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Regulator slams insurers for selling unsuitable products at ‘significantly higher prices’

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General insurance (GI) providers have been warned by the Financial Conduct Authority that their approaches to sales and distribution can lead to customers buying inappropriate products, paying excessive prices or receiving poor service.

In its report, the regulator noted that in distribution chains which involve multiple parties, the remuneration of those various parties can result in people paying “significantly higher prices” than the production and delivery costs of what they are buying.

The FCA said this was most prevalent when the insurance product was sold alongside a non-financial product, such as a car or holiday, while this also leads to a heightened risk of purchasing unsuitable products.

In addition, the FCA highlighted that it saw examples of shortcomings in claims handling, which it warned were creating the risk that legitimate claims could be rejected.

‘Significant potential for customer harm’

The regulator noted that even though it has published two reports in recent years flagging up failings in the governance and control of general insurance distribution chains, “significant potential for customer harm remains”, despite some progress having been made.

It warned that many firms lack “sufficient focus” on the outcomes for their customers and must address this as a matter of urgency.

Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said the “widespread extent” of issues within GI distribution was a sign of a culture which “pays insufficient regard to customer outcomes in some parts of the general insurance sector”.

He added: “We are going to carry out further supervisory work to make sure that firms meet their obligations and will not hesitate to use the full range of our regulatory powers.”

The report is being sent to all GI firms.


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