European inquiry into Equitable Life likely to affect UK general insurance market
Euro-MPs have sharply criticised flaws in the UK system of financial regulation.
According to the MEPs, consumers in the UK and elsewhere in Europe have nowhere to turn to and little form of redress when experiencing difficulties with financial companies.
The criticism was levelled as part of the European Parliament's investigation into the financial crisis at Equitable Life.
While Equitable is a life insurer, Biba warned that the inquiry could have a knock on effect in the general insurance market.
Two policyholders, who appealed to the parliament, accused UK regulatory authorities of failing to supervise the company under EU insurance Directives.
The inquiry's committee is expected to make a number of recommendations on the implementation of EU Directives in member states, and the nature of regulation in the UK and other EU countries, when it reports next spring.
MEP Mairead McGuinness, chairwoman of the inquiry's committee, said: "As the committee continues to gather evidence, we are identifying gaps in the roles and remits of the various national regulators involved and gaps in the understanding of members of the public on who to turn to for assistance."
UK Liberal Democrat MEP Diana Wallis, who is drafting the committee's report, said: "If the single market in financial services is to be, we need the mechanisms in place to ensure that consumers can have access to justice and to redress where things go wrong."
Biba head of compliance and training Steve White added: "Clearly this will have knock-on effect in the general insurance market as there are a number of insurance companies that are based elsewhere and passport financial services into the UK.
"It is confusing for brokers about who is responsible for what, what the relevant rules are and who is liable for compensation. Perhaps there is a message there for the regulator to make it clearer not just for regulated firms but the wider public."
What happened at Equitable Life
Equitable Life began selling policies in Europe in the 1950s. In the 1990s, the company began to experience difficulties because falls in interest rates and inflation meant it was struggling to meet guaranteed returnsoffered on so-called "guaranteed annuity" pension plans.
Equitable closed to new business in 2000 and was forced to cut policy values on more than one occasion. It eventually agreed a deal with guarantee holders which saw them giving up their guarantees for a boost to their policy values.
More than one million policyholders have lost money in the UK as well as 6,500 in Ireland and 7,500 elsewhere in Europe, notably Germany.
