Introduction and Background
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- On 16 July 2008, I laid a report concerning the prudential regulation of The Equitable Life Assurance Society before both Houses of Parliament. My report, Equitable Life: A Decade of Regulatory Failure, was published the following day.
- That report contained the results of a four-year investigation into complaints that the prudential regulators and the Government Actuary’s Department had failed for longer than a decade properly to exercise their powers when regulating the Society during the period prior to 1 December 2001.
- Following perhaps the most complex investigation ever undertaken by my office, I made ten findings of maladministration and determined that this maladministration had led to injustice to those who had complained to me. That injustice took the form of:
- financial loss, where that had occurred;
- lost opportunities to make informed savings and investment decisions; and
- a justifiable sense of outrage on the part of those who had complained to me.
- In line with my general practice where injustice to those who complain to me has resulted from maladministration on the part of a body within my jurisdiction, I made recommendations which aimed to provide an appropriate remedy to put right that injustice.
- My report thus contained two recommendations, namely:
- that, in recognition of the justifiable sense of outrage felt by those who had complained to me, the Government should apologise to those people for the serial regulatory failure which had occurred and which I had found to constitute maladministration; and
- that the Government should establish and fund a compensation scheme, with a view to assessing individual cases and, where appropriate, providing compensation.
- In making these recommendations, I recognised that it would not be appropriate for compensation to be paid merely for losses associated with the stock market or where no injustice to an individual had arisen from maladministration. I also had regard to the fact that there is some evidence that policyholders with other companies suffered losses at around the same time.
- Accordingly, I explained that the aim of such a compensation scheme should be to restore anyone who had suffered a greater loss, relative to that which they would have suffered had they invested in a comparable scheme with another company, to the position they would have been in had no maladministration occurred.
- In my report, I also recognised that my recommendations raised issues related to the public interest and to the potential impact that acceptance of the recommendation to establish a compensation scheme might have on the public purse.
- Decisions as to whether such a compensation scheme would be in the public interest and as to how public resources should be spent are matters for Parliament and Government and not for me. I therefore invited them to consider further the issues that were raised by my report and by my recommendations.
- However, I gave guidance within my report as to the timescales within which I considered it would be reasonable to expect any such scheme both to be established and to conclude its work. I also set out some principles – independence, transparency, and simplicity – that I considered should guide the operation of such a scheme.
- Following the publication of my report, the Public Administration Select Committee of the House of Commons conducted an inquiry into the issues raised by my report and by its recommendations. I gave both oral and written evidence to assist the Committee in the conduct of that inquiry.
- On 11 December 2008, the Committee produced a report, Justice delayed: The Ombudsman’s report on Equitable Life, which endorsed the two recommendations I had made in my report.
