'Equitable' compensation plea

Published on Monday 6 September 2010 15:29

THE board of Equitable Life has made a final plea for the government to pay full compensation to policyholders who lost out when the insurer almost collapsed a decade ago.

• Actress Honor Blackman is among the high-profile campaigners for Equitable Life policyholders

It wants the government to honour a commitment made in the early days of its administration to fully compensate victims of the scandal, amid fears that payouts will be far lower.

The coalition government is expected to use next month's spending review to announce total compensation payments of just 25 per cent of those demanded by both the company and the policyholders who were affected.

Ministers will base their compensation plan on a report by Sir John Chadwick that was commissioned by the previous government and published in July. Chadwick said that while the absolute loss suffered by victims reached up to 3.7 billion, the payouts should be capped at between 20 and 25 per cent of that, reducing the fund to between 475 million and 650m.

The proposal would mean that more than a million people who lost money after the near collapse of Equitable Life can expect payouts of less than 500 each next year. Ann Abraham, the Parliamentary Ombudsman, said in July that Chadwick's recommendations for compensation were "unsafe and unsound".

Now the Equitable Life board has called for the government to pay full compensation to those who lost out.

Chris Wiscarson, chief executive of Equitable Life, said in a letter to Treasury Secretary Mark Hoban that failure to act properly would amount to punishing policyholder 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 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," said Wiscarson.

He pointed out that the new government had made a clear commitment to follow the Parliamentary Ombudsman's recommendation.

"The persistent references to Sir John Chadwick's work severely undermines our confidence that government will deliver on its commitment," he said.

The firm also wants compensation payments to be made in cash to ensure a "simple and swift delivery process".

The Equitable Life Members Action Group (Emag) yesterday called on policyholders to lobby their MPs to back full compensation ahead of a second reading of the Equitable Life Payments Bill on 14 September.

Paul Braithwaite, spokesman for Emag, said: "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 campaign began when the insurer was forced to close to new business in 2000 after losing a High Court in London decision over the rights of policyholders.

In 2008 the parliamentary ombudsman called for the government to set up a compensation fund for policyholders who lost money, prompting the Chadwick report. The government's decision on the amount of compensation to be paid is to be announced in the spending review on 20 October. An independent commission formed by the Treasury to set out exactly how compensation payments should be allocated is to report its conclusions in January.