Which?, the consumer's association, launched a scathing attack on the Financial Services Authority yesterday, accusing it of allowing two of Britain's largest insurers to "get away with a smash and grab raid on billions of pounds" of their with-profits customers' money.
The accusation came as the FSA laid out its guidelines for the proposed reattribution of 4bn of "orphan assets", held within two of Norwich Union's with-profits funds. The guidelines are also likely to apply to a similar reallocation being undertaken at Prudential.
Clare Spottiswoode, the independent advocate representing Aviva's policyholders, said the regulator was unfairly helping shareholders at the cost of policyholders.
"This response is very disappointing in that it largely maintains the status quo which I believe unfairly favours shareholders over policyholders," she said.
"I do not see how the approach is consistent with the 1995 ministerial statement which the FSA supports. Policyholders have an expectation that the estates will be used for their benefit or distributed to them."
The 4bn is made up of surplus assets, which were built up from strong stock market returns and which are not directly attributable to any one policyholder. Although the law states that the funds are owned by the company, 90 per cent of all distributions from NU's with-profits funds are normally made to policyholders, with only 10 per cent going to shareholders. Aviva wants to pay policyholders a small sum to forgo their rights to any potential future distributions from the surplus assets.
Peter Vicary-Smith, the chief executive of Which?, said the regulator had "once again failed to address the needs of policyholders, and sided with those it is meant to regulate", adding that his organisation was now considering legal action to ensure that policyholders get a fair deal.
"This is the worst possible advert for the insurance industry at a time when confidence in the financial services industry is at an all-time low," he said.
"Their decision to allow money in inherited estates to be used to subsidise new business or pay shareholder tax bills will result in 5 million Norwich Union and Prudential policyholders losing out on thousands of pounds each. In the light of today's decision, we will be exploring all legal avenues open to us that may help to protect policyholders."Reuse content