FCA insurance probe leak should not divert attention from life insurers’ own failings

OUTLOOK: Called before the Treasury Select Committee, the boss of the Association of British Insurers portrayed himself as the voice of sweet reason, while wielding a dagger.

Ostensibly Otto Thoresen was in front of MPs to talk about the Budget and the Chancellor’s removal of one the industry’s favourite cash cows, by getting rid of the demand that people buy an annuity with their pension savings.

But he knew committee members would be far more interested in hearing his line on the Financial Conduct Authority’s spectacular mishandling of the announcement of its investigation into 30 million old life insurance policies, which caused a panic on the stock market when it appeared in a newspaper interview.

Mr Thoresen was well prepared. He talked regretfully about the harm done to the “relationship of trust” he said was needed between industry, regulators and government. Dabbing a metaphorical tissue to his eye, he went on to insist that he wasn’t calling for “heads to roll”, despite the siren calls for the resignation of FCA chief executive Martin Wheatley coming from his members and perhaps some of his staff too (albeit privately). That was the sweet reason.

The dagger was wielded by means of the story he told about the way the review had been communicated to the industry in advance of its release to the world via that now infamous interview. Insurers were, we learned, told that the review was coming. But no details were provided. What’s more, they had been sworn to secrecy (so unfair!).

As we now know, the FCA had to issue a clarification in the wake of the impression being given that 30 million policies might have to be individually reviewed. But this took the watchdog six hours and potentially created a false market in insurers’ shares while it dithered.

The testimony came on the day a senior lawyer was appointed to look into what went wrong. Mr Thoresen could have provided him with his starter for 10, which was perhaps the intention from the outset.

His clever and perhaps ever so slightly cynical performance arguably cemented the effort the industry has been making to undermine the credibility of the regulator. So Mr Thoresen has done his job well and it’s doubtful the ABI will hear many complaints when it comes to discussing his bonus.

Andrew Tyrie, chairman of the Treasury Select Committee, is in favour of the review and is clear that the foul-up over its announcement should not divert attention from its content, particularly if it discovers failings by insurers.