When the improbable happens
Life companies have been severely tested in the past few months.
But if there is no future in with profits what is the prognosis for life companies as a savings medium? Poor, as unit-linked products are tax disadvantaged compared to unit trusts and Isas.
Contagion risk
This has been the biggest risk of all. Companies can do sensible things but they cannot insulate themselves from the real world. In this instance the FSA clearly did not read the signals. It is really up to the regulators to have the eye of the eagle not just those of an insect. But the sad thing is that in a free market companies must be allowed to fail to purge the system. Life companies are expendable, so Equitable Life is allowed to fail. Banks are a different matter. But why?
Finally one useful lesson for investors. Stay clear of large conglomerates - they are hard to manage - and avoid companies that dabble outside their area of expertise.
Icki Iqbal is a former director of Deloitte
