LONDON (Reuters) - General insurers are failing to consider value for money for their customers in their products and services, Britain’s financial watchdog said on Wednesday, warning it was prepared to act against firms and their senior managers.
The Financial Conduct Authority has written to the CEOs of general insurers, which provide insurance for homes, cars, travel and pets, telling them their manufacturing, sales and distribution approaches can lead to customers buying the wrong products, paying excessive prices or receiving poor service.
“We are going to carry out further supervisory work to make sure that firms meet their obligations and will not hesitate to use the full range of our regulatory powers,” Jonathan Davidson, FCA executive director of supervision for retail and authorizations, said in a statement.
The FCA said it had found that buying general insurance could involve a chain of intermediaries which “can result in customers paying significantly higher prices than the production and delivery costs of the products they are buying”.
There could be a high risk of “unsuitable sales”, for instance when insurance was sold alongside a non-financial product like a car, washing machine or holiday, it added.
Customers were not always receiving good service, particularly when making claims or complaints, the FCA said.
The FCA said in its letter to CEOs that it expected them to take action where needed to improve their distribution processes, and it would carry out further supervisory work.
“The majority of customers, buying direct from a broker or from a comparison website, should not be concerned with these findings,” the Association of British Insurers said in a statement.
“There are clearly remaining problems in some distribution chains, and it is very important that these are addressed.”
The FCA already has the general insurance market in its sights, after launching a study last year into fairness in pricing. It is also working with the Competition and Markets Authority on an investigation into excessive pricing.
Consumer body Citizens Advice published a study this week showing that home insurance companies in Britain make all their profits from loyal customers holding policies for at least six years.
Companies offering general insurance include FTSE 100 firms Aviva, RSA, Admiral and Direct Line. Their shares were little changed at 0926 GMT on Wednesday.
Reporting by Carolyn Cohn; Editing by Sinead Cruise and Mike Harrison