28/05/2003 - Key points for International policyholders from ELAS AGM at Wembley 28/05/2003

I attended the ELAS AGM today to find out about the items of importance to international policyholders. These are my some of my notes:-

1. Items of interest to all international policies (and all UK policyholders):
   
   
   1. Regulatory failure.
      

      Vanni Treves stated that the report by EMAG as to the financial "black-holes" and apparent previous regulatory failure "had been helpful".

      In response to direct questions by Tom Lake of EMAG, he agreed that ELAS would not seek to stop any part of the Penrose and EMAG report from being made public once Lord Penrose had finished his work, which is due this summer. He repeated his previous commitments to take any legal action necessary to recover losses from any party shown to be liable in the Penrose report.

   2. Director's salaries.

      The issue of the increase in director's salaries was hotly contested. The main defence by Vanni was that the directors had a very difficult job and that their remuneration was good value. This was elaborated further by Sir Philip Olten, the chairman of the remuneration committee.

2. Of interest to Guernsey policyholders who had exited the with profits fund prior to the compromise vote.
   
   The ELAS board confirmed that they had previously wanted any complaints from this group to be handled by the Guernsey regulator. However Vanni Treves made a clear commitment from the society that all complaints about Guernsey purchased policies are now being treated in exactly the same way as those from UK purchased policyholders.
   
   He also confirmed that the UK FOS (Financial Ombudsman Service) had been accepting complaints regarding Guernsey purchased policyholders since last year.
   
   As you may have read in the press (and as confirmed by Vanni at the meeting), five sample complaints have been examined in detail by the FOS and the arbitrator recently decided that compensation was due from ELAS in each case. Vanni said they were considering this judgment and had the right to appeal. The problem is that board are being pulled in two directions - to protect current policyholders value in the with profits fund and to compensate losses incurred by previous policyholders.
   
   In response to a direct question as to their position in relation to this conflict of interests, and as to whether they would act as 'a reasonable person', as defined in law, and not use expensive legal methods to block any claims, there was acceptance by Vanni that the compensation claims had to be assessed individually. Subsequently Vanni stated that communication regarding individual compensation would be going out over the coming weeks.
   
   
3. The society's imposition of 'gagging' orders on previous compensation payments.
   
   Vanni was asked as to why ELAS has imposed legal orders to stop policyholders communicating to other claimants details of their compensation. (I know of at least one such case which covered US based policyholders). The questioner stated that such payments had to be made public to the members of the society so they could judge them.
   
   After some evasive responses, the board finally admitted that such 'gagging' orders existed and that they had been applied so as not to prejudice negotiations for subsequent claims.
   
   
4. The performance of the with profits fund.
   
   Curiously, as ELAS were obliged by circumstance to sell their equities and move into fixed interest stocks to ensure their solvency, they have performed better than other with profit funds (such as Standard Life, AXA, NPI, Pearl, Prudential) who all lost out in the continuing bear market). Vanni was therefore able to announce that an interim bonus would be announced shortly at around 3.2%.
   
   I will not repeat at this point the other points from the meeting which covered all types of policyholders. You will be able to find these in other sections of the EMAG and ELAS web sites.

From the above events the following is the current status of international policyholders.

Guernsey purchased policyholders.

After a lot of battles with regulators and ELAS, you should be glad to know that you are now clearly within the UK complaints and compensation procedure.

- If you held a with profits policy at the time of the compromise vote, then you gave up your right to claim.
- If you sold your with profits fund before the vote, and you had a claim, you should have written to the society and followed up with a complaint to the FOS (if your complaint was not resolved to your satisfaction).
- If you have done nothing then I assume you do not have a problem with what happened previously.

If you are still in the fund, you will be pleased to note that it is now doing better than other funds into which other policyholders had switched.

Irish and German policyholders.

These complaints are being handled through local and European law as they were purchased from European registered companies of ELAS. The issue of the apparent failure of the UK regulator within European law might come into play as there are clear European directives as to the responsibility of member states' non life insurance regulators. These directives are enshrined in European treaties and laws, and are even more exacting than directives for banking.

Again we have to wait for the Penrose report before deciding the actions for the future.

Dubai purchased policyholders.

I anticipate that these policyholders may fall eventually into any UK compensation scheme. However, in the meantime, they should at least be protected by Arab and Koran laws which, I understand, require that a company cannot sell an insurance policy and then declare a loss to the policyholder. So you should, at least, be able to reclaim the amount paid into the policy.

For those Dubai policyholders who sent me e-mails on this subject, I suggest that you make contact with local lawyers, and the legal department of the British consulate. I have heard that the full purchase price of policies have had to have been refunded but I do not yet have details.

If anyone has any extra news on the issue of Dubai policies, could you let me know? I would be pleased to make it generally available.

Leslie Seymour.