The Financial Conduct Authority (FCA) has fined the Swinton Group Limited £7.4 million for mis-selling monthly add-on insurance policies.
Insurance add-ons were mis-sold
The FCA 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 which were sold alongside its car insurance and home insurance products.
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.
The FCA found that 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 set aside £11.2 million to repay those customers who were mis-sold, of which £1.9 million has already been paid out.
Swinton has 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 have been advised to contact Swinton directly.
FCA says Swinton failed its customers
Responding to the £7.4 million fine handed down to Swinton Group Ltd, Which? executive director, Richard Lloyd, said: ‘It’s good to see the FCA handing out a hefty fine, which sends a very clear message to the insurance industry that mis-selling won’t be tolerated.
‘As part of its review of the insurance industry the FCA should scrutinise how sales incentives are offered to staff in-store and how online marketing and product information is presented to customers.’
Tracey McDermott, the FCA’s director of enforcement and financial crime, said: ‘Swinton failed its customers. When selling monthly add-on policies, Swinton did not place the consumer at the heart of its business. Instead it prioritised 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.’
Martin Wheatley, FCA chief executive 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.’
Market review launched by FCA
The FCA market study will look at the nature of competition in these markets, in particular whether these insurance add-on products represent good value for money and whether consumers understand what they are getting with their policy.
The general insurance add-ons study will look specifically at GAP insurance, home emergency cover, gadget, travel and personal accident insurance, and accident cash plans. Companies and interested parties have until early September to submit views and evidence.