Pru chief returns to handle pension crisis
Tuesday 11 August 1998
The latest allegation is that so-called "mystery shoppers" with irregular incomes were advised by Prudential sales staff to take out high-commission but expensive pensions with monthly premiums.
Sir Peter's awaited return came as the Personal Investment Authority (PIA), the financial services regulator, said it too would conduct its own investigation into the claims. If they are found to be true, the Prudential could face a multi-million pound fine, the first since it first admitted earlier mis-selling problems.
Sir Peter's sudden return to London from a brief holiday in Wales was presented yesterday as a sign of the urgency attached by the embattled insurer to bringing an end to the scandals that have continued to dog the Pru in recent years. Shares in the company dropped 23 pence to 807p, partly in response to the new claims.
A Prudential spokesman said: "Sir Peter is taking these claims very seriously and is prepared to scrap his holiday. He has asked to be kept fully informed of developments of our own internal investigation and for any information to be passed to him as quickly as possible."
Prudential's latest crisis comes barely a month after Sir Peter was attacked by a parliamentary committee, one of whose members accused his company of "cheating your customers". This followed an announcement that the insurer was setting aside pounds 1.1bn to compensate victims of the previous mis-selling scandal.
Last year, Prudential was heavily criticised by the Securities and Investments Board, the leading City regulator, over mis-selling of financial products and poor monitoring of its sales force.
At the time, the company said it would reassess all its sales staff to identify any areas where it felt further training was needed. It also acted to strengthen its internal compliance team, checking all proposed sales rather than doing so at random, as had previously been the case. In the past year, the number of compliance staff at Prudential has doubled to several hundred, although the company was unwilling to give exact numbers.
Martin Brownstein, compliance director at Prudential, said yesterday that he was still waiting to receive exact details of which staff had been involved in the mis-selling allegations. But he was confident that even if the claims proved to be true the mis-sold policies would have been spotted.
He added that the Pru was moving to end its commission-based system of paying staff towards one in which they are rewarded more for long-term relationship with their clients.
However, PIA sources said yesterday that the regulator would look closely at any compliance departments which were stopping large numbers of bad sales. "If there is pressure on compliance departments to pick up the sales force, there should be a message going back that there is something going wrong," a regulator said.
Meanwhile, a Metropolitan Police source confirmed yesterday that an investigation into allegations of attempted pensions mis-selling against three different high-street insurance giants is expected to be broadened to include other companies within a few weeks.
The Independent revealed last week that Legal & General, Sun Life of Canada and Guardian Royal Exchange were being investigated after allegations of attempted mis-selling.
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