The FCA has today fined Standard Life Assurance Limited (SLAL) £30,792,500 for failures related to non-advised sales of annuities that saw a fifth of call handlers more than double their pay through sales bonuses.
Call handlers were given wide discretion in how they talked to customers and the regulator says the potential bonuses they could earn meant there was a risk that customers’ interests would be overlooked.
The regulator says that SLAL failed to put in place adequate controls to monitor the quality of the calls between its call handlers and non-advised customers. SLAL offered its front-line staff large financial incentives to sell annuities, which encouraged them to place their own financial interests ahead of their customers. This gave rise to a significant risk that SLAL’s call handlers would fail to provide customers with the information they needed to choose an annuity appropriate to their circumstances, said the regulator
As part of the sales process for non-advised annuities, firms are required to explain to customers that they may get a better rate if they shop around on the open market. Where customers have health or lifestyle factors which may shorten their life expectancy, they may be eligible for an enhanced annuity. Firms need to provide clear, fair and not misleading information about enhanced annuities to help the customer make an informed decision about what product to buy.
SLAL used high level call guidelines which gave call handlers significant discretion about how they communicated with customers. This meant that the firm failed to provide some customers with appropriate information about enhanced annuities, including the option to shop around for a better deal.
SLAL’s call handlers had the opportunity to receive significant bonuses and rewards if they met or exceeded sales targets. During the period of misconduct, nearly 22 per cent of call handlers received more than 100 per cent of their basic salary in bonus payments.
The FCA says SLAL failed to put in place robust systems and controls to mitigate the risks created by high level call guidelines and large bonuses. It failed to adequately monitor calls between call handlers and customers and provide sufficient management information to enable senior management to identify failings in relation to the quality and volume of call monitoring.
On 31 January 2017, SLAL voluntarily agreed to conduct a past business review to identify and pay redress to those customers who were likely to have suffered, or did suffer, loss as a result of its failures. As at 31 May 2019, SLAL had paid approximately £25.3 million to 15,302 customers.
SLAL was formerly part of the Standard Life Aberdeen group of companies. However, on 31 August 2018, it was sold by Standard Life Aberdeen to the Phoenix group of companies (Phoenix Group).
SLAL has already contacted potentially affected customers as part of its past business review. The past business review is ongoing under the ownership of the Phoenix Group and the firm expects to complete the past business review by the end of 2019. Any concerned customers who bought a non-advised annuity from SLAL may contact SLAL (as a member of the Phoenix Group) directly.
SLAL did not dispute the FCA’s findings. The firm’s agreement to accept the FCA’s findings meant it qualified for a 30 per cent discount. Otherwise, the FCA would have imposed a financial penalty of £43,989,300.
FCA executive director of enforcement and market oversight Mark Steward says: ”Standard Life Assurance Limited’s controls needed to place fairness to customers at their heart. Here, the financial incentives available to staff for selling non-advised annuities by telephone created conflicts which led to unfair outcomes for some customers. Firms must have controls in place to ensure they are prioritising fairness to customers.”
Standard Life Assurance Limited and Phoenix group director, open business Susan McInnes says: “While this is an historic issue and one we were aware of when we acquired Standard Life Assurance Limited, we would like to apologise to affected customers, all of whom we have already been in contact with as part of the programme of customer redress. We have also reviewed and updated our telephone practices as part of this process.
“Whenever we get things wrong, we seek to learn from our mistakes and are absolutely focused on putting things right. Our remediation programme for affected customers is progressing well and we expect it to be completed by the end of the year.”
