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| Insurers face exit fees investigation | Insurers face exit fees investigation |
| (about 1 hour later) | |
| Major insurers are being put under the spotlight after a regulator found that customers may have been unaware of life insurance exit fees. | |
| The Financial Conduct Authority (FCA) said it had found examples of poor practice in the treatment of customers with so-called zombie policies. | The Financial Conduct Authority (FCA) said it had found examples of poor practice in the treatment of customers with so-called zombie policies. |
| These are held by long-standing clients and are closed to new customers. | These are held by long-standing clients and are closed to new customers. |
| The FCA is worried about how exit fees and charges were explained to customers. | The FCA is worried about how exit fees and charges were explained to customers. |
| These included "paid-up fees", where customers stop paying premiums but are still in the policy. | |
| The fresh investigation will focus on the explanation of charges after December 2008 at six firms - Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows. | |
| "The FCA is concerned that some customers may potentially have been unaware that they would have to pay such a charge or that they have paid, or are paying, such a charge," the FCA said. | "The FCA is concerned that some customers may potentially have been unaware that they would have to pay such a charge or that they have paid, or are paying, such a charge," the FCA said. |
| Capping or cutting fees | |
| The regulator has been conducting a long-running review into the life insurance sector. It investigated insurance products including pensions, endowments, investment bonds and life insurance policies. | |
| The average value for policies in the FCA's sample of the sector was approximately £18,000 for an endowment policy and £23,000 for a personal pension policy. | |
| The regulator looked particularly at policies which penalised savers who wanted to switch providers. It considered how customers were being treated now, rather than when the policies were sold. | |
| It found that some insurers might have failed to tell customers of the exit charges at the time they were incurred. | |
| This will now lead to a further investigation. The regulator stressed that no conclusions had been drawn, such as whether customers suffered financial setbacks as a result. | |
| The FCA said it would also work to improve firms' behaviour generally, with plans to reach a voluntary agreement with the industry to capping or removing some charges. | |
| Hugh Savill, director of regulation at the Association of British Insurers (ABI), said the review raised "serious issues". | |
| "However it should be noted that products sold today bear little resemblance to those described by the report," he said. | |
| "The long-term savings industry is now modernising and focused on serving its customers, through auto-enrolment pension products or helping them make the most of the new pension freedoms." | |
| Overhaul | |
| The original announcement of the investigation caused a huge headache for the FCA. | |
| Information about the inquiry was pre-briefed to the Daily Telegraph, causing insurers' share prices to fall, and the FCA came in for heavy criticism over its handling of the announcement. | |
| An independent report into the affair found that the FCA's strategy was "high-risk, poorly supervised and inadequately controlled". | |
| Four top executives at the Financial Conduct Authority (FCA) lost their bonuses as a result. Two more senior figures, who were heavily criticised in the report, had already stepped down by the time the report was published. |