Liberty Mutual Insurance Europe has been fined £5,280,800 by the Financial Conduct Authority (FCA) over failures in its oversight of mobile phone insurance claims and complaints handling, it has been revealed today.
The regulator handed down the fine for failures that occurred between July 05, 2010 and June 07, 2015, regarding claims and complaints handling processes administered through a third-party.
Having settled at an early stage of the investigation, UK insurer Liberty qualified for a 30% discount which saw the insurer avoid the full fine of £7,544,000.
During the relevant period, Liberty customers were exposed to the possibility that their claims and complaints would not be handled fairly, the FCA said. Some claims were unfairly declined or not investigated adequately. Some customers who complained had their original decision overturned, which created a de facto two-stage claims process, and others had complaints dismissed without a proper investigation having been undertaken.
Liberty had entered into a relationship in the UK with a third-party to enable them to provide mobile phone insurance to retail customers. This third-party undertook all administrative functions associated with the mobile phone insurance on Liberty’s behalf, including all claims and complaints handling functions.
But the insurer retained regulatory responsibility for ensuring that claims and complaints made by customers were handled fairly, and ought to have ensured that it had in place adequate systems and controls to oversee the activities of the third party throughout. However, the FCA said it had failed to do so.
Mark Steward, executive director of enforcement and market oversight at the FCA, said that “fair, effective, and prompt settlement of claims” is a fundamental requirement of mobile phone insurance, and customers should expect that any claim they make, or any subsequent complaint they lodge, will be dealt with fairly.
“Insurers must put in place adequate measures to make sure that claims and complaints are handled fairly, especially where those functions are outsourced,” Steward commented in a statement.
Prior to the commencement of the enforcement investigation, a voluntary redress and remediation exercise was undertaken by the third-party in conjunction to Liberty in relation to claims which may have been unfairly rejected.
The total amount of redress offered to customers who may have suffered detriment was nearly £4 million, which the FCA said was taken into account in calculating the financial penalty.
In 2013, the regulator published a Thematic Review setting out its expectations for the mobile phone insurance market and followed this up with a further publication in December 2015, having also produced a Thematic Review reiterating insurers’ regulatory obligations for overseeing outsourcing arrangements in 2015.