Watchdog warns general insurers over value for money and high commissions
The City watchdog has warned general insurers it is prepared to crackdown on distribution chains failing to give customers value for money.
The Financial Conduct Authority (FCA) said that poor manufacturing, sales and distribution approaches were rife in the sector.
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The regulator’s investigation found customers were paying high prices due to “potentially excessive” levels of commission being taken by distributors.
It warned that some distribution chains had a high risk of “unsuitable sales”, as it involved retailers selling insurance alongside non-financial products, such as cars, white goods or holidays.
It also uncovered sales of low value and inappropriate insurance products and a culture that ignored customer outcomes.
In one example, a car dealership selling insurance alongside the purchase of a car took more than 70 per cent commission.
The FCA said its findings were “disappointing” given its crackdown on distribution chains in recent years.
Early this year the regulator fined The Carphone Warehouse more than £29m for mis-selling mobile phone insurance.
In February 2017, Express Gifts agreed to pay £12.5m in compensation to 330,000 customers who were sold insurance with little or no value.
The FCA has written to chief executives and expected firms to review their operations in light of the findings.
The watchdog said it would not hesitate to use the “full range” of its regulatory powers if firms failed to meet their obligations.
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“Through our recent work we have continued to see poor manufacturing, sales and distribution approaches leading to sales of low value and inappropriate products, unfair treatment of claims and services issues,” FCA executive director of supervision Jonathan Davidson said.
“The widespread extent of these issues demonstrates a culture which pays insufficient regard to customer outcomes in some parts of the general insurance sector,” he added.