FCA fines Swinton Group Limited £7.38 million for mis-selling monthly add-on insurance policies

Between April 2010 and April 2012, Swinton sold personal accident, home emergency and motor breakdown policies, which during the relevant period generated an income for accounting purposes of £92.9 million. The FCA found that Swinton did not provide enough information to customers about the key terms of the policies and also failed to properly monitor its sales calls.

Swinton set aside £11.2 million to repay those customers who were mis-sold, of which £1.9 million has already been paid out. Swinton has contacted over 650,000 customers it thinks may have been affected. Any policy holders who believe they bought monthly cover as a result of mis-selling should contact Swinton directly.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said:

“Swinton failed its customers. When selling monthly add-on policies, Swinton did not place the consumer at the heart of its business. Instead it prioritised profit.  

“At the FCA we have been clear in our expectation that firms must behave in the interests of consumers. Today’s outcome shows our approach in action and will act as a deterrent for other firms tempted to put profit figures above the fair treatment of customers.”

Martin Wheatley, FCA chief executive said:

“I recently told the insurance industry that we were taking a strong interest in the area of add-ons, and our first competition study will take a far-sighted view of the impact of current practice on consumers in this market.”

The market study will look at the nature of competition in these markets, in particular whether these products represent good value for money and whether consumers understand what they are getting with their policy

Failure to give adequate information

The FCA found Swinton did not explain the cover clearly enough or tell customers the monthly policies were optional and separate from other core insurance products. It did not give enough information about the terms of the policy, including the conditions and limitations, and cancellation process. The nature of the failings, particularly poor sales scripts, meant that every sale could have been a mis-sale.

Sales calls were not properly monitored

Swinton’s monitoring of its sales calls for these add-on policies was extremely limited both in scope and nature. There were no effective checks to ensure customers had been provided with adequate and balanced information and that the sale was fair.

An aggressive sales strategy at the expense of customers

During the period investigated, Swinton adopted a business strategy geared to boosting profits at each stage of the process - design, launch and sale. This strategy meant that it failed to ensure customers’ interests were put at the heart of its business.

The £7.38 million fine reflects the number and seriousness of the issues raised during the investigation. The substantial sum was reduced from £10,543,500, with a 30 per cent discount applied as Swinton settled at an early stage in the FCA’s investigation.   

The fine would have been higher had Swinton not taken part in an FCA study, published this year, which looked into how letters offering compensation could be written to ensure more customers respond. Further, the FCA took into account the swift action taken by the new management of Swinton to put things rights after the problems were discovered.

Notes to Editors

1. The final notice for Swinton[1]
2. The announcement of the market study into insurance add-ons[2]
3. The FCA is carrying out a number of thematic reviews into everyday insurance, and has already published the findings of its work looking at motor legal expenses insurance[3], mobile phone insurance[4], and a fine for one mobile phone insurance firm[5]. The FCA is also looking at premium finance and private investigators.
4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
6. Find out more information about the FCA, as well as how it is different to the PRA.