"Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm."
LGBI comprises Lloyds Bank General Insurance, St Andrew’s Insurance, Lloyds Bank Insurance Services, and Halifax General Insurance Services.
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. The FCA's investigation found that 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.
The regulator says 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.
FCA has not imposed a requirement for LBGI to pay redress to those customers who received a renewal letter that included the claim the renewal premium was ‘competitive’.
However 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.
Under the FCA’s new rules, which come into effect on 1st 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.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: "Firms must ensure their communications with customers are clear, fair and not misleading. LBGI failed to ensure that this was the case. Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm."
