Sunday, 26 March 2017

AR scandal: FCA document reveals full catalogue of horrors

Insurance salesman targeted ‘potentially vulnerable’ customers as they sought to maximise profits, the FCA probe into ARs states.

The targeting of potentially vulnerable people is just one among a catalogue of horrors found by the regulator and could now result in the biggest industry customer compensation since the PPI scandal.

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The regulator found that the majority of the 15 principal firms it heavily probed, which had 10,594 reps, fell short of regulatory standards.

Insurers, managing general agents and brokers are all among those in the firing line, although the regulator has not specifically named any culprits in the shock report which is likely to cause huge damage to the reputation of the insurance industry. 

 In some of the worst examples of abuse, the regulator’s 41 page document reveals:

  • Travel insurance customers with pre-existing medical conditions sold cover despite there being significant risk they would never be able to make a claim
  • Staff falsifying customer signatures on GAP insurance in order to push through the sale
  • A principal with a motor dealer network of appointed representatives discovering mis-selling - but then did nothing about it such as contacting customers or reprimanding staff
  • Numerous instances of the principal having no idea of what their appointed representatives were doing when selling products
  • The majority of principals visited by the regulator failed to monitor customer complaints properly and had no real idea whether customers were getting fair treatment
  • Sales staff flogging warranty insurance by pressurising customers and failing to get consent from potentially vulnerable people

The report clearly states failings were serious and widespread, and only a minority of those investigated had good practice. 

The report says: “It should be noted that while practices were predominantly poor, the shortcomings that we identified were not universal across the sample of principal firms included in the review.

“A minority of principal firms within the sample had a good understanding of their ARs and were able to demonstrate how they effectively managed, monitored and mitigated the risks arising from their activities.”

Readers' comments (1)

  • If the FCA did its job properly it would realise it is the prime instigator of so many problems within the industry. Its rules are vague to the point of being all too often unclear and no one is prepared to make any amends to the status quo.
    The fact that if you don't get a clear response you should consult your legal adviser. The FCA should be ashamed that it continues to spew out endless regulations ad infinitum regardless of the fact it is not removing inappropriate rules or adopting the 'plain English' approach as recommended by the government.
    People will always look to circumvent regulations but it doesn't help criticising if you don't offer a better way forward.

    EU regulations are excessive but it is the UK that is gold plating every time and, by doing so, pretending regulation is better in the UK than say in Germany. If we are all working off the same hymn sheet that can't be the case

    There needs to be an external audit of the practises of the FCA. As well there needs to be a cost benefit into the amount of regulation and the value generated by it.

    Not in the form of penalties, but in whether it is capable of delivering, regulation in a format that is easy to understand with sufficient warning about the consequences of failure to adopt.

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