Our CIMA-sponsored study explored how PPFMs were being used both internally in firms and externally by consumers, policyholders, independent financial advisers, auditors and the FSA.
The research involved reviewing the PPFMs and governance arrangements of mutual, proprietary and conglomerate UK life insurers.
Our interviewees agreed that PPFMs had made a big contribution to improving internal governance.
Other benefits included the insurers' implementation of new management information systems to monitor and report on compliance with PPFMs. The new with-profits committees also challenged actuaries to communicate complex mathematical issues in a meaningful way to board and committee members without actuarial experience.
There were variations with regard to the basis for the board's opinion on compliance with PPFMs, too.
Overall, our interviewees agreed that PPFMs were of little use to consumers, and that the wording and format of board statements and with-profits actuaries' reports could usefully be standardised.
Our auditor interviewees pointed out that PPFMs were an important tool in reviewing the "realistic" balance-sheet approach to the preparation of the statutory accounts.
We were surprised to find that PPFMs were not being benchmarked either by the firms themselves or by stakeholders such as independent financial advisers or the FSA.
Despite these disappointing findings, our accountant interviewees generally believed that the implementation of PPFMs had led to improved decision-making and accountability because they had introduced new internal governance mechanisms, such as with-profits committees.
PPFMs and related reforms to the governance framework of with-profits funds represent a significant innovation by the FSA to protect the interests of with-profits policyholders.
Although we found that PPFMs weren't used routinely for benchmarking, the practice would probably benefit firms, consumers, policyholders, independent financial advisers, auditors and the FSA.