LONDON – Shares of British insurers slumped Friday after the Financial Conduct Authority confirmed it planned to conduct a review later this year on whether long-standing customers were being treated fairly by their insurers.
The authority, which regulates financial firms, said Friday that it would officially announce the review on Monday as part of its business plan for the year.
The review comes just over a week after the British government announced plans to radically change its pension and savings policies, including allowing consumers to take their state retirement as a lump sum or a draw down over time, rather than being forced to buy an annuity at retirement.
Consumers also will be able invest up to 15,000 pounds, or about $24,940, a year in cash accounts or stocks tax-free as part of the changes.
Insurance stocks here have been weaker since the pension changes were outlined by George Osborne, the chancellor of the Exchequer, as part of the government’s 2014 budget on March 19.
The F.C.A. said Friday that its review would examine how consumers are being treated for so-called closed accounts — insurance products that are no longer open to new business.
“These accounts have been closed for many years in some cases, but there are still valid issues to be looked at around the question of the service that consumers receive in relation to those accounts,” the F.C.A. said. “Are they getting the right information?
Are they getting the right level of service? Are these investments still appropriate?” The review will be of a representative sample of firms, the F.C.A. said.
After insurance stocks ended Friday lower in London, the F.C.A. issued a statement saying that its board acknowledged “the concerns of the market” regarding press coverage of the proposed review and would bring in an external law firm to “conduct an investigation into the F.C.A.’s handling of the issue.”
The Daily Telegraph, a British newspaper, first reported in its editions on Friday that the review would include life insurance and other retirement products that were sold door to door by salesman on commission and carried hefty exit fees if a consumer wanted to move to another retirement planning provider.
“As a forward-looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action,” the F.C.A. said in a statement.
“No conclusions have been reached as work has not started.”
Still, news of the review sent several insurers that make up the FTSE 100 index on the London Stock Exchange lower on Friday. Shares of Resolution, the owner of Friends Life, was hit the hardest, ending down 7 percent.
Aviva fell 2.75 percent, while Prudential was down 2.6 percent. Aviva said that it believed the FCA’s review into long-standing life insurance customers could apply to about £200 million in value of its policies in force, less than 2 percent of the company’s embedded value.
“Of this £200 million value in-force, Aviva believes that its treatment of customers has been fair and appropriate, and therefore any impact on the group’s profits should be minimal, if at all,” the insurer said.
Aviva said it had previously introduced capped charges of 1 percent or less on its pre-2001 book of group personal pensions and “has no material exit charges applying to its legacy book.”
“Aviva is already committed to ensuring both existing and new customers are treated fairly,” the insurer said.
In his budget announcement last week, Mr. Osborne, the British chancellor, said that consumers would be able to put up to £15,000 a year in so-called individual savings accounts that can either be all-cash, all-stock or a mix of the two.
The accounts are used to supplement retirement savings and differ from a traditional savings account. Previously, there was a limit of £11,520 and no more than half of that could be in cash. The amounts also were required to be held in separate accounts.
He also announced a government-backed bond plan in which people 65 years old and older would be able to invest as much as £10,000 annually and scrapped rules that forced retirees to invest their state pension savings in annuities.
The changes are expected to severely pressure annuity sales by insurers by providing consumers more options to ensure a steady income stream in their old age.
nytimes.com
The authority, which regulates financial firms, said Friday that it would officially announce the review on Monday as part of its business plan for the year.
The review comes just over a week after the British government announced plans to radically change its pension and savings policies, including allowing consumers to take their state retirement as a lump sum or a draw down over time, rather than being forced to buy an annuity at retirement.
Consumers also will be able invest up to 15,000 pounds, or about $24,940, a year in cash accounts or stocks tax-free as part of the changes.
Insurance stocks here have been weaker since the pension changes were outlined by George Osborne, the chancellor of the Exchequer, as part of the government’s 2014 budget on March 19.
The F.C.A. said Friday that its review would examine how consumers are being treated for so-called closed accounts — insurance products that are no longer open to new business.
“These accounts have been closed for many years in some cases, but there are still valid issues to be looked at around the question of the service that consumers receive in relation to those accounts,” the F.C.A. said. “Are they getting the right information?
Are they getting the right level of service? Are these investments still appropriate?” The review will be of a representative sample of firms, the F.C.A. said.
After insurance stocks ended Friday lower in London, the F.C.A. issued a statement saying that its board acknowledged “the concerns of the market” regarding press coverage of the proposed review and would bring in an external law firm to “conduct an investigation into the F.C.A.’s handling of the issue.”
The Daily Telegraph, a British newspaper, first reported in its editions on Friday that the review would include life insurance and other retirement products that were sold door to door by salesman on commission and carried hefty exit fees if a consumer wanted to move to another retirement planning provider.
“As a forward-looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action,” the F.C.A. said in a statement.
“No conclusions have been reached as work has not started.”
Still, news of the review sent several insurers that make up the FTSE 100 index on the London Stock Exchange lower on Friday. Shares of Resolution, the owner of Friends Life, was hit the hardest, ending down 7 percent.
Aviva fell 2.75 percent, while Prudential was down 2.6 percent. Aviva said that it believed the FCA’s review into long-standing life insurance customers could apply to about £200 million in value of its policies in force, less than 2 percent of the company’s embedded value.
“Of this £200 million value in-force, Aviva believes that its treatment of customers has been fair and appropriate, and therefore any impact on the group’s profits should be minimal, if at all,” the insurer said.
Aviva said it had previously introduced capped charges of 1 percent or less on its pre-2001 book of group personal pensions and “has no material exit charges applying to its legacy book.”
“Aviva is already committed to ensuring both existing and new customers are treated fairly,” the insurer said.
In his budget announcement last week, Mr. Osborne, the British chancellor, said that consumers would be able to put up to £15,000 a year in so-called individual savings accounts that can either be all-cash, all-stock or a mix of the two.
The accounts are used to supplement retirement savings and differ from a traditional savings account. Previously, there was a limit of £11,520 and no more than half of that could be in cash. The amounts also were required to be held in separate accounts.
He also announced a government-backed bond plan in which people 65 years old and older would be able to invest as much as £10,000 annually and scrapped rules that forced retirees to invest their state pension savings in annuities.
The changes are expected to severely pressure annuity sales by insurers by providing consumers more options to ensure a steady income stream in their old age.
nytimes.com
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