With the Financial Services Authority (“FSA”) taking control of the regulation of general insurance
products from 14th January 2005, many retailers will now come under its scrutiny. The recent experience of AXA Sun Life at the hands of the FSA will therefore be of more than passing interest.

The FSA gave AXA an unwelcome Christmas present in the form of a £500,000 fine for running two misleading television advertising campaigns. The first was for AXA’s with-profits endowment policy and initially ran for 4 months at the start of 2003. It contrasted the returns from the AXA policy with those from a building society account, but failed to calculate the compound interest correctly, resulting in an unduly favourable comparison. AXA corrected the
mistake of its own volition immediately after its discovery, but did not mention anything to the
regulator until the FSA launched its own inquiry several months later.

The second campaign was for a life insurance policy and was criticised for failing to provide enough
information about the workings of the policy, the risks attached, and the costs of cancellation.
Although AXA was credited with having fully co-operated with the FSA’s investigation and for having ensured that consumers were properly compensated, the FSA was anxious to send a clear message through the hefty fine: they will come down on misleading advertising, not just mis-selling,
even if consumers have suffered no loss.

Please note that although the campaigns were fronted by June Whitfield and Carol Smillie
respectively, that had no bearing on the level of the fine imposed.