Following the Financial Ombudsman's ruling that misled former policyholders must be compensated, Equitable Life has made its decision to appeal. However, if they lose their appeal the Financial Ombudsman will be free to set the amount of compensation due to those policyholders.
Equitable Life had set aside £75m in its accounts to compensate those people that moved their money away before the compromise deal had been settled. However, a spokesperson for the insurance company said that Equitable would take legal action if the Ombudsman set compensation above the £75m.
Our View
The Financial Ombudsman is purely around to act in the best interests of consumers. If the Ombudsman believes consumers should be compensated, there have to be investigations and proof provided.
Equitable Life have written to around 16,000 policyholders that took their money out before the compensation deal and have admitted that compensation might be due. However, with the five test cases recently winning, Equitable appear very concerned that the compensation due will exceed £75m.
This could be good news for those people receiving the money but bad for Equitable. There have already been questions raised over the solvency of the company and this could push it over the edge, especially as there is also the legal battle with Equitable's former auditors, Ernst & Young.
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