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FCA to probe 30m insurance policies

28/3/14

By Verena Vogt

The Financial Conduct Authority (FCA) has announced a probe into millions of insurance policies - some up to 40 years old - over fears that customers with older contracts are "forgotten" by the industry.

The regulator said its review will include 30 million pensions, endowments, investment bonds and life insurance policies sold by firms from the 1970s to the beginning of the decade.

Details of the investigation, which is set to be launched in the summer, are to be given in the FCA's annual business plan for the next financial year, which will be released at the beginning of next week.

Areas of concern

The FCA said it comes after concerns were raised that those policyholders who hold older contracts are not being treated with the same priority as those with new contracts.

And instead are faced with high fees and substandard service.

One of the areas of concern identified are so-called "zombie funds", which are not open to new customers and are often neglected by existing ones.

The FCA said it is unfair that some insurers use the returns from these funds to pay the costs from other parts of their businesses.

The regulator also said that a significant proportion of insurance policies include exit fees which could reduce a policy's value by half if a customer tries to switch to a cheaper provider.

Unfair overheads

Clive Adamson, the director of supervision at the FCA, told The Daily Telegraph: "We want to find out how closed-book products are being serviced by insurance companies.

"We are concerned insurers are allocating an unfair amount of overheads to historic funds.

"As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal.

"As part of the review we will collect information to establish whether we need to intervene on exit charges."


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