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Banking giant hit by huge penalty for insurance failures

By 08/07/2021No Comments
Banking giant hit by huge penalty for insurance failures

The Financial Conduct Authority (FCA) has today hit LBGI (Lloyds Bank General Insurance Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited) with a fine of over £90 million. The fine of £90,688,400 has been issued for LBGI’s failure to ensure that the language of millions of home insurance renewals communications was “clear, fair and not misleading”.

Commenting on the case, Mark Steward, executive director of enforcement and market oversight at the FCA highlighted that firms must ensure any communications with customers are fair. LBGI failed to ensure that this was the case, he said, and, as a result, millions of customers received renewal letters that claimed customers were being quoted a competitive price. This was unsubstantiated and risked serious consumer harm.

The FCA noted that between January 2009 and November 2017 LBGI sent nearly nine million renewal communications to home insurance customers which implied that they were receiving a “competitive price” at renewal. These claims were not substantiated and policies were renewed in approximately 87% of renewal communications containing this language.

The watchdog revealed that LBGI did rewrite its renewal communications and began to remove “competitive price” wording from 2009 onwards, but that the language remained in a significant number of renewals communications (in the relevant period) despite repeated missed opportunities to address it.

“Separately,” the FCA said. “LBGI informed approximately half a million customers that they would receive a discount based on either their ‘loyalty’, on the fact they were a ‘valued customer’, or otherwise on a promotional or discretionary basis, where the described discount was not applied and was never intended to apply. This affected approximately 1.2 million renewals, with approximately 1.5 million communications sent by LGBI. The erroneous discount language was only identified and rectified by LBGI during the course of the FCA’s investigation.”

The FCA found that LBGI breached Principle 3 and Principle 7 of its Principles for Businesses between January 01, 2009 and November 19, 2017.

The FCA has not yet established whether individual consumer behaviour would have been changed if the communications in the case had been up to standard and has not required LBGI to redress customers who received a renewal letter that included the claim the renewal premium was ‘competitive’.

The regulator has taken into account that LBGI voluntarily made payments of approximately £13.5 million to customers who received communications that erroneously referred to the application of a discount when none was applied. The banking giant is now proactively contacting customers proactively, and the FCA continues to engage with LBGI on the voluntary payments process.