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Government told to pay compensation for Equitable Life failings

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Date: Thursday 17 Jul 2008

LONDON (ShareCast) - Over a million policyholders in collapsed insurer Equitable Life may still have to wait years for any compensation, even though the parliamentary ombudsman has recommended that the government set up fund for customers who lost out.

Reports today suggested that the government is unlikely to pay anywhere the £4bn claimed by action groups formed by Equitable Life customers. They claim regulators were aware of Equitable's problems in the early nineties but allowed it to carry on trading regardless.

Ann Abraham, parliamentary ombudsman, yesterday published a damning report that blamed “serial regulatory failure” for allowing the problems at Equitable Life to develop unchecked and and urged the government to compensate customers.

Abraham said the DTI, the Government's Actuary Department and the Financial Services Authority failed to use the powers available to them to protect Equitable's customers. Her report identified 10 instances of maladministration by its departments and said the government should apologise to Equitable Life customers.

She said that the regulators failed to verify the solvency of the company and make sure the information that was in the public domain was reliable.

The life insurance company came close to collapse in 2000 after being ordered by the High Court to fulfil commitments to pay guaranteed annuities sold at a time of rapid inflation that promised a minimum level of retirement income.






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