PensionsMay 1 2015

Equitable Life CEO: Lessons have not been learnt

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Equitable Life CEO: Lessons have not been learnt

What happened at Northern Rock proves the regulator, government and industry did not learn from the mistakes of Equitable Life years before, the insurer’s chief executive has said.

Speaking to FTAdviser’s Emma Ann Hughes, Chris Wiscarson, chief executive of Equitable Life, said he “very much doubted” that lessons had been learnt from the mutual’s demise in 2000, or that a major financial provider would never meet a similar demise again in the future. Mr Wiscarson became chief executive in 2009.

In the latest FTAdviser video interview he said: “There was an excellent paper published by King’s College London a few years ago on ‘did anyone learn anything from Equitable’.

“They diagnosed a number of the problems, such as complex products, complex business models, weak governance, poor regulation and out of control executives. Then you saw Northern Rock have exactly the same thing and they were a bank.

“Why didn’t they learn? I think new generations of executives don’t always look at the history, because it is history. They say the world is different and then go and make the same mistakes.”

When asked was the regulatory regime at the time of Equitable Life’s demise right to blame the insurer’s business model, Mr Wiscarson said: “The business model [at fault] with Equitable was that they did not hold capital back. They distributed to all policyholders. Shareholders would not have been so happy with all the capital going back to the policyholders.”

During the video Mr Wiscarson also talks about the impact of the greater access to pension cash on the insurer and revealed there had been a 60 per cent to 70 per cent increase in general enquiries about what the changes mean.

Mr Wiscarson also talked about the possibility of a boost to payments to the beleaguered insurer’s policyholders.

He said: “The Equitable Members Action Group were brilliantly successful at the beginning of the last government. As a result of their work £1.5bn of compensation was paid to past Equitable policyholders.

“Emag’s strategy all along has been to wait for the next general election and hopefully the economy would be turning up and then call for more compensation and that is exactly what they have been doing.

“In April we announced for every £1,000 of a policyholder’s with-profits policy we would give an extra £350 if they took their benefits at retirement.

“Now they can take it in cash it is particularly interesting. We have increased that from 12.5 per cent three years ago and from nothing before that. Our job [as a closed office] is to get capital back into policyholders hands.”

emma.hughes@ft.com