UK banks' insurance bill tops 10 bln pounds and rising

Thu Jun 27, 2013 6:39am EDT

Related Topics

* No let up in monthly compensation tally for PPI

* FCA also outlines concerns over mobile phone insurance

* FCA to levy hefty fines related to phone insurance

By Huw Jones

LONDON, June 27 (Reuters) - Britain's banks have paid out more than 10 billion pounds ($15.3 billion) for mis-selling loan insurance, the Financial Conduct Authority said on Thursday, and the bill is rising with no deadline set for claims.

Separately, the FCA said it will levy a hefty fine next month on a firm for poor handling of complaints about insurance it sold to cover the loss or theft of mobile phones.

The FCA - launched in April after the financial crisis convinced legislators the Financial Services Authority was too lenient a regulator and had to be scrapped - is mandated to protect consumers and end years of mis-selling products.

It said banks have paid 10.1 billion pounds to customers hit by the country's biggest financial mis-selling scandal. Compensation is still being paid out at the rate of about 400 million pounds a month.

The Bank of England told five British banks last week to increase their capital buffers by a collective 13 billion pounds by December, partly because of the rising bill for mis-selling payment protection insurance (PPI).

Banks have made PPI provisions of about 14 billion pounds and had hoped that the FCA would set a deadline for claims, but talks with the regulator broke down.

In a review of mobile phone insurance (MPI), the watchdog said there is a gap between what the customer expects from a policy and what it gets from a sector dominated by nine, unnamed firms.

Some products were not designed to meet customers' needs, terms and conditions were unclear and unfair, and claims were poorly handled, the FCA said.

"Although the costs of MPI are relatively low, with premiums for some policies as little as a few pounds a month, the product is widely held with over 10 million customers," the FCA said.

One man lost his phone in the back of cab and made a claim after being unable to recover it, but it was rejected on the basis he'd left the phone unattended in a public place.

Another claimant was rejected because of "mis-use" of his phone - it had not been used in the last two weeks.

"We have begun communicating the findings to the firms that took part in the review and they are making improvements," FCA director of supervision, Clive Adamson said.

The review is the latest example of how the regulator is stepping in earlier and scrutinising the products themselves more closely, compared with looking at sales practices in the past long after evidence of mis-selling had emerged.

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