Eight years after the near collapse of Equitable Life and four years after the Parliamentary Ombudsman began an investigation into the insurer, there was finally some hope for the company’s million or so policyholders yesterday.
Ann Abraham, the parliamentary ombudsman who led the exhaustive investigation, found the government should apologise to policyholders – some of whom lost up to half their life savings – and offer compensation. Abraham found the government had overseen a “decade of regulatory failure” and identified 10 instances of maladministration.
The report into Britain’s oldest mutual insurer, which almost collapsed in 2000 after being forced to honour unsustainable guarantees stretching back 30 years, recommended a compensation scheme to redress losses, and called on the government to act swiftly, as tens of thousands of policyholders – estimated to be 30,000 – have already died since the problems surfaced.
The report said a compensation scheme should be set up within six months of any decision by the UK government or parliament, and it should take no longer than two years to determine who is eligible for compensation and how much they should receive.
The report, however, does not guarantee a pay out for all policyholders and further delays are expected. But despite the lack of material compensation, policyholders, who have campaigned for years for government action, were still jubilant yesterday. The Equitable Members Action Group, a policyholders pressure group, said compensation could amount to around £4bn.
The group says the compensation should be paid to as many as 1 million policyholders who lost out when their policy values or bonuses were cut in the aftermath of the insurer closing to new business at the end of 2000. The group’s call was supported by Vanni Treves, Equitable Life’s chairman since 2001, who said the regulators’ failure to tackle problems at the society meant the government should compensate policyholders who suffered losses as a result.
“Year after year, the regulators failed to do anything about problems that were absolutely evident to them,” Treves said.