Correspondence: 01/11/2003 - Letter From Alex Henney to the Editor of the Telegraph
Letter From Alex Henney to the Editor of the Telegraph
1st November, 2003. Draft
Editor
Daily Telegraph
dtletters@telegraph.co.uk
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38 Swains Lane
London N6 6QR.
T: 020 7284 4217
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Dear Sir,
Professor Philip Booth (letters 5 November) argues that Equitable policyholders should not be compensated because the government failed to regulate the Society effectively.
His statement of The Equitable's problems is incorrect, as is his description of government regulation. Following the Insurance Companies Act 1982 the government had a responsibility as prudential regulator to protect policyholders' reasonable expectations. Policyholders paid for this "service", but because of the incompetence of the government failed to get anything in return.
The government should have required The Equitable (and other life companies) to reserve for guaranteed options from the mid 1980s when the methodology was known, but it did not do this until 1998. Likewise the government should have stopped The Equitable from over-bonusing during the 1990s, which gave policyholders who left at least £2bn more than their asset share. This largesse was at the expense of policyholders who stayed after 16 July 2001, whose policy values have been savaged. Contrary to Professor Booth's claim, few of them "reaped the gains of unexpected profits in earlier decades". They surely have a right to expect that "Regulated by HM Government" entitles them to something better than the shambles of The Equitable, which is a consequence of mismanagement that was not checked by incompetent regulation.
In Australia, a year after the HIH Insurance Company was suspended in 2001, a Royal Commission reported on the fiasco. Here, by way of contrast, it is now 3 years since The Equitable closed. To avoid facing up to its responsibilities to the policyholders of The Equitable, this evasive government sent Lord Penrose off to write a history book. We did not need a 26 month inquiry involving 30-40 man years of work, to spell out the story of serial misregulation by the government. In the Commons yesterday Treasury Secretary Ruth Kelly came up with more excuses to delay and edit publication of Penrose's report. Meanwhile, some policyholders have died, and as cut after cut falls on the annuitants, many are very worried. Justice delayed is justice denied.
Yours faithfully,
ALEX HENNEY
Chairman of EMAG
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