BRITAIN'S COMPENSATION culture, which is costing around £10bn a year, could be the greatest "threat" facing the insurance industry, Lord Levene, Lloyd's of London chairman, will tell the City Forum lunch today.
According to the Daily Telegraph, he will also accuse the industry for "suicidal behaviour", saying "the way the industry behaves in 2004 could decide whether it really has a future at all".
Levene will warn: "It is my firm conviction that 2004 will be the real test, not just for Lloyd's but for the entire insurance industry." This comes as the industry "is still paying dearly for mistakes of the past", he will add.
SLIGHTY LESSENING the pressure on the industry, the Treasury has announced that it will raise the 1% price cap on its new Child Trust Fund (CTF), opting instead for a 1.5% charge, reports the Times.
The decision signals that the Treasury has decided to make a U-turn on plans to impose a 1% charge across the whole range of low-cost investment products, which have been schemes proposed by Ron Sandler in a government-sponsored review of long-term savings.
According to the Treasury, the rise "is in the best interests of consumers, as it encourages as wide a selection of providers as possible to offer CTF accounts".
A spokesman for Norwich Union commented: "This is a welcome climbdown. Until today we, along with others in the industry, had understood that the Government would cap the annual charges on the Child Trust Fund at 1 per cent . . . At that level we did not believe it was economically viable to offer a product in the sector."
The insurer estimated expenditure rose yesterday after the appointment of the blue-chip management consultant McKinsey. The consultant will work on a strategy for Standard Life as part of a review team that includes five other firms.
A Standard Life spokesman said: "We intend to keep costs of the review to a minimum, but will spend whatever is necessary to ensure the review is thorough and effective."IFAonline
Three examples of compensation rule issues
Buying in baskets
Scam victims lost average £91,000
Stepped down following MBO
Helped by rising oil price