The UK’s Financial Conduct Authority (FCA) [the successor to the FSA] has fined Swinton Group Limited, one of the country’s largest insurance retailers, £7,380,400 [$11.215 million] for mis-selling.
After an investigation the FCA said it had “found that Swinton’s aggressive sales strategy meant that it failed to treat customers fairly in its telephone sales of monthly add-on insurance policies.
“Between April 2010 and April 2012, Swinton sold personal accident, home emergency and motor breakdown policies, which during the relevant period generated an income for accounting purposes of £92.9 million [$141.17 million],” the FCA’s report continued. It said: “Swinton did not provide enough information to customers about the key terms of the policies and also failed to properly monitor its sales calls.”
Swinton has set aside the £11.2 million to “repay those customers who were mis-sold, of which £1.9 million [$2.887 million] has already been paid out,” the FCA said. The company has also “contacted over 650,000 customers it thinks may have been affected. Any policy holders who believe they bought monthly cover as a result of mis-selling should contact Swinton directly.”
Tracey McDermott, the FCA’s director of enforcement and financial crime, commented: “Swinton failed its customers. When selling monthly add-on policies, Swinton did not place the consumer at the heart of its business. Instead it prioritized profit.
“At the FCA we have been clear in our expectation that firms must behave in the interests of consumers. Today’s outcome shows our approach in action and will act as a deterrent for other firms tempted to put profit figures above the fair treatment of customers.”
The FCA’s Chief Executive Martin Wheatley added: “I recently told the insurance industry that we were taking a strong interest in the area of add-ons, and our first competition study will take a far-sighted view of the impact of current practice on consumers in this market.”
The market study will look at the nature of competition in these markets, in particular whether these products represent good value for money and whether consumers understand what they are getting with their policy.
The FCA listed the necessity for buyers of insurance to obtain adequate information as the first item on the list. It noted that in Swinton’s case, the company “did not explain the cover clearly enough or tell customers the monthly policies were optional and separate from other core insurance products. It did not give enough information about the terms of the policy, including the conditions and limitations, and cancellation process. The nature of the failings, particularly poor sales scripts, meant that every sale could have been a mis-sale.”
Aligned with this type of misconduct is the company’s failure to “properly monitor” its sales calls for these add-on policies, which the FCA said “was extremely limited both in scope and nature. There were no effective checks to ensure customers had been provided with adequate and balanced information and that the sale was fair.”
The FCA strongly indicated that the mis-selling was the result of an “aggressive sales strategy at the expense of customers.” The FCA said that “during the period investigated, Swinton adopted a business strategy geared to boosting profits at each stage of the process – design, launch and sale. This strategy meant that it failed to ensure customers’ interests were put at the heart of its business.”
The £7.38 million fine “reflects the number and seriousness of the issues raised during the investigation,” the report continued. “The substantial sum was reduced from £10,543,500 [$16.042 million], with a 30 per cent discount applied as Swinton settled at an early stage in the FCA’s investigation.
“The fine would have been higher had Swinton not taken part in an FCA study, published this year, which looked into how letters offering compensation could be written to ensure more customers respond. Further, the FCA took into account the swift action taken by the new management of Swinton to put things rights after the problems were discovered.”
Source: Financial Conduct Authority (FCA)
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