Mortgage News
FCA to investigate 30 million zombie insurance policies
The Financial Conduct Authority is to launch an investigation in to 30 million insurance policies sold across three decades, looking for signs they were “unfair” to customers, according to reports.
The FCA has concerns that pensions, endowments, investment bonds and life insurance policies sold in the UK between the 1970s and 2000 subjected customers to “unfair” conditions.
In particular, the FCA is preparing to act on exit fees from such policies, which currently penalise savers who want to switch providers.
According to the Daily Telegraph, the FCA has said it might “intervene on exit charges” as a result.
A move to tackle zombie funds could shake up the insurance and savings markets in a huge way and free up money to be invested in new products.
Many savers with legacy deals are effectively stuck in some products because of the huge exit penalties – some charge as much as 50% of a person’s investment to leave.
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The charges have been criticised for years but the FCA now appears ready to act.
It told the paper it feared “zombie” funds, which are closed to new clients, are being used by insurers to pay bills from other parts of their businesses.
Details of the investigation will be published on Monday, as part of the FCA’s annual business plan.
Clive Adamson, the FCA’s director of supervision, told the Daily Telegraph: “We want to find out how closed-book products are being serviced by insurance companies, as we are concerned insurers are allocating an unfair amount of overheads to historic funds.
“As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten.
“We want to ensure they get a fair deal.”