Last December Scottish Widows was fined pounds 120,000 by the life insurance industry regulator, Lautro, for failing to exercise proper control over its tied agents.
Mike Ross, managing director of Scottish Widows, resigned from the board of Lautro as a result of the insurer's brush with the regulator.
Scottish Widows was ordered by Lautro to review 20,000 policies to see whether they were suitable for the investors' needs. Yesterday Mr Ross said Scottish Widows had so far paid out between pounds 20,000 and pounds 40,000 to people who appeared to have been sold unsuitable policies. About 100 people had received refunds of premiums and about 100 had been compensated for loss where, for example, they had cancelled long-term contracts early and lost money as a result.
Scottish Widows had not yet completed its investigation of all the sales. Mr Ross added that in 97 per cent of the cases investigated so far, policyholders had been sold appropriate investments.
He said the management of the insurer's tied sales force had been overhauled. The cost of the fine had been met from reserves, which were about pounds 2bn at the end of 1992.
He said Scottish Widows' free asset ratio, of assets over liabilities, stood at about 20 per cent, a little higher than at the end of 1991. He saw no need for Scottish Widows to seek the kind of capital-raising deal announced on Tuesday between Scottish Equitable and the Dutch group Aegon.
Scottish Widows increased sales of annual-premium life and pensions contracts last year by 10 per cent to pounds 122m while sales of single-premium products increased 19 per cent to pounds 536m. Sales of unit trusts and personal equity plans increased 62 per cent to pounds 92m.