Is the Equitable Life saga finally staggering to a conclusion? We have had the report of the Parliamentary Ombudsman and are now waiting for the government’s response to that. Back in July when the report came out this was promised for the “autumn” so time is running out. All the signs are that we will get the key decisions before Christmas, however.
In the meantime, both the Equitable Life board and the Equitable Members Action Group have been busy inside Parliament. They have both appeared before the Public Administration Select Committee PASC) and the All Party Parliamentary Group on Insurance & Financial Services and next Tuesday the Liberal Democrat MP Jo Swinson has secured a Westminster Hall debate on the topic.
The two All Party Group meetings have attracted over 30 Parliamentarians and have been surprising in both their tone and content.
The meeting with Vanni Treves (chairman) and Charles Thomson (chief executive) was a rather chaotic affair as the members of the House of Commons present had to leap out to vote three times during the hour long session (on the rather obscure issue of regional select committees). It did, however, give Equitable a very fair hearing and welcomed its four square support of the Ombudsman’s key recommendations of a full apology for the maladministration by the Department of Trade & Industry, Government Actuary’s Department and the Financial Services Authority and the creation of a compensation scheme. The Equitable board also made re-assuring noises about having got the society into a stable position, admitting this had taken far longer than they expected.
The one thing they would not be drawn on was the size of the compensation package, restricting themselves to observing that it could range from “very little to billions” depending on how far the government believes maladministration was the problem and how far the society contributed to its own downfall.
The Equitable Members Action Group, on the other hand, didn’t get as sympathetic a hearing as might have been anticipated. In particular, backbench Labour MPs do not seem to take too kindly to them, one criticising the tone of their lobbying as akin to “the language of an angry 19th century landlord”.
Not surprisingly, EMAG also agreed with the Ombudsman that there had been maladministration a-plenty and that compensation from public funds would be necessary to rectify this wrong. Unlike the Equitable board, however, they were prepared to put a figure on it: £4.6bn.
EMAG surprised some MPs by accepting that the proposed Compensation Commission would take around two years to settle all the cases, rejecting the notion that some fast-track route to early closure of the issue should be put in place. A fast-track option appeals to some MPs but I got the impression that EMAG feels this could lead them down a road towards being forced to accept lower levels of compensation. Where there was some agreement was in the need to avoid a claims process that relies on policyholders submitting detailed claims to a commission. EMAG doesn’t like this idea because it feels that many of the now elderly policyholders would be intimidated by the prospect of filling in lengthy and complex claims forms. At the previous weeks’ meeting with the board, several MPs made clear their unease at a claims-led process because of the scope for this being hijacked by ambulance chasing law firms. The Equitable board seemed content with the prospect of being asked to provide detailed information about the circumstances of its policyholders so that a compensation commission could determine the right settlement figures without people having to submit claims. A degree of consensus there then.
It all comes down to how much money the government will put up and then what process it will put in place for distributing it. There isn’t much consensus on these points.
Some MPs, and I got the feeling the Equitable board, would be happy for the government to short-cut a long-winded compensation process by creating an “assistance” as opposed to a “compensation” scheme with a fixed amount of money that the compensation commission would be told to distribute as fairly as possible. This would avoid the government having to admit liability on behalf of any of the public bodies named in the Ombudsman’s report and skip the potentially lengthy detailed assessment of all the claims from Equitable policyholders.
It would also have the supreme attraction to the government of being able to keep tight – if not total – control over the amount it pays out, eliminating the potential for upward drift if it allows a compensation commission to work through hundreds of thousands of individual cases. The big question is: how much?
Clearly, anything less than £4.6bn isn’t going to satisfy EMAG, the main policyholders’ representative body, although others have suggested as much as £6bn is need to adequately compensate everybody. The Equitable board gently dismissed these figures as being off the scale, but wouldn’t be drawn on one of their own.
My guess is that we won’t see much more than a billion offered and that it will not be billed as a compensation scheme.
As to timing, I can’t see how the government can pronounce on this until the PASC has reported. This is promised by Christmas so pencil in 17 or 18 December for an announcement – and a barrage of follow-up arguments in the new year.
With great sadness we confirm that Sir David Rowland, our former Chairman from 1993 to 1997, has passed away. He played a critical role in safeguarding the future of the Lloyd’s market through perhaps its most difficult period.— Lloyd's (@LloydsofLondon) February 18, 2019
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