UK watchdog the Financial Conduct Authority has opened an investigation into six life insurance firms after wrapping up a report on how long-standing customers are treated and concluding, in the words of acting CEO Tracey McDermott, that “the practices at some firms appear to have been poor.”
Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows are all in the spotlight. Abbey Life and Old Mutual will be subject to a broader probe than the others, the FCA added, although all will have their practices examined as far back as 2008, write Katie Martin and Caroline Binham.
The FCA said:
These investigations have been commenced in order to enable the FCA to establish the reasons for the practices within firms; whether customers have suffered detriment as a result and how widespread any practices are within the six firms. No conclusion has been reached as to whether there have been any breaches of regulatory requirements. The commencement of investigations should therefore not be taken to indicate that they will necessarily result in disciplinary action against the firms involved nor does it indicate that a penalty will inevitably be imposed or that redress will be payable.
The report that the FCA has published today looked into a broader set of insurers and sought to establish whether customers get “clear and timely communications” about policy features, and whether it is easy for customers to switch from one product to another.
The FCA said it had found that firms were good in some areas but poor in others. A particular issue was six firms’ communication with customers when they requested to surrender or transfer a policy.
Although most exit or other fees did not apply in most cases, the FCA is now concerned that in some cases customers may not have been aware fees applied; hence an enforcement investigation to determine more facts. Investigations can lead to fines on firms and penalties like fines and bans on individuals if wrongdoing is found.
The whole issue has been mired in controversy for months, and not just for the insurers.
Nearly two years ago, news that the FCA was planning a probe into the matter caused insurers’ share prices to fall sharply. The manner in which news of this investigation, through an early briefing to the Daily Telegraph, emerged ended up with the FCA being labelled “dysfunctional” by MPs. It also attracted the fury of chancellor George Osborne.