Insurers face investigation of with-profit ops

THE FSA is investigating two insurers over failings in their with-profits operations and has warned several others to make changes or face possible fines, it said yesterday.

Some of the firms did not have adequate governance arrangements for their with-profits funds, while others were not doing enough to help customers understand their policies, the watchdog said.

“Firms should make sure that their communications with policyholders are clear and manage expectations about the likely performance of their policy,” FSA director of insurance Ken Hogg said in a statement. “They should also ensure that their with-profits committees are providing an independent challenge to their management.”

The FSA’s findings are the culmination of a review in which it inspected 17 firms controlling 80 per cent of the assets in British with-profits funds. Two of the firms have been referred to FSA enforcers for further investigation, the regulator said, without providing further detail. Any disciplinary action would take the form of a fine.

With-profits policies smooth out customer returns by keeping back some of the profits generated when the underlying fund performs strongly.