The Financial Conduct Authority has warned that a “small number” of insurance companies in the UK may face regulatory action for their failures in informing customers on one financial product.
The FCA recently published the findings of its review of non-advised annuity sales practices and found no evidence of an industry-wide or systemic failure to provide customers with sufficient information about enhanced annuities through non-advised sales, Reuters
The watchdog said many firms provided clear and comprehensive information to customers with written communication. However, it had concerns at a “small number” of firms where significant communications took place orally.
“In a number of the telephone conversations we reviewed it was clear that customers had a limited understanding of the subject matter,” the FCA said in its report.
“Firms did not recognise that customers are not experts in insurance products and also failed to understand that the eligibility criteria and benefits of enhanced annuities are not well known by the ordinary customer.”
The regulator found evidence of telephone conversations where call handlers did not appear to respond effectively to their customer’s apparent lack of understanding. The FCA said this may have caused some clients to purchase a standard annuity when they may have been eligible for an enhanced product.
The FCA has asked the firms at fault to review all non-advised sales from July 2008 and provide redress. The watchdog is also investigating the companies to determine whether further action is necessary.
“While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules,” said Megan Butler, director of supervision for investment, wholesale and specialist at the FCA.
“Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements,” Butler added.
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