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UK insurance sell-offs a possibility following regulatory probe

8th September, 2014

A recent probe into old life insurance policies could encourage companies to sell off parts of their businesses after details leaked into the media caused insurers’ share prices to plummet.  The warning came from an industry leader following the Financial Conduct Authority's investigation earlier this year into the treatment of 'long standing' life cover customers who bought products as far back as 1970.

The report is expected to reveal how many of these consumers remain 'trapped' in long-term plans which no longer serve their interests.  Instead, it is widely believed that people should be encouraged to compare life insurance quotes and find a plan better suited to their needs.

In March this year, the industry regulator briefed a newspaper about the investigation which resulted in the market value of listed life insurers' falling by hundreds of millions of pounds.  Several hours after the publication, the Financial Conduct Authority (FCA) announced that the report had limitations which were not explained and share prices recovered some of their losses.

Chief executive of Phoenix, Clive Bannister, an expert on historic life insurance policies, said earlier this week that despite the clarifications made by the FCA there may still be an increase in other companies selling off what the industry refer to as 'closed books'.  Mr Bannister said Phoenix is in a good state for the review but that other insurers may not fare so well as they remain in damaging positions.

The FCA's probe into insurers' so-called 'zombie funds' has been criticised by Chancellor George Osborne, who claimed that the watchdog has distorted details of the investigation.  He accused the regulator of ‘damaging the UK financial services sector’.  

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