You are here: Home - Insurance - News -

Lloyds fined £90m for misleading customers about insurance quotes

0
Written by: Emma Lunn
09/07/2021
The bank has paid out £13.6m to 350,000 customers following an investigation into home insurance renewal policies.

The Financial Conduct Authority (FCA) has fined Lloyds Bank £90m for failures in communications for home insurance renewals between 2009 and 2017. The bank failed to ensure that language contained within millions of home insurance renewals communications was clear, fair and not misleading.

The fine related to communication sent to customers by four Lloyds brands: Lloyds Bank General Insurance (LBGI) Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited.

Between January 2009 and November 2017 Lloyds sent nearly 9 million renewal communications to home insurance customers which included language to the effect that they were receiving a “competitive price” at renewal.

But Lloyds didn’t substantiate the “competitive price” language included in the renewal communications by taking steps to check that it was accurate. Policies were renewed in respect of approximately 87% of renewal communications containing this language.

The bank rewrote its renewal communications and began to remove “competitive price” wording from 2009 onwards, but the language remained in a substantial number of renewals communications throughout the period concerned.

The FCA says this caused a “risk of harm” for the majority of Lloyds’ home insurance customers who received the communication, because it was likely that the premium quoted to them at renewal would have increased when compared to their prior premium.

Renewal premiums offered to customers would also likely have been higher than the premium quoted to new customers, or customers that chose to switch insurance provider. This was particularly likely to be the case for customers who renewed repeatedly.

Separately, Lloyds informed about half a million customers that they would receive a discount based on either their “loyalty”, on the fact they were a “valued customer” – but the described discount was not applied and was never intended to apply.

This affected about 1.2 million renewals, with approximately 1.5 million communications sent by LGBI. The erroneous discount language was only identified and rectified by Lloyds during the course of the FCA’s investigation.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Firms must ensure their communications with customers are clear, fair and not misleading. LBGI failed to ensure that this was the case. Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm.”

The watchdog has not established whether individual customer behaviour would have been different had the communications in this case been clear, fair and not misleading.

The FCA hasn’t forced Lloyds to refund or compensate affected customers, but the bank has voluntarily made payments of about £13.5m to customers who received communications that erroneously referred to the application of a discount when none was applied. This has been taken into account in the assessment of the financial penalty.

Under the FCA’s new rules, which come into effect on 1 January 2022, insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer. The FCA estimates that these measures will save consumers £4.2bn over 10 years, by removing the ‘loyalty penalty’ and making the market work better.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Seven ways to get help with energy bills this winter

We knew today’s announcement was going to be painful, but it’s still a shock to the system. When this kick...

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week