FSA to force insurers to improve information for investors

The Financial Services Authority may force insurers to give customers much more information about how their investment in the stock market has fared so that they can judge whether they are getting a good deal.

The regulator yesterday published a range of proposals as part of its drive to crack down on the opaque with-profits industry, which has recently attracted criticism for débâcles including endowments mis-selling and the collapse of Equitable Life.

One major area that may be changed is insurers' practice of announcing annual and terminal bonuses on with-profits policies without disclosing the actual return made on a policyholder's assets. This means that it is impossible to judge whether the bonus is fair compared with the investment return and relative to what other insurers offer.

The move comes as many insurers are announcing dramatic reductions in bonuses, following two years of negative stock market returns.

The FSA said it would also look at measures to make companies give better explanations of terms such as "reversionary" and "terminal" bonuses, meaning the payments made on with-profits policies every year and on maturity.

John Tiner, the FSA managing director, said: "The latest research confirms there is a pressing need to raise the quality of information offered to consumers before they buy a with-profits product and then throughout the life of their investment."

The FSA will issue a giant consultation paper on disclosure in all financial services in the summer but sees the lack of clarity on with-profits as particularly worrying. It aims to enforce improvement by next year.