The FCA is investigating six life insurers over concerns that customers may not have been informed they had paid exit charges on exiting a policy.
The regulator says the six firms – Scottish Widows, Prudential, Old Mutual, Abbey Life, Countrywide and Police Mutual – face an investigation into their behaviour in respect of the disclosure to customers of exit and paid-up charges. The investigation will focus on disclosure of exit and paid-up charges after December 2008, when disclosure rules were tightened.
The FCA says is not possible to draw final conclusions as to whether customers suffered detriment as a result or how widespread these practices were in these firms or in the wider market. The regulator says commencement of investigations should not be taken to indicate that they will necessarily result in disciplinary action against the firms involved nor does it indicate that a penalty will inevitably be imposed or that redress will be payable.
Abbey Life and Old Mutual will also be investigated over whether they contravened regulatory requirements across a number of other areas assessed in the thematic review. This investigation into wider contraventions of regulatory requirements will also focus on behaviour from December 2008.
Earlier this week Scottish Widows announced it was scrapping exit charges on its workplace pensions and was looking at doing so on its individual contracts.
Depending on the outcome of this action the FCA may extend this work to a wider population of firms, including any of the firms in the thematic review and/or other firms in the life insurance sector.
The FCA plans to convene an industry-wide discussion with a view to pushing the industry towards a voluntary solution to capping or removing exit and/or paid-up charges. This work will be in addition to the new duty to make rules, proposed by HM Treasury and currently being considered by parliament, to cap exit charges on customers cashing in, and taking certain other action relating to, their pension savings from age 55 following on from the Government’s pension reforms.
FCA acting chief executive Tracey McDermott says: “Given the long-term nature of closed-book products, it is vital that customers are treated fairly and given the right information on an ongoing basis in order to help them make important financial decisions. We expect all firms with closed-book customers to take into account the findings we have published today and ensure they are treating their closed-book customers fairly.
“The practices at some firms appear to have been poor. 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.”