7th December 2000 - Market Research into Equitable Life policyholders' views

Summary:

The Equitable Members' Action Group (EMAG) decided that it would commission a survey of members' opinions, since The Equitable confirmed that it had no such plans.

1,000 policyholders were polled (statistically at random) with a self-completion questionnaire by post. The response rate was particularly high.

The questions EMAG asked, developed by a team of members independent from the influence of The Equitable, endeavoured to be even-handed.

The results are highly critical of The Society's management.

Conclusions:

The findings on pages 3 and 4 speak for themselves.

The membership is not satisfied with the board's chosen solution to its problems:

viz. seeking an immediate sale of The Society to a PLC.

The policyholders do not share the board's belief that it is best placed to decide what is in the best interest of all the members.

The members do not accept, without any detailed explanation, that sale is the only course.

The overwhelming majority would like to be offered alternative options.

The Society has mismanaged the PR and communication process and appeared arrogant.

It has not acknowledged that communication should be a two way process.

In consequence, trust in the board appears to be very low.

Issued by: The Equitable Members' Action Group (EMAG)

P.O. Box 49, Virginia Water, Surrey, GU25 4YT

For further information on this survey (or if you need it faxed) contact Paul Braithwaite by E mail at: emagpr@yahoo.com

The Equitable Members' Action Group (EMAG) decided early in November to commission a market research exercise because The Equitable admitted that it had no such study in hand.

EMAG wished through this consultation exercise to explore and establish the views of the membership. It was EMAG's view that it did not know the opinions of the policyholders and probably neither did the board! EMAG sought to become more accurately aware of the range of views to ensure that it reflects members' shared common concerns. The findings did indeed come as a surprise and they are already influencing EMAG's stance.

The questionnaire was developed by three members of the EMAG committee to be deliberately even-handed. It was prepared completely independently from The Equitable.

EMAG's objectives, to be found at the website "www.emag.org.uk", clearly state that it seeks information and influence on behalf of ALL membership classes. It regards The Society as a valuable asset of the members. Thus, EMAG's disposition is that of a critical friend.

Whilst the cost of the exercise was modest (entirely funded by donations), it was conducted with scrupulous rigour. The questions asked were, in EMAG's view, rather less political and more probing than they might have been had the study been commissioned by The Society!

EMAG purchased 20,000 names and addresses of policyholders from The Equitable. Over the weekend of November 18^th a questionnaire was sent to 1,000 members - a stratified random sample - from the list provided. Despite the absence of any stamped addressed envelope, the response rate was unusually good - indicating a high level of interest. Although the questionnaire was subsequently placed on EMAG's website, this document is an analysis strictly confined to only the responses from the random sample of 1,000 policyholders.

EMAG intended to re-visit a sample of the non-responders subsequently by telephone to check that their opinions were not at variance with the findings. Unfortunately, the reported position of The Society has now changed so radically that re-polling is thought to be considerably clouded and hence less relevant.

So the re-visit, which would have been an expensive ancillary exercise, did not proceed. However, because the long tail of the late responses received remained remarkably consistent with the first wave, EMAG is quite confident in the stability of the findings.

Whilst acknowledging that those members who are broadly content with the board's strategy may, through lethargy, not have been motivated to respond, it seems unlikely that their inertia could outweigh the opinions expressed in this randomly composed survey.

Findings: The questions and results:

Here are verbatim questions asked and a summary of answers.

All questions offered response options of "Yes", "No" or "Don't Know".

Q: "Do you agree with the board that it is best placed to judge what is in the best interests of all members?"

A: Only 1 in 5 answered Yes (22%).

Q: "Do you believe The Equitable is giving adequate consideration to options other than outright sale?"

A: The majority (52%) answered No.

Q: "Would you like to be offered alternative options, rather than a single bid recommended by the board?"

A: An overwhelming 86% answered Yes.

Q: "Whichever course is followed, there will probably need to be a reduction in the level of terminal bonuses and/or reduced future bonus levels. In this light, would you prefer:

a. The Society remain a mutual.

b. The Society be sold, as planned, to a PLC.

c. The Society be sold, managed or broken up to maximise returns

to the existing membership.

d. Other."

A: A surprising majority (52%) favoured (c) - only one member in six (16%) favoured the board's chosen course (b).

Q: "What course of action would you now wish to see the board of The Equitable

adopt:

1. An EGM to be called (as planned) for next Spring to seek approval for a single bid approved by the board.

2. The board should conduct a comprehensive consultation exercise of all members.

3. An EGM should be called at the earliest practical date to seek members' consent to the sale of The Society.

4. Other."

A: Only one in six (17%) chose (a) - the board's current path. Half (48%) elected (b) - conduct a comprehensive consultation exercise.

