Government Regulators Failed Equitable Life Policyholders for Over a Decade
Policyholders Must Continue to Fight for Compensation, Says Law Firm Clarke Willmott
In a damning report to be laid before MPs today, the Parliamentary Ombudsman has slammed financial regulators for their serial failure in the financial regulation of Equitable Life for over a decade. This is quite justified according to Robert Morfee and Paul Chapman, the Clarke Willmott partners who have been pursuing claims on behalf of policyholders since 2002.
Clarke Willmott has represented over 600 Equitable Life policyholders in claims for compensation including a group of over 400 annuitants whose litigation settled on confidential terms in December 2007.
Robert Morfee, partner at Clarke Willmott, said: “The report is long overdue recognition by the Parliamentary Ombudsman of significant regulatory failings. These have caused serious financial distress to many policyholders. However, its conclusions are far from straightforward particularly on which policyholders should benefit from compensation for financial loss. Further, there is no guarantee that the Government will put in place a compensation scheme and, even if it did, no guidance as to how any such scheme would work.”
Paul Chapman added: “The recommendations regarding the compensation scheme are far from clear. Any resulting scheme is likely to be difficult for the policyholders, many of whom are now very elderly or have since died. Policyholders will undoubtedly need professional help to present their cases correctly. We know the Financial Services Ombudsmen rejected earlier claims simply because complainants mentioned “Penrose type” allegations. We expect to see arguments over whether particular individuals are entitled to claim in respect of the categories identified and also how their undoubted financial loss should be quantified. Calculation of loss is extremely demanding. This is particularly so for policyholders who purchased with-profits annuities. These subsequently proved vulnerable to significant cuts and were policies in respect of which the Equitable’s financial standing, as endorsed by the regulators, was absolutely fundamental.”
“The Government’s reaction to this Report will be key. It is only four years since the Government rebuffed the equally damning Penrose Report. It will be many months until a full response is provided. The Government has already signalled that it will seek to argue that the blame lies at Equitable’s door and that the failings highlighted did not cause additional loss. However, this misses the fundamental element of this scandal: Equitable’s culpability is clear, but it operated in that way because the regulators allowed it to do so, when it was their duty to prevent this. It was the regulators’ handling of Equitable’s finances that allowed it to disguise its liabilities and bolster its returns. As a result, Equitable falsely represented that policyholders had a safe and secure home for their monies with a reasonable expectation of good returns in the future.”
“If the Government does not promptly agree to meet its responsibilities, policyholders should give serious consideration to legal action. This would be either to force a proper implementation of the recommendations or to bring a more wide-ranging legal claim based on the Government’s failure to comply with its EU obligations regarding financial regulation.”
Source: Clarke Willmott