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.”

Contributor

Hilary Osborne

The GuardianTramp

Related Content

Article image
Swinton fined £7.4m over mis-sold insurance add-ons
Swinton failed to inform customers that the policies, which netted it £93m, were optional and separate from the core cover

Hilary Osborne

16, Jul, 2013 @12:22 PM

Article image
Lloyds fined £64m for unfair treatment of mortgage customers
City watchdog rules bank mishandled cases of 526,000 customers who fell into difficulties

Kalyeena Makortoff

11, Jun, 2020 @11:51 AM

Article image
CPP mis-selling: what you need to know
Card providers have agreed to compensate customers who were sold policies between 2005 and 2011. Here are the key facts

Patrick Collinson

22, Aug, 2013 @10:25 AM

Article image
Direct debit option increases insurance payments, FCA finds
Consumers are not told the higher cost of paying by instalments, the Financial Conduct Authority says, with some being charged interest of up to 75%

Patrick Collinson

11, May, 2015 @10:25 AM

Article image
Neither Eurostar nor insurers will refund me for cancelled trip
My journey was cancelled due to Covid restrictions but Lloyds bank and Axa won’t pay up

Miles Brignall

26, Oct, 2020 @7:00 AM

Article image
Financial watchdog to ban add-on insurance on sales of products
Automatically added insurance policies are poor value for money and cost consumers £200m a year, says FCA

Miles Brignall

11, Mar, 2014 @1:54 PM

Article image
Lloyds Banking Group 'using loophole to cut PPI compensation payouts'
Customers of taxpayer-owned Lloyds bank who were mis-sold PPI policies are not getting all of their money back, BBC claims

Hilary Osborne

25, Mar, 2014 @12:01 AM

Article image
FCA seeks ban on premium rate calls for bank and insurance customers
City watchdog also calls for changes in the way complaints are reported

Miles Brignall

12, Dec, 2014 @5:54 PM

Article image
Lloyds demands earlier cut-off point for PPI mis-selling claims
Bank urges Financial Conduct Authority to set tighter time bar for claims, after saying its total payouts for mis-sold insurance nears £14bn

Jill Treanor

28, Oct, 2015 @9:55 AM

Article image
PPI compensation: Lloyds fined £4.3m
Quarter of successful claimants in 10-month period waited longer than four weeks

Hilary Osborne

19, Feb, 2013 @11:35 AM