Lloyds fined £90m for letters’ pledge on competitive insurance

Renewal letters suggested customers were getting ‘competitive price’ without backing up claim

Lloyds Bank’s insurance arm has been fined £90m for sending insurance renewal letters to customers suggesting they were getting a “competitive price” without backing up the claim.

Between January 2009 and November 2017 almost 9m letters were sent to home insurance policyholders under its Halifax, Lloyds and Bank of Scotland brands. The language used in the letters suggested a good premium price was on offer for the next year’s cover.

In about 87% of cases where the letters were sent, the policyholders opted to renew.

But the regulator, the Financial Conduct Authority, said Lloyds Bank General Insurance had not taken steps to check that the claim was accurate. It had failed to ensure that the wording used with millions of home insurance renewals communications was clear, fair and not misleading.

The FCA said there was a “risk of harm” to customers because it was likely that the renewal premium was higher than had been the case in previous years, and higher than in offers quoted to new customers, or to those who were opting to switch provider. This was particularly likely to be the case for customers who had renewed repeatedly with the insurer.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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.”

The insurer also told half a million customers that they would get a discount on renewal, because of their “loyalty” or because they were “valued customers”, but then did not apply the reduction.

About 1.2m renewals were affected, and Lloyds has repaid £13.6m to customers for this.

The FCA said it was unable to establish if the promise of competitive prices had changed customers’ behaviour, so Lloyds was not asked to pay compensation to those who had received the letters.

A spokesperson for Lloyds Banking Group said: “We’re sorry that we got this wrong. We’ve written and made payment to those customers affected by the discount issue and they don’t need to take any further action.

“We thank the FCA for bringing this matter to our attention, and since then we’ve made significant improvements to our processes and how we communicate with customers.”


Hilary Osborne

The GuardianTramp

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