Insurers reluctant to cut policy charges

Insurance companies are refusing to cut charges on the policies they sell, in spite of being forced to disclose them for the first time, a survey from a senior financial services watchdog reveals, writes Nic Cicutti.

Despite hopes of a price war in the wake of new rules from the Personal Investment Authority, more than 20 per cent of the companies it sampled now charge more for pensions than they did a year ago.

The PIA survey, published earlier this week, showed that among the 67 companies offering 25-year unit linked pension schemes, 14 were more expensive than a year earlier.

Over that length of time charges by some companies, including household names such as Pearl and London & Manchester, can be up to a third or more of a policy's total proceeds. Potential policy proceeds of about pounds 63,800 can be cut by as much as pounds 22,000 by some companies.

The regulator's survey came out for the first time last week, a year after the introduction of rules making insurers give specific details of their expenses to their clients. Until then, they only had to provide an industry average, which allowed the most expensive to hide behind the cheapest.

When the new rules were introduced, it was claimed they boosted competitiveness and led to cheaper prices for policyholders. But the survey shows that although the level of charges fell by 3.2 per cent for all the firms in the survey, the drop was far greater among life companies with highest costs.