But the insurance industry yesterday rejected a report to the Chancellor by Sir Bryan Carsberg, director-general of the OFT, claiming that it would lead to 'overkill by regulation and excessive disclosure'.
Sir Bryan's proposals would add significantly to costs for little real consumer benefit, said Brian Richardson, chairman of the Life Assurance Council of the Association of British Insurers. There were also cool receptions from City regulators, independent financial advisers and Fimbra, their regulatory body.
Sir Bryan criticised four sets of rules produced by the Securities and Investments Board and Lautro, the life assurance regulator. He called for:
Early disclosure of commissions paid by life assurance companies to independent financial advisers, rather than notification of the commission by the life company after a sale.
Estimates of surrender values of policies farther ahead than the present five years. Companies pay 30 per cent below average to 30 per cent above on similar 25-year policies surrendered five years early.
Tied agents to be allowed to operate differential pricing to reflect differences in efficiency.
The industry to drop the use of costs based on industry averages in illustrative projections of returns on policies. Companies should incorporate their own costs so that investors can see what they are buying.
The Chancellor has to decide whether to impose the rule changes proposed by the OFT under the Financial Services Act, which obliges Sir Bryan to vet City rule books for competition effects.
But Sir Bryan produced a second wide-ranging report under the Fair Trading Act recommending that companies should publish the proportion of their policyholders who cancel after a period. A survey in 1991 showed that 30 per cent cancel within two years. This would restrain what he called 'overselling'.
He gave a shopping list of other disclosure provisions to allow consumers better to compare projected cash returns and identify costs. He also published a model disclosure statement.
The most significant backing for Sir Bryan came from the Consumers' Association, which said he had delivered a knockout blow for the consumer and urged him to stand firm against lobbying by vested interests.
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