At least the criticism has helped to focus attention on "orphan assets", the term used for surplus cash in with-profits funds. Orphan assets come about because of strong returns on with-profits business and shareholders' cash. In effect, neither shareholders or policyholders have taken as much out of the business as they could have.
Life insurance companies want to access some of this money, arguing that large chunks of it only accrued because shareholders' resources were used to build up the business. Prudential's fund has a pounds 12bn surplus, from which its pounds 1.1bn provision for pension misselling will be taken. But within that pounds 12bn is a pool of cash whose ownership is unclear. Analysts estimate this is worth up to pounds 5bn, although the Pru says it is likely to be much less.
Prudential has been criticised for not paying for mis-selling directly out of shareholders' cash. But how it is allowed to use its orphan assets is potentially just as controversial and could be a test case for the industry.
The company has been in negotiations with the Department of Trade and Industry (DTI) over the money. Life insurers argue "policyholders' reasonable expectations" will not be affected by distributing this spare cash.
If shareholders are granted a significant proportion of it, the money could be used to pay extra dividends, help fund acquisition, or help expand the business.
The 1990s have seen a rash of life insurers negotiating with the Government to enable them to access the cash.
Until now, however, they have tended to be funds mainly built up from industrial branch business, cheap policies sold door-to-door, a type of business most companies have now pulled out of.
Traditionally this type of business sees returns from with profits funds of shareholder owned companies split, with 90 per cent going to to policyholders and 10 per cent to shareholders. Companies such as Britannic Assurance are among those involved in industrial branch business who are in discussion over orphan assets.
Prudential's negotiations are being keenly watched by the industry because they involve "ordinary branch business", the day-to-day activities of its salesforce. Should the Pru be able to access funds from such business, it could open the floodgates to similar claims.
Analysts say companies such as Axa, Commercial General Union, Legal & General, Pearl, Britannic Assurance, and United Assurance could follow suit. If the DTI refuses to strike a deal, the courts could be an option.
Merrill Lynch insurance analyst Roman Cizdyn says: "Prudential in important historically. The Government has only allowed industrial branch funds to be accessed. It has not given ground on ordinary branch business.
"If they were to make a breakthrough Axa would be able to go back, CGU would probably look at the issue as would Legal & General."
He doubts whether Prudential's lobbying of the Government will be successful, leaving the courts as its only option.
Alan Richards, a former life insurance analyst and director of Arc Asset Management, tips recently merged companies such as Royal & Sun Alliance, Axa Sun Life, which merged with Equity & Law, then Sun Life and Commercial General Union. "I think Axa will go to the courts. If they are successful it would be ground-breaking for the rest of the industry."
Philip Telford, senior money researcher at the Consumers' Association, says: "The issue of policyholders' reasonable expectations is rather vague. There are prudent reasons for smoothign but it seems these funds can build up. Some has to go to share holders but policyholders should benefit as well."