The FCA said that it ’would not consider it appropriate to cancel a policy purely on the basis of a policyholder’s views’
The scandal around the decision by a leading bank to close the accounts of former UK Independence Party (UKIP) leader Nigel Farage has created a freedom of speech storm that threatens to spread from banking to the wider financial services sector.
It has raised an important question over the issue of whether financial companies, including those that provide insurance, should refuse to deal with individuals or companies due to their political views or personal beliefs, with the issue shooting to the top of the UK financial regulator’s agenda.
Insurance and the risk mitigation that it provides customers are essential tools for operating in modern society and, much like with banking services, it would be difficult for anyone to live in that society without access to insurance.
Freedom of speech is an important underpinning of healthy democracy – but as it becomes clear that UK banks are making decisions on who to provide services to based on their political opinions, can we be sure that insurance companies are not also discriminating on this issue?
What started as a Twitter row ignited into a national scandal when Coutts owner NatWest Bank was caught using disinformation to defend itself in the escalating crisis over the decision to close Farage’s accounts.
At the end of June this year, Farage announced that Coutts Bank has suddenly closed his accounts and accused the bank of trying to make him a “non-person” by denying him access to banking services.
On Twitter, now known as X, he said: “The establishment are trying to force me out of the UK by closing my bank accounts. I have been given no explanation or recourse as to why this is happening to me. This is serious political persecution at the very highest level of our system. If they can do it to me, they can do it to you too.”
He added that the issue extended beyond a single bank, given that he had tried to open accounts at nine other banks and had been refused by all.
Mr Farage claimed banks did not want him as a customer due to him being a “politically exposed person” (PEP).
The row took a new turn the following month when the BBC carried a report saying the reason his account has been closed was because he failed to meet Coutts’ minimum requirements in terms of the funds needed to bank with the company.
The BBC added that the decision had nothing to do with his political opinions. However, as the month went on, it was revealed that staff at Coutts had been preparing a dossier on Farage for a considerable period of time to feedback to the firm’s Wealth Reputational Risk Committee.
The dossier concluded that there was “significant reputational risks of being associated with him”.
It pointed to the decision having been taken partly because Farage’s views did not align with the firm’s “values”, including his position on LGBTQ+ rights and friendship with former US president Donald Trump.
The document concluded by saying Farage’s views were “at odds with our position as an inclusive organisation”.
The dossier’s publication prompted an apology from the BBC and the resignation of the chief executive of the NatWest Group. It also saw several other people come forward to claim they had been refused accounts for their political views, particularly around the UK’s vote to leave the European Union.
The treatment of Mr Farage by the banking sector prompted a response from the FCA, which wrote to senior management at the UK’s banks seeking information on whether such decisions were more widespread.
The letter stated: “In recent years, we have seen a significant increase in the number of bank accounts being closed. This may reflect increased monitoring by firms to tackle financial crime, including fraud.
“However, it is less clear the extent to which banks may be terminating accounts for other reasons, which may be unjustified.”
It continued: “As the regulator, it is important that we understand the scale of the issue and the drivers behind them.”
Speaking to Insurance Times, the FCA explained that the recent efforts made by the regulator to understand the treatment of PEPs were not connected to the decision by Coutts to close Mr Farage’s accounts.
A spokesperson explained that the current review around PEP was focused on the potential for corruption and was an entirely unrelated issue.
On insurance, however, the FCA was clear. It explained: “FCA rules require that firms ensure that any policy provided meets the demands and needs of the customer. We would not consider it appropriate to cancel a policy purely on the basis of a policyholder’s views.
“While the activities insurers choose to underwrite and the customers they provide services to are commercial decisions for them, we expect them to treat people fairly and meet all relevant legal and regulatory obligations, including under equalities legislation.”
“Anyone who believes they have been treated unfairly is able to complain to the Financial Ombudsman Service.”
Take me as a whole
Despite the clarity provided by the FCA, the debate around PEPs is one that the many in the industry were reluctant to engage with publicly, given the impact the debanking scandal has had on the banking sector.
Underwriters, however, were unanimously clear in stating that they have always assessed risks based on a range of factors.
One spokesperson at a leading insurer, who asked not to be named, told Insurance Times: “The market will make decisions [on whether to offer cover based] on the risk profile of those they are asked to insure. We are bound by international sanctions, for example, from dealing with certain Russian individuals as well as oil exports from Iran.
“Every company will make an individual decision on the policyholder. With the move towards climate ESG in the industry and climate issues we are already having to examine the wider reputational issues around industries and companies involved with fossil fuels and coal projects.”
Many underwriters seeking to write reputationally difficult risks, such as providing cover for the sex industry, will often utilise a managing general agent (MGA) to keep any potential reputational damage at arm’s length from their brand.
Peter Blanc, former chief executive of Aston Lark and Howden’s head of mergers and acquisitions (M&A), told Insurance Times: “In reality, as brokers we do our best to source cover for anyone [and] everyone – [we] occasionally have to work hard to persuade underwriters that so-and-so is actually a good risk and to ask the insurers not to believe everything they read in the press!
“Insurers will often shy away from offering cover to high-profile figures, but they do so because of the perceived increased exposure – high-profile people tend to associate with other high-profile people – but I haven’t heard of anyone being unable to buy cover completely, as there are distressed markets that specialise in placing the very hard to place.”
A spokesperson for Aviva added: “Any decision relating to customers such as PEPs is taken on a case-by-case basis. It is not our policy to cancel or decline policies [for politically exposed individuals] other than where we are required to do so by law or where the individual is on a sanction list.”
Zurich Insurance, however, was categorical on its approach to the issue of political beliefs.
“We do not take personal or political beliefs into account when making coverage decisions,” it said.
The danger of debanking is perhaps more acute because of the lack of players in the market, whereas, as Blanc noted, the incredibly competitive insurance sector contains a number of firms that specialise in placing more difficult risks.
One broker, who also asked not to be named, explained that, given the wide range of insurers in the market, the situation was not as concerning as it would be in the banking sector.
They concluded: “We work hard for our clients and to place their risks.
”We have not had a situation where an individual has been refused cover for any belief or political view, but there can be difficulties if they have a very poor claims record or come with a degree of reputational concern.”