Axa fiasco makes orphans of consumers

Another week, another fiasco in the insurance industry. This time, the problem is Axa's scheme to distribute 'orphan assets' - surplus profits whose ownership is unclear.

The row revolves around the proportion of the assets built up over years being distributed to shareholders, versus the share going to policyholders. The Consumers' Association claims the policyholders are getting a raw deal - receiving, at best, 55 per cent of the £1.7 billion, and perhaps as little as 35 per cent.

But one of the difficulties is the complexity of the scheme; the CA cannot make a final estimate without more information.

Policyholders must choose between a one-off payment averaging £400 now - most will get less than £1,000 - plus a larger final bonus when their policies mature, or to forgo the one-off money in return for a possibly larger return in future.

But there are no guarantees, so the temptation will be to go for jam today, even if policyholders' share of the pot is too thin.

The CA is right to question the deal, even if only because it is too complicated for policyholders to assess for themselves. They have until 16 October to make up their minds, and should be in no rush to say yes.

The row underlines the shortcomings of the with-profits method of investment, where all the deci sions about how much profit is distributed are made by insurance company directors behind closed doors. This is fine in theory, but the execution is proving tortuous, and policyholders cannot judge whether they are being offered a good deal.

Often the misjudgment - or miserliness - of directors becomes clear too late for policyholders to put up a fight. In future, investors may judge that they would do better taking their chances with a direct investment in the stock market.

Halifax is contacting mortgage customers paying its standard rate - a sky-high 7.74 per cent - inviting them to switch to lower-cost loans. It is a laudable move in an industry that has got fat by allowing existing customers to subsidise the cheaper deals of new ones.

But if Halifax was serious about helping longstanding clients, it would simply cut its standard rate. It is revealing, perhaps, that only 10 per cent of those approached so far have swapped.