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