Swinton, the insurance broker, has been handed a £770,000 fine by the Financial Services Authority (FSA) for mis-selling controversial payment protection insurance (PPI) policies. Under an agreement with the FSA, Swinton will contact over 350,000 customers who paid for PPI and offer them a refund. Swinton’s PPI sales process was “flawed”, the FSA found, because of an “assumptive” selling technique in which PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover. “This resulted in unacceptable levels of non-compliant sales,” the regulator said.
PPI policies have been criticised for including hidden exclusions that make it difficult to claim successfully. While Swinton sold over 500,000 policies, only 266 claims were paid out, the FSA said. “Swinton did not put in place any or any adequate system for establishing that the PPI was suitable for the customer before the recommendation was made,” it added.
“Swinton’s sales process provided customers with inadequate information about the significant features of the PPI at the point of sale and the firm’s sales process included statements about the extent of the PPI cover which did not adequately explain the features and benefits whilst at the same time explaining the complex limitations and exclusions.”
In addition, the FSA found that Swinton did not make it sufficiently clear that PPI was optional, as the cost was bundled within the initial insurance quote. Swinton also failed to disclose before the sale completed that the policy cost only £1.21, with the remainder of the charge of £15 or £20 being a fee taken by Swinton.
The insurer’s PPI customers will now be able to get a full refund. Swinton will also proactively review previously rejected claims and pay compensation where appropriate, the FSA said, adding that the company accrued approximately £7.8m from its PPI sales.
Margaret Cole, FSA director of retail enforcement and financial crime, said: “These were deliberate breaches. Swinton was fully aware it should establish a customer’s need for PPI before recommending it, yet nearly half a million policies were sold to customers who didn’t necessarily require them.
“Swinton’s PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly.”
By agreeing to settle at an early stage of the investigation Swinton qualified for a 30pc reduction on the full fine.
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