View from City Road: Pru's proposals fail to excite
Tuesday 20 July 1993
It is not obvious that it has been worth the wait. Mr Newmarch draws a number of distinctions, but it is far from clear that Prudential's preferred method of disclosure would be any better at preventing thousands of life insurance policies being taken out and cancelled before buyers receive value for their premiums.
The OFT is keen to give much more information about the financial penalties investors face on early cancellation. Mr Newmarch argues that, rather than give hypothetical illustrations of cash proceeds, it would be better to ensure that 'the saver is put in possession, pre-sale and in frank and unambiguous terms, of the material facts about the contractual arrangements which will apply'.
These key contract terms would cover premiums and penalties imposed for stopping payments, the build-up of policy proceeds, ancillary features such as mortality cover and fund management and administration charges.
Mr Newmarch makes the valid point that buyers of life insurance rarely shop around. They will therefore make little use of comparative expense and performance data to select a contract. Publication of these details would stimulate improvement from companies least able to bear scrutiny.
In contrast, Mr Newmarch claims the Pru's approach would give a more general impetus to improved standards through self-assessment and peer pressure.
The trouble is that many in the life insurance industry would already claim to be setting out the terms of their policies. Some deluded fools might even believe they are doing so frankly and unambiguously. Life companies argue that they sell long- term contracts. Those who leave early must expect to lose out.
If policyholders did understand the issues in this clear way, there would be no problem. But, even if a contract is set out clearly, many fail to imagine the impact of divorce, redundancy or serious illness until it happens.
The OFT intends to respond to the Pru with an open letter of its own. The Pru, meanwhile, is to produce more detailed proposals. It will need to work hard to convince.
- 4 #JeSuisEd: People share photos of themselves eating awkwardly in solidarity with Labour leader
- 5 Women think Irish men are the sexiest, survey finds
Italian police 'reveal' what Jesus looked like as a young boy
Mysterious 'X-Files' sounds heard miles above the Earth
Florida couple forced to register as sex offenders for having sex on public beach
Who should I vote for in the general election? Take The Independent's interactive quiz to find out which party is the right choice for you
General election: Conservatives mocked online over Boris Johnson's claim of SNP 'jockalypse'
In defence of liberal democracy
General Election 2015: Post-election 'shambles' looms as 70 per cent of voters say SNP 'should not be able to veto UK government policies'
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
General Election 2015: Sturgeon claims Scots 'appalled' by Ed Miliband's refusal to work with SNP
iJobs Money & Business
£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...
£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...