One of the UK’s largest insurers, Swinton Group Plc, has been fined for an insurance scandal reminiscent of PPI and Libor rate fixing. The new Financial Conduct Authority (FCA, the successor to the now defunct FSA) has fined Swinton a record £7.4m for mis-selling insurance ‘add ons’. Additionally, all customers affected will be compensated, at a cost of over £11m.
According to the FCA, between April 2012 and April 2012, Swinton Insurance had sold insurance policies (covering home, personal and motor breakdown) without fully informing customers of all of the terms and conditions. Many customers had been sold insurance ‘add ons’ to their policies, often without those being fully explained, or being informed that such ‘add ons’ were optional. A aggressive, target driven sales culture was unearthed, that had also not properly monitored such sales calls. The problems emerged after a new Chief Executive was appointed in 2011. Christophe Bardet conducted a review of the insurer- and consequently reported Swinton to the new regulator.
Swinton has already set aside £11.2m in compensation, and has been contacting affected customers. In 2012, it contacted over 650,000 customers, and has already paid out £1.9m. The ‘add on’ scandal came after Swinton had been fined £770,000 in 2009, and ordered to refund 350,000 customers over mis sold PPI. Moreover, the insurer took part in an FCA study earlier this year as to the best way to draft compensation letters- and had agreed to settle.Taking Swinton’s cooperation into account, the FCA reduced the fine by almost a third.
According to a blunt statement by FCA enforcement chief Tracey McDermott “Swinton failed its customers… When selling monthly add-on policies, Swinton did not place the customer at the heart of its business. Instead it prioritised profit… [The 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.”
In response to the ruling, Swinton “acknowledges the shortcomings in its sales practices during this period, and the company unreservedly apologises to customers”.
The case comes amidst an (unconnected) FCA review into the insurance sector. FCA chief Martin Wheatley recently announced a sweeping review into ‘add on’ insurance policies. In addition to insurance companies, such polices sold by train companies, airlines, and electrical goods retailers that are alongside their products or services will be examined. The concern here is that such policies are once again more concerned with profit than being in the best consumer interest.
Although the FCA has only been around since April 1st of this year, it has certainly made its mark already. This ruling only goes to show further that the FCA means business, and is determined to bring the financial services sector to account, and to ensure that consumers get fair treatment- very welcome after after several years of banking excesses and scandals.