Insurance customers in line for compensation following misselling by agents
Insurance customers could be in line for compensation after city watchdog probe finds evidence of agents mis-selling, faking signatures and falsifying documents
Insurance customers could be entitled to payouts after a probe by the City watchdog found worrying evidence that some agents have been mis-selling.
The Financial Conduct Authority conducted a study of 15 insurance firms in the general insurance sector over a range of products including motor, home and travel insurance.
The focus of the investigation was on the middlemen who sold the products on behalf of the insurance companies. While the agents themselves are not regulated by the watchdog they must be overseen by the regulated insurance companies themselves.
The FCA conducted a study of 15 insurance firms and found evidence of generally poor practice The watchdog aimed to further understand the impact that these arrangements had on customers.
‘Widespread examples of poor practice’ was found by the FCA, including in one or two instances agents faking signatures and falsifying documents.
Such bad practices included some agents selling travel insurance to customers with medical conditions who would not be covered if they were to try and claim.
Two companies were told by the regulator to cease sales activities. It also ordered ‘Section 166 reviews’ on another two, which meant that they would need to pay an expert to come and review their policies for mis-selling. All four and an additional firm were also told that they had to stop taking on new agents.
Over half of the 15 principal firms in the study were also found to be unable to consistently demonstrate that they had effective risk management.
The watchdog added that it is considering whether further regulatory action is needed and will also be sending letters to the CEOs of firms to set out what is expected of them.
The FCA directly authorises the operation of 400 insurers and 5,100 intermediaries. No firms were named in the report.
Jonathon Davidson, director of supervision, retail and authorities at the FCA remarked on the findings: ‘While some principals did have a good understanding of their appointed representatives’ activities and their obligations as principal firms, we found widespread examples of poor practices across the sector.
Some agents were found selling travel insurance to customers with medical conditions which would not be covered if they were to try and claim
‘In many cases firms were simply failing to understand and manage the risks arising from their appointed representatives’ activities.’
Mr Davidson added that the FCA is concerned about the ‘potential for customer detriment arising from the lack of oversight of appointed representatives’.
A spokeswoman for the British Insurance Brokers’ Association (Biba) said that a firm using appointed representatives must be confident in the management of the operation in order to protect its own brand worth.
She said: ‘We will be working with the FCA to ensure that the key findings of the review are shared with our members and to help them think about their own processes and controls. We are confident that this model can offer customers access to appropriate insurance – especially in well-managed, properly supervised organisations.’
A spokeswoman for the Association of British Insurers (ABI) also commented on the findings: ‘This review did not look at insurers, but focused on the role of intermediaries and retailers in the selling of general insurance products. It raises some important issues for those firms involved and the wider insurance market to address.’