The FSA has sent a letter to with-profits insurers telling them they need to ensure policyholders are treated fairly.
The letter follows reviews of two aspects of the management of with-profits funds which revealed varying standards of funds governance.
The regulator has carried out two thematic reviews looking at how firms provide independent input into with-profits funds management and also on closed with-profits funds.
Its review into with-profits management found:
- Some firms' arrangements for independent input did not involve consideration of wider issues that could affect whether policyholders are treated fairly.
- Firms need to identify and manage any conflicts of interest in the way that the firm uses independent reviewers to look at the firm's management of with-profits funds.
- Firms did not always provide timely information to those responsible for the independent review of the management of funds.
The closed with-profits funds review found management “had not devoted sufficient attention to managing the run-off of the fund”.
FSA insurance sector leader Sarah Wilson says the regulator has been monitoring the new with-profits funds rules since introduction in 2004/05.
“The mixed picture shown in the reviews of two key areas is of concern,” she says.
“Some firms are not doing enough to provide independent input into the management of with-profits funds or are not devoting enough attention to running off closed funds.”
"Senior management need to review our findings against their approach to managing their firm's with-profits funds and take prompt action to address any shortcomings."
Last week the Financial Services Consumer Panel released a report urging the FSA, providers and advisers to protect the 11 million policyholders with £190bn in closed with-profits funds.
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