Pru chief says rivals are acting 'like ostriches': Insurer's profits more than double to pounds 406m

MICK NEWMARCH, chief executive of Prudential Corporation, Britain's biggest life insurer, yesterday attacked the 'ostrich-like' refusal of his rivals to recognise consumers' demands to provide better information about the policies they are sold.

Mr Newmarch said Prudential accepted that last week's proposals from the Office of Fair Trading would lead to greater disclosure of policy surrender values and commissions. But he added: 'The industry is in parts tending to behave in an ostrich-like way. Some companies have not cottoned on to the fact that we are living in a different environment than the one we used to live in.'

The attitude of the insurers came in for further criticism at a hearing of the House of Commons Social Security Select Committee yesterday. Joel Joffe, the former Allied Dunbar boss who has become a trenchant critic of the industry that made him wealthy, attacked the Association of British Insurers' automatic rejection of the OFT's proposals.

Mr Joffe said: 'One of the problems, they say, is that if the consumer understands what he is being sold he might not buy the product, which is bad for the insurance industry . . . There must be a fair body of companies who must be saying, that's actually quite satisfactory, let's get on and do it.'

Prudential reported pre-tax profits for 1992 of pounds 406m, more than double a restated pounds 182m for the previous year. The Pru was hit by a 'dire' pounds 143m loss from the non-life side of its Mercantile & General reinsurance side. As well as the pounds 56m cost of last year's US hurricanes, M&G had to set aside more money to cover claims arising from the Exxon Valdez disaster and the 1987 and 1990 storms.

A new management team at M&G has laid off about 100 staff and intends to reduce the amount of business it writes, cutting premiums from its UK non-life side almost by half.

However, the Pru's main life insurance business increased profits from pounds 385m to pounds 444m despite a cut in the bonuses paid to policyholders which reduced shareholders' profits by pounds 276m.

A typical pounds 30-a-month policy maturing after 25 years would pay pounds 58,032, some pounds 2,000 less than a year ago. Peter Nowell, chief actuary, said further bonus cuts would be necessary.

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