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Insurance firms' shares rally despite City watchdog inquiry

Shares in a number of insurance firms have recovered slightly since tumbling this morning after the City watchdog , the Financial Conduct Authority, announced plans to start an investigation into 30 million policies sold between the 1970s and 2000.

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Financial regulator to investigate 30 million policies

The Financial Conduct Authority (FCA) is planning an investigation into 30 million policies sold by insurance companies between the 1970s and 2000.

The inquiry comes amid concern that loyal policyholders are not being given the same priority as new customers and are facing high fees for substandard service. It will include pensions, endowments, investment bonds and life insurance.

Details of the inquiry will be included in the annual FCA business plan to be published Monday. Credit: REUTERS/Chris Helgren

The FCA review, which is to begin this summer, is concerned about insurers using returns from so-called "zombie" funds - which are closed to new customers - to pay bills from other parts of their businesses.

A large number of policies also include exit fees that can halve a policy's value if a customer attempts to switch to a cheaper provider.

Clive Adamson, the director of supervision at the FCA, told The Daily Telegraph: "As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal."

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