Prosperity Life fined for breach of Lautro rules

PROSPERITY LIFE, the small life insurance arm of Municipal Mutual, the recently troubled council insurer, has been fined pounds 75,000 for allowing sales agents to 'churn' clients' investments, writes Paul Durman.

Prosperity has already paid out about pounds 750,000 compensation to investors who suffered. A salesman for a firm called All Saints encouraged more than 70 investors to cash in their existing investment bonds with another life office and switch the money to Prosperity. The costs involved meant this was contrary to the investors' interests.

Lautro, the life insurance regulator, found that Prosperity had 'failed to take all reasonably practicable steps to monitor' All Saints' investment business and had committed a serious breach of Lautro's rules.

Nigel Herrick, Prosperity's sales and marketing director, said Prosperity had severed its links with All Saints in mid-1991. It does not intend to appeal. Having recently transferred its direct sales force to Laurentian, a larger life insurer, Prosperity now sells through tied agents, independent advisers and direct marketing.

The company has had talks with potential purchasers, but Mr Herrick said there was no urgency to find a new owner. It had sufficient financial backing to ensure its solvency.

MMI has transferred the bulk of its ongoing business to Zurich Insurance for about pounds 70m. Its past book of business, on which it has suffered heavy losses, is in run-off.