A recent rule change at the industry regulator, the Financial Services Authority means better news for policyholders.
Currently, if an insurance or investment company is fined for things such as poor practice or bad advice by the regulator, the money to pay the fines generally comes out of policyholder funds (not directly though).
This has been seen as unfair for so long as it was on the policyholder and not the shareholders that were hit.
However, the new rules say that any fines must be paid out of shareholder and not policyholder funds.
This news means that the more influential shareholders could call the company to task over fines.
They may then be more likely to improve practices to reduce future fines.
Our view
We see this as a very welcome change. Many of the larger companies are just not controlled properly with only the policyholders losing out. This way, the people making the decisions will have their own profits hit. Well done FSA!