UK rebuffed over Equitable Life scandal

A special European Parliament inquiry committee urged the UK to compensate victims of the Equitable Life scandal, which incurred major financial losses for more than a million people. MEPs also said that the EU should put the necessary regulation in place to prevent such cases in the future.

An overwhelming majority of MEPs sitting in a special inquiry committee backed a report by liberal MEP Diana Wallis on 8 May 2007.

The committee assigned the blame to the UK authorities for not implementing EU insurance legislation correctly and added that “the implementation process as a whole was flawed”.

It further stated that many victims of the crisis had “great difficulty to make a complaint and obtain redress”, especially policyholders in Ireland and Germany.

Even though the committee is not in a position to enforce compensation payments, it urged UK authorities to “assume responsibility” and set up a compensation scheme for victims in the UK and abroad.

The report further criticised the Commission’s role in monitoring the application of EU legislation and demanded it should be “more proactive” in the future.

The document underlines that consumer confidence in pension products needs to be fostered and calls for consumer and investor protection to be made a priority in any financial services legislation. MEPs argued that if business is to get the benefit of the single market, consumers must have clear rights too. Businesses must be told that there is “no mobility without liability”.

Positions

Liberal MEP and rapporteur on the Equitable Life case, Diana Wallis, said: "For the victims of the Equitable Life failure, the report delivers an analysis of the UK's flawed process of implementing EU law which, combined with the imminent report of the UK Parliamentary Ombudsman, should arm the victims with powerful findings."

She added: "For European Parliamentarians this process has provided a once in a generation opportunity to focus on the law-making and implementation process of one particular directive, the third life directive. If our recommendations are taken on board, this will enhance the future lawmaking process."

Green MEP Heide Rühle said: "The EP's inquiry has shed light on the Equitable Life scandal and, as such, gives some hope of redress to the 1.5 million or so EU citizens whose pensions or investments suffered financial losses. The final report makes clear that the UK failed to ensure Equitable Life met its obligations under European law and that flaws in the UK regulatory system meant it failed to react in time to prevent or limit the losses suffered by Equitable Life's customers. The UK government must take responsibility for these failings."

Background

The Parliament's inquiry committee was set up in January 2006, following two petitions from victims of the financial scandal over the Equitable Life Assurance Society (ELAS). More than a million savings or pensions policyholders in the UK, Ireland and Germany suffered major losses when the company came close to collapse in 2000.

The committee examined how EU insurance law was implemented by the UK government and regulators, as well as the Commission's role in monitoring and implementing the EU legislation. In particular, it examined the plight of policyholders and implications for the single market in financial services.

Timeline

  • June 2007: Committee report is to be approved by the Parliament plenary.

Further Reading

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