Battle Over Compensation collapsed Life Insurance Firm

During an economic downturn, everyone feels the pinch, but hundreds of life insurance customers want to be pinched so they can wake up from a financial nightmare they are experiencing.

Victims of a collapsed Equitable Life Insurance group have launched a High Court battle after the Government refused to pay compensation to those who lost their savings. Some customers lost up to half their savings.

Trouble began when the insurer closed to new business in 2000 when it was unable to pay promised annuities.

From the 1950s the firm had sold policies that guaranteed a minimum allowance rate to investors but the scheme left it unable to respect its pledge.

Last summer, Parliamentary Ombudsman Ann Abraham found that the regulatory bodies had functioned in an inactive and unworried manner and that the FSA had supplied policyholders with information that was inaccurate and misleading.

Therefore, Ms Abraham recommended the establishment of a scheme that would consider individual claims for an award and that former clients should have the right for compensation after she found the Government guilty of 'a decade of regulatory failure.'

However, this stern warning from Abraham clearly fell on deaf ears, as eight years on; the customers are still waiting for their compensation.

It was revealed that the Government has rejected some of her findings, and stated that it will only consider ex-gratia payments for those in special dire positions.

The decision by the Government has angered equitable members action group (Emag) who have stated that they have been 'forced to take legal action', so therefore has applied to the High Court for a judicial review.

Paul Braithwaite, general secretary of the lobbying body, said its legal action was aimed at forcing the Government to pursue her proposals.

"The Government's continued intransigence has forced us to take legal action. The proposed hardship scheme is totally inadequate, will take years to implement and looks like leaving 90% of victims out in the cold. Our members are frail and elderly and dying by the day," he said.

The group is therefore demanding a judicial review of the government's offer on the grounds that the Treasury has not given 'cogent reasons' for refusing to accept some of the Ombudsman's findings.

As a result, EMAG is pushing for an early hearing date, claiming that around 15 Equitable Life policyholders who could be considered for compensation die each day.

Over 100's life insurance

This compensation feud between life insured consumers and the government could serve as a warning to future insurance customers – especially as another life insurance firm has introduced its over 100's policy.

The insurance group decided to begin this policy, because the average age of an individual is increasing every year.

The cover will allow people that were born before 1999 a chance to purchase the life insurance protection they need. Existing policies would only cover people to the age of 80.