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Last Updated: Monday, 19 July 2004, 16:10 GMT 17:10 UK
Q&A: Equitable Life probe
Ann Abraham
Policyholders are pinning their hopes on Ms Abraham's investigation

The Parliamentary Ombudsman has announced she is reopening her investigation into Equitable Life. What does it mean for its policyholders who lost money when the society nearly collapsed in 2000?

Should policyholders be pleased?

This is good news for policyholders, as it opens up the chance of redress and compensation.

Almost one million policyholders - some of them very elderly - saw their savings slashed when the mutual nearly collapsed in 2000.

Many policyholders had pinned their hopes on the ombudsman re-opening her investigation because they saw it as the only serious chance they would have of receiving compensation.

The parliamentary ombudsman Ann Abraham said she was mindful of the number of policyholders, and especially the elderly, in financial difficulty as a result of the society's troubles, and would try and complete her review as quickly as possible,

What will she focus on?

The investigation will be far wider than her previous investigation into Equitable, completed in July 2003.

Following an investigation, the Ombudsman may conclude that the complaint was wholly or partly justified, or that it was not justified
If the Ombudsman finds that the complaint is justified, she can recommend that the organisation complained about should provide a remedy.
The Ombudsman has no power to enforce her recommendations, but the government almost always accepts them.
The Ombudsman's conclusion can also lead to new procedures in government departments.

Ms Abraham will investigate whether government regulators - such as the Government Actuary's Department and Department of Trade and Industry - were at fault for not preventing the society's financial problems.

She is obliged by law to conduct her investigations in private, but she may publish evidence along the way.

The probe will not concern the management of Equitable or complaints about the alleged mis-selling of policies.

Ms Abraham has asked the government to bring GAD within her jurisdiction, so that she can assess the department's role in regulating the life assurer.

GAD was among a number of regulators that were criticised by Lord Penrose's report into the near-collapse of the insurer, which was published in March 2004.

Lord Penrose's report, published in March, said the society was "principally" to blame for its "own misfortunes."

However, Lord Penrose concluded that "regulatory system failures were secondary factors."

Is there a realistic chance of compensation?

This is a ray of hope in what has been a long and draining emotional rollercoaster for policyholders.

They have already had their hopes for compensation dashed before.

Many hoped Lord Penrose's criticisms of government regulators would have paved the way for compensation from the Treasury.

If Ms Abraham finds there were regulatory failings, she can recommend compensation is paid to policyholders - but she cannot demand the government pays up.

In the meantime, policyholders face another anxious wait for the outcome of her deliberations.

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