Articles and Reports

Policyholder Advocate Roadshow Gets Warm Welcome in Wales

Cardiff marked the second stop on the Policyholder Advocate's nationwide tour.
Policyholders travelled from across Wales and the South-West to attend the event at the Hilton Hotel and the warm welcome from the audience of 133 overcame the bitter cold of the weather outside.
Communications Director Jonathan Haslam apologised to the audience for the insurance jargon that surrounds the Norwich Union plan.
"The words - distributions, reattributions, asset share, smoothing - don't actually help; they cloud some of the issues. But we're here to try clear some of the way," he said.
Jonathan described the dual key concept behind the agreement that will need to be reached on reattribution plan.
"Reattribution is a process which will allow Norwich Union to reorganise its funds. Unlocking those funds requires two keys - one key to be turned by the policyholders and one key turned by the shareholders.
"If both of you agree to unlock these funds and if you, as policyholders, agree to take a payment for giving up rights you have to future distributions, those funds become 100 per cent shareholder controlled. So there is a bargain to be done here.
"We have to negotiate very hard about the split of money. That's crucial. Norwich Union are not going to play this game if they feel their shareholders aren't going to get something out of it. So our responsibility is to get as far as we can up to the ladder to 90 per cent without the shareholders saying no.
"And we don't know what number is at this point."

What Cardiff Asked Clare:

Q. Isn't it totally unfair to ask us to vote on a reattribution when what should happen is a distribution on a 90/10 basis?
A. There are statutory requirements for the company to hold more than their realistic liabilities. You are only entitled to a distribution if they company believes that they have far too much inherited estate and that some of it is not necessary - and if the FSA agrees with that. Then you would get 90 per cent as policyholders. But that is not certain. So with the reattribution you are being given the opportunity is to exchange future uncertainty for certainty now.
Q. What are you going to do to try and address the problem of mortgage endowment shortfalls?
A. Having agreed the pot of money for shareholders with Norwich Union we then have the task of working out what is a fair way of splitting it between the different groups of policyholders. But there's one pot of money and if we are going to favour, for example mortgage endowment policyholders, then inevitably that means taking money away from another group of policyholders. To date policyholders have in general said to us don't do that.
Q. My mortgage endowment is not expected to pay out fully at the end of the 25-year period; I received a red letter about three months ago. If I don't take up this proposal will this hinder my rights with regard to my endowment mortgage in the future?
A. You will in effect be offered a windfall payout that will not affect your policies at all. I'm afraid those red letters will continue and you will have a separate decision to take as to whether to increase payments.
Q. What are the possibilities of shareholders obtaining more than 10 per cent?
A. The truth is if we were to say the deal must be 90/10, then Aviva will just say we're not going to do this exercise because there is nothing in it for shareholders. What is really good about this particular exercise is that you all have the choice to decide whether to take cash in your hand today for giving up the chance of 90/10 payouts in the future.
Q. Smoothing hasn't worked, has it?
A. Smoothing has been a black box and an important part of these negotiations is to get smoothing much better understood and explained because unless people understand how smoothing operates it's very difficult to take decisions.
Q. Will those who agree to the reattribution and give up the right to future distributions find they receive lower future bonuses than those who do not agree?
A. This deal will not affect your annual bonuses; it will not affect your terminal bonuses. What it will affect is your right to any special distributions of the inherited estate.

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