Guillaume Prache, Managing Director of BETTER FINANCE, was quoted in the French financial magazine Challenges on Aviva's "mistake" when in the 80s it issued life insurance products with an unusual feature - the ability to trade funds based on last week’s prices, a so called Fixed Price Abitrage Life Insurance.
Under the terms of these insurance contracts, clients could effectively invest with hindsight since funds were available for a fixed price for a week, irrespective of market fluctuations in the meantime.
The problem arose in the 90s when it became possible to carry out financial transactions over the Internet on funds for which listing and trading had gradually become more and more frequent and Abeille Vie - now part of Aviva France - was not the only insurance company to offer that kind of investment.
At the end of the 1990s, in order to tackle this problem, the insurance company sent a letter to customers, offering to pay them a small sum in exchange for resigning their right to trade in this way and switch their contracts to less generous terms. Most clients agreed, but roughly 30 of the contract-holders didn't.
Individual court cases are now emerging as Aviva is trying to put an end to the terms of these individual contracts. However, should these individual investors win, they could all be billionaires by the end of the decade and, in two decades, be worth more than Aviva itself.
By refusing to settle these contracts, Aviva now finds itself with an issue in hand that can represent the payment of huge sums, probably more than a billion euros, to contracting parties, said Guillaume Prache.
Please find here the full article and here Guillaume Prache's interview to Financité on "the world most foolish financial products".