In the 1980s, some life-insurance companies, such as Abeille Vie - now part of Aviva France - issued life assurance 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.
Over the years, as trading methods changed and sped up, such contracts were no longer offered, but the banks remained tied to the existing ones. 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.
On Wednesday 18 March 2015, Aviva lost the latest appeal in the Paris courts, leaving intact a ruling that the firm must make immediate payments to Mr Max-Herve George, one of the contacting parties. AFP reported that Aviva was ordered to pay €4.7m to compensate for lost opportunities since it restricted the investments.
In an interview given to Financité, Guillaume Prache, Managing Director of BETTER FINANCE, approached the evolving story from the perspective of financial services users. According to him, the contracting parties who find themselves increasingly criticized, are merely exercising their contractual rights and beneftting from the opportunities possibilities provided by their contracts.
As such, says Prache, their claims should fall under the protection of consumer legislation. Nonetheless, he admits that in case the number of individual claims that are now popping up in the media continues to grow, the damage to Aviva could put at risk the company’s financial solidity.
Please see the interview (in French) on the website of Financité.