LONDON (Bloomberg) — The British Government is considering loosening the rules on who can advise insurance policy holders on their rights when insurers seek permission to pay out a portion of the surpluses held in long-term savings funds.The payouts occur when policy holders are offered cash in return for foregoing future claims. Yesterday the Treasury said it may ease rules on "policy holder advocates", allowing for their appointment without the approval of regulators.

The proposal follow requests from insurers including Aviva Plc, which last month began consulting 1.1 million policy holders on possible payouts from $4 billion ($7.8 billion) of surpluses held in two funds. An agreement, which would be negotiated through policyholder representative Clare Spottiswoode, could mean Aviva gains about $2 billion.

Not making these changes would mean "agreements between the insurer and its with-profits policyholders" could be invalidated if the advocate didn't have the proper authorisation, the Treasury said in a paper seeking the views of the insurance industry on its proposal.

Prudential Plc, the UK's second-biggest insurer has contacted the UK's Financial Services Authority to examine whether it is possible to reattribute its inherited estate, which was valued at $8 billion in 2005.

Axa SA, Europe's second-biggest insurer, gained approval to split $1.7 billion of surplus funds between policyholders and shareholders in 2000. That followed a court challenge by the Which? consumer group that sought to secure more of the funds for policyholders.