Six insurance firms face investigation from the Financial Conduct Authority (FCA) into what impact exit charges are having on their customers.
The announcement follows today’s publication of a review by the watchdog into 11 firms on fair treatment of long-standing life insurance customers.
Six of the 11 companies – Abbey Life, Countrywide Assured, Old Mutual, Police Mutual, Prudential and Scottish Widows – provided details of exit charges applied to some of their closed-book policies as part of the FCA study. The FCA discovered that, when these charges did apply, the firms may have failed to properly inform some of their customers, prompting the City watchdog to plan further work on the matter.
“The practices at some firms appear to have been poor,” said Tracey McDermott, acting chief executive of the FCA. “We have particular concerns regarding how some firms communicated with their customers about exit and/or paid-up charges. “We are now doing further work to understand the reasons for these practices, whether customers may have suffered detriment as a result and, if so, how widespread these issues are.”
Commenting on the review, Hugh Savill, director of regulation at the Association of British Insurers, said: “This is an important report the findings of which we will study in detail. It should be recognized that products analyzed in the review bear little resemblance to the long-term savings market today, which continues to modernize and deliver value for money products with lower charges in the era of auto enrolment and pension freedoms.”
Meanwhile, Andrew Tyrie, chairman of the Treasury Committee, said: “The FCA now need to examine carefully whether customers have suffered detriment. The Treasury Committee will be keeping a close eye on this. So far, no conclusions have been reached as to whether there have been any breaches of regulatory requirements by any of the companies involved. In light of its findings, the FCA will also be producing some guidance for firms with closed-book customers on what they should be doing to treat customers fairly”
Matt Browne, director at PwC, added: “The review is going to have a big impact on life assurers. That’s to be expected – but these firms are already shouldering a weight of regulatory and legislative change, not least of which are the pensions reforms, which could include a cap on charges.”
Article taken from: City A.M.
Posted on Tuesday Mar 8