The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Correspondence: 18/12/2003 - Letter from EMAG to the FSA

Letter from EMAG to the FSA - 18 December '03

David Strachan Esq
Director of Insurance Firms Division
The Financial Services Authority
25 The North Colonnade,
Canary Wharf,
London E14 5HS
42, Bartholomew Villas
Kentish Town
London NW5 2LL

18th December, 2003

Dear Mr Strachan,

Thank you for your letter of 4th December, responding to mine of 14th November.

The letter did not address our request, made on policyholders' behalf, that the FSA henceforward require that the society provide the detailed basis of calculations, promptly on request, for with-profits annuity reductions and transfers. Even this week EMAG has been informed, for example, of an annuitant who anticipates a reduction of his pension income from 1st January 2004 who has been told by the Society that it cannot inform him of his revised income expectation until Christmas Eve, which shows a lack of consideration.

Nor did you explain on what basis the FSA felt able to allow Equitable Life, in the current accounts to June 30th, 2003, to depend upon £150m of future profits in achieving technical solvency in a Society with wafer-thin margins between guarantees and investment returns. What possible basis can there be for any such waiver to have been granted since the closure of ELAS?

It beggars belief that you reported that the GAR rectification scheme, required by the House of Lords, has received an FSA waiver, such that it need not be completed until December 2004 - four and a half years after the Lord's ruling. Nor did you comment at all on the flagrant inequity of the new scheme's far less generous terms in comparison to the settlements given to 3,000 policyholders who were settled well over a year ago, before the first scheme's suspension - a scheme that had previously been designed to be fair.

You excused the Society in writing because of having to prioritise to deliver the Compromise - but that that was signed, sealed and delivered two years ago.

It is hard to believe that the FSA defends the Society's failure to report the investment performance of its knife-edge-vulnerable with-profits fund, with the words: "….it is debatable what would have been gained by stating the rate of return…".

Do you not acknowledge that it for the policyholder to arrive at their own informed view on such absolutely fundamental information, whose obfuscation you so clearly continue to support? Do you place no weight on the FSA's own fine words? I append examples chosen from: "The future regulation of Insurance: A progress report." October, 2002" and the FSMA2000.

It is unsatisfactory that you repeatedly wrote that I should ask the Society, when it is about the Society's evasion that EMAG seeks FSA intervention to lift the veil. EMAG has made repeated representations to the FSA on the inadequacies of accountability in mutual societies.

On the subject of EMAG's suggestion that the FSA appears to have been acting as a shadow director of Equitable Life you wrote: "…I have nothing to add to our previous response." That response was a denial extending to just three sentences.

EMAG is not satisfied and will now ask the FSA's Complaints Commissioner Rosemary Radcliffe to take an interest.

Yours sincerely,

Paul Braithwaite
General secretary, EMAG

Cc John Tiner
Rosemary Radcliffe
(See appendix enclosed)


"The future regulation of Insurance:
A progress report." October, 2002.

...that "there are three key elements to achieving out strategic aims in the area of insurance. Firstly, to secure a fair deal for consumers, through:-
  • requiring firms to treat customers fairly, during and after the point of sale, for example by giving clearer and fairer information
  • equipping consumers to make informed decisions, for example through improved product disclosure and consumer education initiatives
Secondly, to strengthen our requirements for insurance firms to be soundly managed and to have adequate financial resources through…improving public and regulatory reporting.

The new regulatory reporting environment, Discussion Paper 12, The Financial Services Authority, May 2002:

"This means we need to consider issues such as what information is needed for…achieving better information about firms for consumers...".

"Public disclosure of information about financial institutions helps actual and potential consumers of financial services products and other market participants to understand the financial position and strength of the institutions they are dealing with. For consumers, the availability of this information allows them to make better informed decisions and choices. However, consumers may not make this assessment alone, since in many cases they will rely upon information/sophisticated users, such as the media, agents and brokers, independent financial advisers and the like, to give them relevant information to address their needs. To this end, information that is publicly disclosed needs to be relevant, reliable and easily accessible. So, the data being collected should be targeted to achieving information that gives a clearer picture of a firm's financial well-being, and is in line with the principles of good information (see Annex D)."

The FSA's Issues Paper 3
advocates explaining to consumers the risks of the with-profits product.

The FSMA 2000:
2 (1) In disclosing its general functions the Authority must, so far as is reasonably possible, act in a way -
  1. which is compatible with the regulatory objectives……
( 2 ) The regulatory objectives are……( c) the protection of consumers
5 (2) In considering what degree of protection may be appropriate, the Authority must have regard to -
(c ) the needs that consumers may have for advice and accurate information.