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Insurer gets £7.4m fine for mis-selling add-on products

The Financial Conduct Authority (FCA) has fined Swinton Group Limited (Swinton), one of the largest insurance retailers on the high street, £7,380,400 for mis-selling.

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.  

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 should contact Swinton directly.

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 said: “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.

Failure to give adequate information

The FCA found Swinton 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.

Swinton’s monitoring of its sales calls for these add-on policies 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.  

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 substantial sum was reduced from £10,543,500, with a 30% discount applied as Swinton settled at an early stage in the FCA’s investigation.  

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  • Shedloads - 17/07/2013 09:06

    MASSIVE issue this. The floodgates have opened so lookout all of those banks, insurance companies, brokers, supermarkets and car sheds who've entered into deals with breakdown companies like RAC, or legal services providers like Arc, to sell their products as 'add ons'. What many customers don't realise is that they're often double, triple or even quadruple covered having been sold a product that includes breakdown cover, legal etc. via their breakdown company, the manufacturer of their car, their insurance policy or with their bank account etc. Call it mis-selling, it's really just customer confusion created by complex contractual arrangements between financial services companies and their suppliers. They're all looking to take a slice from a very large pie, but their salespeople often don't understand the details of these contracts or the add-ons they're selling and often don't have time to explain them to the customer especially over the phone. Hopefully this ruling will help clean up the 'add-ons' industry, ensure proper sales and compliance training for staff (not just paying lip-service) and save customers millions in the process.

  • gezza37 - 21/07/2013 11:26

    Until salespeople are not target driven and paid commission,this is bound to continue.If you don't sell add-ons, you are told you are failing in your job, and if you do, you are at risk of mis-selling!