Equitable faces new FSA probe

By ROBERT LINDSAY
Updated:

 

Troubled Equitable Life is facing yet another investigation, it has emerged. Financial Services Authority chairman Sir Howard Davies told the Treasury Select Committee today that he was looking into complaints that Equitable mis-sold life insurance last year, after the House of Lords had produced the ruling that effectively meant it had to put itself up for sale.

MPs said that, contrary to the belief of Equitable, many people who bought Equitable policies that year had not seen the coverage of its troubles and had no idea it was up for sale. One policyholder, the MPs claimed, said she had talked to several financial advisers who had also been unaware of Equitable's problems.

Sir Howard said: 'We have received complaints from people who were sold policies during 2000, and we are looking into it.'

However, he stressed that the FSA had agreed to allow Equitable to carry on selling pensions as 'it was in the best interests of policyholders' since it meant the life insurer could be sold as a going concern.

Earlier, MPs had accused Equitable's outgoing chairman John Sclater of being 'glib' if not 'deceptive' in his answers to their committee.

Sclater, soon to be replaced by Vanni Treves, was asked by the committee why policyholders were not told of a potential £1.5bn liability when the regulators knew about it. He replied that the information was in the statutory returns. Asked how policyholders could see the returns, he replied: 'They can ask for it.'

But he was forced to admit he did not know on what page of the 420-page document the section on liabilities was contained. MP Jim Cousins said: 'Don't you think your answer to this committee was rather glib, even possibly deceptive?' Sclater replied: 'Not particularly, no.'

Asked if they considered they had made any mistakes, chief executive Chris Headdon admitted that the insurer did not do enough in 1993 to make sure members were aware that their bonuses would be cut.

'We thought we had, but obviously we hadn't,' he said, because members started to protest in 1998.

He also admitted that with hindsight it was a mistake to assume that Equitable would win its House of Lords case over cutting the bonuses. 'But our legal advice was that it was an extremely remote possibility that we would lose.'

Headdon and Sclater denied they concealed the £1.5bn potential liability from policyholders, and said they had told the regulator about it.

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