The FCA has fined LBGI (Lloyds Bank General Insurance Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited) £90,688,400 for failing to ensure that language contained within millions of home insurance renewals communications was clear, fair and not misleading.
Between January 2009 and November 2017, LBGI sent nearly 9 million renewal communications to home insurance customers which included language to the effect that they were receiving a ‘competitive price’ at renewal. LBGI did not substantiate the ‘competitive price’ language included in the renewal communications by taking steps to check that it was accurate. Policies were renewed in respect of approximately 87% of renewal communications containing this language.
Although LBGI rewrote its renewal communications and began to remove ‘competitive price’ wording from 2009 onwards, the language remained in a substantial number of renewals communications throughout the relevant period despite repeated missed opportunities to address it.
This caused a risk of harm for the majority of LBGI’s home insurance customers who received these communications, because it was likely that the premium quoted to them at renewal would have increased when compared to their prior premium. Renewal premiums offered to customers would also likely have been higher than the premium quoted to new customers, or customers that chose to switch insurance provider. This was particularly likely to be the case for customers who renewed repeatedly.
Separately, LBGI informed approximately half a million customers that they would receive a discount based on either their ‘loyalty’, on the fact they were a ‘valued customer’, or otherwise on a promotional or discretionary basis, where the described discount was not applied and was never intended to apply. This affected approximately 1.2 million renewals, with approximately 1.5 million communications sent by LGBI. The erroneous discount language was only identified and rectified by LBGI during the course of the FCA’s investigation.
The FCA therefore found that LBGI breached Principle 3 and Principle 7 of the FCA’s Principles for Businesses between 1 January 2009 and 19 November 2017.
LBGI has voluntarily made payments of approximately £13.5 million to customers who received communications that erroneously referred to the application of a discount when none was applied, and this has been taken into account in the assessment of the financial penalty. LBGI is contacting customers proactively, meaning customers do not have to take any steps to receive payment. The FCA continues to engage with LBGI on the voluntary payments process.
Under the FCA’s new rules, which come into effect on 1 January 2022, insurers will be required to offer renewing customers a price that is no higher than they would pay as a new customer. The FCA estimates that these measures will save consumers £4.2 billion over 10 years, by removing the loyalty penalty and making the market work better.
