Legal & General
Aviva and Legal & General Shares Tank on Mis-selling Inquiry into 30 Million 'Zombie Funds' Reuters

Insurance stocks are tanking in early trading after a leaked report revealed that the Financial Conduct Authority will unveil a new inquiry into whether 30 million pension, endowment, investment bond and life insurance customers were 'exploited' and mis-sold products.

A source close to the regulator told IBTimes UK that will allegedly sift through 30 million policies sold by doorstep salesmen between the 1970s and 2000, when it announces its annual business plan on 31 March.

However, due to the volume, it will initially look at a sample amount first to also see if policyholders were moved onto platforms that benefited the firm but not the customer.

Aviva's stock price sank 8% to 446.00p while Legal & General shares fell over 5% to 201.40p.

Meanwhile, Standard Life and Prudential shares fell by over 2.2% on the London Stock Exchange.

The inquiry is set to begin this summer after the regulator "became concerned about insurers using returns from zombie funds to cover costs from other parts of their businesses."

It will exclude workplace pensions.

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 FCA will say that it think some insurers have "exploited loyal policyholders, who are not given the same priority as new customers and are charged high fees for substandard service."

The FCA will say "savers could get a free exit from rip-off pensions and investments, or be moved to better deals."

The FCA declined the comment.