Equitable's sales pitch proved too good

In its heyday Equitable Life was famed for the abilities of its salesmen. They were acknowledged as some of the most successful in the insurance industry and allowed Equitable to plough its own corporate furrow; eschewing payment of commission to brokers and independent advisers. Backed by a marketing campaign plugging the no-commission message Equitable's sales force was the envy of other insurance companies.

Equitable's art of persuasion seems to have infected the entire organisation, right up to board level. That is one of the main conclusions to be drawn from the first major investigation into the Equitable affair, published last week. The report is the result of an internal investigation by the Financial Services Authority into its own role as regulator of Equitable since the beginning of 1999. Contrary to expectations, the report has not turned out to be a whitewash. It identifies a number of serious failures on the fledgling regulator's part - it is worth remembering that the FSA was being formed as Equitable was hurtling towards disaster.

One of the chief failings was the readiness of its officials to be swayed by the insurer's management. Reading between the lines, the insurer managed to persuade the regulator that its plight was not nearly as serious as it was.

In particular, says the report, the FSA did not plan for the worst possible outcome of the court case that led eventually to Equitable's downfall. 'The lack of preparedness stemmed from a lack of scepticism about the outcome of the legal proceedings, based partly on a misconstruction of the legal briefings which had been received about the nature of the decisions of the judges in the Court of Appeal, and partly as a consequence of being influenced by Equitable Life's confidence in its case,' the report states.

When Equitable closed to new business last December the regulator claimed that the unfavourable House of Lords judgment could not reasonably have been foreseen.

This always seemed an odd judgment. How could it ever have been safe to pre-judge the views of the Law Lords, who eventually ruled in favour of investors denied the guaranteed pensions once promised by Equitable?

A much wider investigation, commissioned by the Government after months of pressure from policyholders and commentators, will look at regulation of Equi table before the FSA took on the role . The Department of Trade and Industry and the Treasury will be under scrutiny - the blame for Equitable's demise must surely lie with its past management, but regulation exists to check management. Last week's report says the 'die was cast' by the time the FSA took responsibility.

It would be surprising, if not astonishing, if the Department of Trade and Industry and the Treasury emerged unscathed. It is looking increasingly likely that a strong case will emerge for Government compensation to be paid to investors who have lost money through the Equitable disaster.

Pension it off

The disillusionment of small investors and pension savers with the life insurance industry is reflected in the views of Cash readers, published as part of our lead feature this week.

The plan for a new basic state pension proposed by pensions experts, economists and politicians from all major parties, described opposite, looks to have much to recommend it. The public may find the idea of higher compulsory payments towards pensions unattractive but so is the alternative: a hit-and-miss system with means-testing rules. Over to the Government now, for a fresh look at pensions.

Meanwhile, the insurance industry continues to try to rebuild its battered image. Now there is a quality mark scheme to distinguish companies that meet certain standards. Only five companies have so far come up to scratch. Much of what is being asked of insurers is common sense. It seems a little sad that it took a multi-million pound vetting exercise to convince insurers that much of their patently incomprehensible jargon was upsetting their investors.