On the positive side, he said, some consumer-protection measures like enhanced with-profit fund
management and increased guaranteed surrender values on traditional products could strengthen the insurance industry's foundation in the long term because customer confidence would be enhanced through fair treatment.
Usually, the calculation takes into consideration factors such as completed policy years, policy type and time to maturity, with-profit fund
performance in case of participating policies, besides the company's customer philosophy and industry practice," says Suresh Agarwal, executive vice-president, head, distribution and strategic initiatives, Kotak Mahindra Old Mutual Life Insurance.
"The investment choice has increased substantially in the last decade and therefore, there is often no need to select a with-profit fund
. If you are currently invested in a with-profit fund
, you should ask the provider what other investment options are available to you and consider whether it would be in your best interest to transfer to an alternative fund offered by the provider."
The surplus assets in the with-profit fund
, known as the inherited estate, was valued at Au2.1 billion in June last year, shortly before the reattribution offer was announced.
"Payouts from the with-profit fund
are linked to the rate of investment growth achieved on the fund.
When Provident Mutual was swallowed up by General Accident, investors in the with-profit fund
got an average of pounds 300 more.
A with-profit fund
might be suitable so long as there are more than 10 years until the money is required.
Some investors also like to withdraw 5% each year from a with-profit fund
tax-free - although higher rate taxpayers can get caught with a tax bill when their policy is eventually cashed in.
The firm recently declared bonuses totalling pounds 1billion for three million with-profit policies last year, with an investment return of 11.5 per cent before tax on their CGNU with-profit fund
Hooton noted that default money is likely to wind up in an insurer's with-profit fund
, which is held on behalf of customers with participating life insurance policies.
Mr Errington said: "The increased sales that we're seeing are contributing significantly to growth in operational profits and, being a mutual, these will show through in the returns for our with-profit fund
, which has been market-leading over a number of years."