Pru set for `orphans' outcry
Sunday 17 March 1996
Millions of past holders of savings policies such as endowments may have been underpaid by thousands of pounds to fund the companies' treasure chests, insurance experts are suggesting. To date, those past customers have been left out of deals on these assets.
Robert Wharton, a solicitor at the Bristol-based firm Ringrose Wharton, which specialises in financial services litigation, said ex-policyholders might have a case against insurers, perhaps in the form of group actions.
The issue has arisen as increasing numbers of insurers seek to quantify and divide surplus monies held in their funds between shareholders and policyholders. The Prudential, the UK's biggest insurer, last week said it was in talks with the Department of Trade and Industry about its orphan assets, which analysts say could amount to between pounds 1bn and pounds 5bn.
In many cases, say consultant actuaries, much of these surpluses has been built up by insurers paying policyholders less than their entitlement, either by penalising them when they cashed in policies such as endowments early or because their policy returns at maturity were at the discretion of the insurer.
Prudential this weekend claimed its orphan assets were "nothing to do with policyholders being underpaid in the past". Its talks with the DTI could last up to 18 months. The DTI's role, as regulator of insurers, is to protect the "reasonable expectations" of policyholders in any move on orphan assets.
Legal & General confirmed that the pounds 1.5bn of surplus assets it identified in November as belonging to policyholders came from old customers. Last week, it announced it would distribute pounds 163m of this in a special bonus to current - but not past - policyholders. But it noted that this surplus had been built up over the 160 years of the insurers' existence and that "most [past policyholders] are now dead". Furthermore, it said, these old customers had benefited from the insurer's increased financial stability as a result of these retained funds.
Similarly, previous moves on orphan assets by United Friendly, Refuge and Britannic made no provision for past policyholders.
"Previous generations [of policyholders] may reasonably feel aggrieved," said David Beale, joint managing director of Beale Dobie, a firm that buys and sells endowment policies that are midway through their term.
Options for complaining are limited, however. Financial ombudsmen say complaints about short-changing or being left out out of any orphan assets split are not part of their remits. The Personal Investment Authority Ombudsman, Stephen Edell, said: "Basically, you can't complain - apart from through the courts."
Mr Wharton at Ringrose Wharton said the terms of any policy contract would be very important in deciding whether past policyholders had a case. He added that past policyholders of mutual insurers would be likely to have a better claim than those of quoted insurers, because of the absence of shareholders.
With quoted insurance companies such as the Prudential, shareholders have in many cases helped build up the orphan assets through injections of capital and by not taking their due entitlements to profits from insurers' funds. Insurance experts say the mix of the surplus varies from company to company and can be difficult to untangle.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 3 Belgium fan Axelle Despiegelaere lands L'Oreal campaign after World Cup viral photo
- 4 Britney Spears sings 'Alien' without Auto-Tune in embarrassing leaked audio clip
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Mick Jagger denies being World Cup curse and reason for Brazil’s embarrassing defeat
Israel-Gaza crisis: ‘We just want it to end… We don’t deserve to live like this’
Israel-Gaza crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
Socialist Worker called to apologise over ‘vile’ article saying Eton schoolboy Horatio Chapple's death is ‘reason to save the polar bears’
There’s a nasty smell in the political air – and it’s coming from the Tories
iJobs Money & Business
£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...
£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...
£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...
£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...