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The Financial Conduct Authority has finally confirmed that it is looking into whether 30 million pension, endowment, investment bond and life insurance customers were 'exploited' and mis-sold products.
The regulator will determine whether policies, sold by doorstep salesmen between the 1970s and 2000, were mis-sold or moved onto platforms that benefited the firm but not the customer.
Zombie funds are closed to new customers and companies can run-off its portfolio of insurance liabilities, until the final policy matures, which may be many years into the future.
The regulator came under pressure to release the details of the inquiry ahead of its business plan date - 31 March- after it was leaked to the press today.
A number of insurance stocks have plunged as a result.
Legal & General urged the watchdog to officially confirm and release details as its stock continues to drop.
FCA's Full Statement
The FCA publishes its Business Plan on March 31st that provides a picture of the key priorities and areas of work for the year ahead.
The work on fair treatment of long standing customers in life insurance is a supervisory piece of work. We enter into this work to gain a better understanding of how this area functions.
We will be looking at how people in closed accounts are being treated.
These accounts have been closed for many years in some cases, but there are still valid issues to be looked at around the question of the service that consumers receive in relation to those accounts. Are they getting the right information? Are they getting the right level of service? Are these investments still appropriate?
We will be reviewing a representative sample of firms who we expect to look at whether they are treating their customers fairly.
We are not planning to individually review 30 million policies, nor do we intend to look at removing exit fees from those policies providing they were compliant at the time. This is not a review of the sales practices for these legacy customers and we are not looking at applying current standards retrospectively – for example on exit charges.
This work will commence in the summer and we will be speaking to firms about how we can undertake that review.
As a forward looking regulator, we want to examine areas that are of interest and relevance to consumers and to firms and assess whether there is an issue that requires any action. No conclusions have been reached as work has not started.