FTAdviser.com

Advertising

Insurance companies may soon be banned from charging compensation for mis-selling to the inherited estates of with profit funds.

The FSA revealed a consultation paper reviewing the charge after deciding to "consult again" on whether shareholders alone should meet those costs.

FSA rules currently allow firms to pay the costs of compensation from the inherited estates through their with profit funds. In return, firms are annually required to consider whether they have an excess surplus that should be distributed to policy holders.

But under the proposed change, if an inherited estate that is part of the with profits fund is judged to be surplus to meeting the fund's liabilities, it could be distributable to policy holders.

The consultation will close on 3 September and a policy statement giving feedback will be published later this year.