Q; "EMAG is considering whether to offer to cast members' proxy votes at the EGM, either as directed by the member or at EMAG's discretion. Would you approve of having an option to nominate EMAG to cast proxy votes for those unable to attend an EGM?"

A: 77% answered Yes.

Q: "If The Society is sold the members may be offered windfall payments. What is the minimum sum you personally would want in recompense for your loss of ownership to approve the sale?"

A: Fully half declined to give a figure but wrote in "pro rata to my fund" or equivalent. The average of the half that did write in a figure was £5,100.

Interestingly, EMAG separately analysed the responses of the GAR's (those with guaranteed annuity rates) and compared them with the responses of the non-GARs. GARs represent 17% of respondents and on this question they quoted a cash figure 40% higher than the non-GARs. This may reflect that they have, by definition, older policies and hence higher fund values.

Interpretation:

The board of The Equitable has not communicated with its members since the late July announcement that, as a result of the House of Lords ruling, it had placed The Society up for sale.

The board stated clearly that the next communication should be in December to propose a recommended bidder, after a sale negotiation process. No amount of enquiries from action groups or individuals in the intervening four months has penetrated a veil of secrecy. Inevitably, this has led to immense anxiety, frustration and hostility in the membership. This is clear from the hand written responses to the final open-ended question (see next section).

The membership does not agree with the board's unilateral decision to put The Society up for sale. It may be the case that that is, quite simply, the only available course. But the board has failed to explain this need in detail. It has chosen instead to plead the need for confidentiality which, if breached, might prejudice the sale.

The board appears not to trust the member/owners, despite their professional backgrounds and high fund values. In consequence the members no longer seem to trust the board. There has been a pattern, however innocent, of dissemination of inaccurate information by the management resulting in a loss of trust. This has caused a downward spiral in the board's relationship with its policyholders.

It is galling for the members who are the owners of The Society to have to rely on press comment/speculation to keep them informed. Each step of the way The Equitable has deplored the inaccuracy of press stories whilst apparently doing nothing to correct them. Subsequently, all too often, the journalists appear to have been vindicated.

Fully three-quarters of members polled would like to see EMAG itself as an alternative proxy on any EGM ballot paper, indicating the mistrust of the board (and the meeting's chairman) to choose on their behalf what is in the interests of the membership.

It is possible that The Equitable may seek to discredit this small, inexpensive study because the findings are unfavourable. That would be regrettable. EMAG hopes that The Society will accept the results as indicative and learn from them. This is a valid pilot study which EMAG would be happy to develop in co-operation with The Equitable into a mass sampling exercise, at the expense of The Society (or the media).

Policyholder's verbatim responses to open-ended last question:

Respondents were assured that their comments and individual answers would not identifiably be fed back to The Society. The quotes that follow are a genuine cross-section but must, therefore, remain anonymous:

"Equitable's approach over recent years to members appears to have been high-handed and arrogant. Things seem to keep getting worse. Time that heads rolled. No-one can do worse than the existing management."

"I am with this company because I trusted it."

"Any new PLC owner will essentially be taking some of our future returns as their profit! They must pay for that in buying individual ownership."

"The position as at this time is very unsatisfactory and requires the views and opinions of ordinary members to be taken into account."

"There should be a vote of 'no confidence' in the board."

"It is a pity that The Equitable didn't behave honourably in the first place and accept its contractual obligations. I get the impression that in recent years The Equitable Life has been complacent and not living entirely in the real world, which has moved on apace."

"A sale to a PLC may prejudice any future bonuses."

"The board should be personally liable. We need the best deal out of the mess possible."

"If a mutual is owned and run for the benefit of the members, why should the profits and losses not be shared? Why should some be guaranteed lifeboats and others left to drown?

"We only want the best return on our investment and of course are worried about this."

"Alan Nash and the board misjudged the potential impact of the GAR issue and then misinformed policyholders. I feel they should step down and allow new blood to steer The Equitable back towards a stronger and more stable Life Society, based on full mutualist principles."

"I would like more clarity as to the current financial position of The Equitable and how dire is the situation? It amounts to being shrouded in mysticism."

"It's really sad. I trusted The Equitable and now I feel let down."

"The services of Alan Nash should be dispensed with forthwith, having brought a once great institution into disrepute."

"Listen to what the members have to say. I'm sure some bright ideas will come out of the exercise."

"I feel the policyholders do not have sufficient financial information to enable them to decide the best course for them. I do hope EMAG will campaign vigorously to prevent massive payoffs to members of The Equitable's board who have got The Society into its present situation."

The Equitable Members' Action Group (EMAG):