Clock is ticking for fair Equitable Life compensation
The board and policyholders of Equitable Life are making a last-ditch attempt to lobby the government to pay full compensation, ahead of the spending review next month.
After a decade of argument over how much compensation should be paid to around 1.5 million policyholders after the firm’s near collapse in 2000, the government will finally announce the level of compensation on 20 October.
Two years ago, the parliamentary ombudsman Ann Abraham recommended that policyholders be compensated by the government for their relative loss after identifying "serial regulatory failure".
The "relative loss" has been put at between £4 billion and £4.8 billion.
However, a further review this year by Sir John Chadwick recommended that total compensation be a 10th of that, around £450 million. The ombudsman said Chadwick’s proposals did not ‘in any sense enable fair and transparent compensation to be delivered’.
The Equitable Members Action Group is now urging policyholders to lobby their MPs to back full compensation, as recommended by Abraham, for victims of the failed insurer, prior to the spending review. There will also be a House of Commons debate on 14 September where MPs will hear the second reading of the Equitable Life Payments Bill.
Concerns are growing that the government will accept Chadwick’s proposals and ignore the ombudsman’s 2008 report.
The Equitable Life action group says a House of Commons report on the history of Equitable Life compensation payments, prepared for the debate next week, is "grounded" in Chadwick’s proposals.
Paul Braithwaite, spokesman for the Equitable Life Members Action Group, says: "We are appalled that the Treasury is seemingly bent on toughing it out. The paper seems grounded in the Chadwick report and given the ombudsman’s view that Chadwick is unsound, this must be torn up."
The board of Equitable Life has also written to Mark Hoban, the financial secretary of the Treasury, pleading with him to honour the coalition commitment to implement the full parliamentary ombudsman’s recommendation to Equitable Life policyholders.
The letter says the government must accept Abraham’s conclusion that policyholders suffered a loss "that they would not have suffered had they saved or invested elsewhere", and reject Chadwick’s insufficient compensation proposals.
Chris Wiscarson, Equitable Life’s chief executive, blasts: "Let’s not make Equitable policyholders victims three times over. First, at the hands of the regulators as so clearly articulated by the parliamentary ombudsman; second, at the hands of the Labour government who failed to bring closure for over a decade; and now third, compensation that will be decimated if Sir John Chadwick’s advice, meant for the Labour government and slated by the ombudsman, is used."
He adds: "The persistent references to Sir John Chadwick’s work severely undermines our confidence that the government will deliver on its commitment."
The firm is also calling for compensation payments to be made in cash "enabling a simple and swift delivery process".
The government has set up an independent commission to advise on how to allocate payments to policyholders. It will report back by January 2011.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.