Keeping an eye on the man from the Pru

complaints about their sales tactics. They should also be regulated

directly by the Government rather than by industry watchdogs.

Ironically his speech comes at a time when Lautro, the life insurance

watchdog, has shown itself to be increasingly effective in rooting out

bad practices among life insurance salesmen.

Whether direct regulation by Government will do any better a job than

the self-regulating watchdogs is debatable. ''Mr Newmarch is trying to

return regulation to the same basis that caused the Barlow Clowes and

Dunsdale scandals, both of which were perpetrated during the direct

statutory regulation of the DTI,'' says the largest trade association

for independent financial advisers.

In a hard-hitting speech to actuaries Mr Mick Newmarch, chairman of

the giant Prudential insurance group, became the first industry leader

openly to urge life insurance companies to stop fighting their critics

and instead find ways to deal with the concerns raised.

Mr Newmarch said that the industry has compounded its problems by

insisting that critics like the Office of Fair Trading do not know what

they are talking about.

''Either it is possible to persuade the OFT . . . that the current

level of criticism of life industry products and sales practices is

unjustified -- or we must take on board the message that some of our

products and our methods of presenting them have not kept pace with the

changing expectations of the public,'' he said.

Criticism of the life insurance industry has reached new heights over

the past couple of years, highlighting the failure of the system of

self-regulation set up by the 1988 Financial Services Act to deal with

the concerns of consumers.

The Act was a bold move and, for the first time, tried to establish a

regulatory framework for the financial services industry.

But, according to Mr Newmarch, ''the Government should now acknowledge

that the experiment has failed and begin to organise investor protection

on a fully statutory basis, under direct Government control.''

Mr Newmarch is the first industry leader to have called publicly for

the scrapping of self-regulation, although concerns from the public,

press and consumer groups have been growing for some time.

''We have sympathy with his views, but you have to remember that

self-regulation is not a cosy club,'' says Maurice Paterson of Scottish

Amicable. ''There may be self-regulation, but it's within a statutory

framework.''

It's not just blatant frauds such as investment advisers running off

with savers' money that have worried critics. The industry's refusal to

deal effectively with the thorny problem of ''disclosure'' in particular

has only left the public confirmed in their belief that life insurance

companies have something to hide.

Mr Newmarch comments that ''life insurance has become a pejorative

term'' over the past two years as the industry has resisted demands that

they provide more information about the policies being sold, before

rather than after customers sign on the dotted line.

These demands include a clear indication of how much salesmen earn in

commission for selling one type of policy rather than another and how

that commission, and other charges, might affect the policy's growth.

Resistance to more and better disclosure by the industry has added to

public scepticism about the merits of life insurance which may have

contributed to the recent downturn in sales.

Mr Newmarch urges the industry to start direct talks with the Office

of Fair Trading -- rather than leaving the job to the Securities and

Investments Board -- and agree a system for disclosing information to

customers. But he has also indicated that, ahead of any industry

agreement, the Pru might begin to tell prospective customers more than

is actually required under the law.

That can only be good news for consumers who, for too long, have been

kept in the dark about the real costs associated with life insurance so

don't have the ability to compare one policy with another or, indeed,

with alternative types of investment.