MPs demand action on insurance ‘fat cats’
Insurance firms were criticised yesterday by a Commons committee for granting massive pay rises at a time when millions of customers faced endowment policy shortfalls.
The chief executives of Aviva, Legal & General, Prudential, Royal & Sun Alliance and Standard Life admitted that seven out of ten endowment mortgage policyholders – some 3.5 million people – faced shortfalls, costing consumers between £30-50 billion in the coming years.
But during 1999 and 2002 insurance bosses saw their own pay package bulge by between 45 and 71 per cent.
Meanwhile, endowment shortfalls averaged £3,500 for Prudential-branded endowments and £7,000 for members of Royal & Sun Alliance.
David Prosser of Legal & General received £1.3 million, up by over a half from three years earlier. Aviva’s Andy Haste accepted just over £1 million including bonuses.
Scott Bell, former managing director of Standard Life, had a pay rise of 71 per cent, pocketing him £619,000 including bonuses.
Treasury Select Committee chairman John McFall, Labour MP for Dumbarton, said the exorbitant pay rises seemed “way out of line” given that many people were “suffering and feeling the pinch.”
“How can you justify these pay figures? The average pay increase was 3.5 per cent last year. You can surely explain why you are wonderkids, but then people are feeling the pinch and are suffering, this seems way out of line.”
The insurers were accused of pooh-poohing “any duty of care” to customers and of consistently putting their own interests first.
Mr McFall said: “Once the product is sold and the commission to advisers paid, you have no interest. The customer bears all the risk.”
Mr McFall asked if the executives should “lighten executive bonuses” but Sandy Crombie, CEO of Standard Life said the board had been doing that and SL had been straightforward and honest.
David Prosser, group CEO of Legal and General, defended the pay rises, pointing out that executive salaries were assessed by directors and analysed by 30 to 40 analysts.