The Financial Services Authority fired a broadside at insurers and financial advisers yesterday, saying they were failing to serve holders of with-profits savings policies and warning of fines if standards are not improved.
The chief City watchdog blasted the industry for failing to provide "sufficient advice" for the holders of this type of life insurance policy. It also criticised what it said was the "variable quality" of communications with consumers, particularly after-sales documents which all too often failed to explain key points and used complex language without explanation.
With-profits policies aim to provide smoothed returns for holders, by holding back some of the money they make in good years to pay out in bad years. With-profits funds invest in a variety of assets including shares, bonds and property. There are 32 million policies in force. But the FSA said many policyholders no longer have access to the adviser that sold the policy and an "independent" survey of independent financial advisers found many were reluctant to advise clients on existing with-profits policies they did not sell.
Sarah Wilson, director and insurance sector leader for the regulator, said: "These findings are significant. Without ongoing advice, customers might not be able to make properly informed decisions about their with-profits policy. They might also not understand the need to take action to meet any gap between their past and current expectations of investment returns."
A spokesman of the Association of British Insurers said: "We certainly accept that improvements are required in a number of areas and the ABI is working closely with member firms to achieve this. It should be pointed out that the FSA report is not entirely negative."Reuse content