BusinessBusiness RecoveryAccident Group liquidator slams insurance industry

Accident Group liquidator slams insurance industry

The liquidator of the failed after-the-event insurance company Accident Group has launched a scathing attack on the industry, accusing it of using 'imprudent' accounting policies.

Link: Accident Group enters liquidation

Paul Stanley levelled the charge after examining the revenue recognition policies of the failed insurance company, which went into liquidation in January. He said he believed much accounting was ‘massively imprudent’.

‘My personal view is that the income recognition is all wrong, and it encourages people to think they’ve made a massive amount of profit when actually they haven’t. It can therefore only end up in tears,’ said Stanley.

He expressed concerns about revenue being recognised from day one of a transaction. ‘The fundamental principle is that you haven’t earned until you’ve done your job,’ he added.

November saw the launch of FRS5, which is intended to deal with revenue recognition and expected to have a particular impact on insurance intermediaries. Experts have warned the industry to heed the new rule or face problems later.

Meanwhile, insurance industry figures have complained about the introduction of FRS5, which applies to accounts for 2003. Eric Galbraith, chief executive of the British Insurance Brokers Association, said: ‘What is disappointing is the low profile given to the consultation and the lack of time given for implementation.’

Despite warnings, the Accounting Standards Board said it has had little feedback from the industry in the run-up to the launch of the new standard

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