FSA red flag for life insurers

THE City watchdog has warned that badly kept records by life insurance firms could be leading to larger-than-expected obligations on life policies.

The Financial Services Authority is hoping to head off another Equitable Life scandal and has written to the bosses of all life insurers - including Prudential and Aviva - to tell them to lift their game or face the consequences.

An FSA review of a cross-section of life insurers revealed the majority did not formally assess their long-term obligations on a regular basis - and smaller firms often drafted policies without any legal input. David Strachan, of the FSA's insurance division, told bosses they need to keep processes up to date and in line with FSA policy.

It came as part of his ongoing work into with-profits policies. Insurers have been given until November 30 to review their practices.

Separately, the FSA said that it had taken action against 100 small financial firms in the last year, 19 of which were banned from carrying out investment business due to regulatory breaches.