Insurance analysts are suggesting that home emergency insurance policies taken out by consumers could be the next battleground over mis-selling. The news broke this week that HomeServe has been hammered with a fine totaling £30.6 million for failing its customers in a number of ways which includes mis-selling home insurance policies.
Analysts are further hinting that the company may be hit with penalties that will force the company to pay out millions in compensation to consumers holding insurance policies.
Next PPI mis-selling scandal ?
According to a report released by the Financial Conduct Authority (FCA), HomeServe has been hit with a retail fine of £30.6 for “mis-selling policies and not investigating complaints.” The FCA cited “serious, systemic and long running failings, extending across many key aspects of its business.”
FCA records show that HomeServe has already paid out £12.9 million in compensation and may face another £16.8 million in redress. The regulator accused the senior management at HomeServe of being “insufficiently engaged with compliance matters” and showing a “reluctance to address risks to customers if there was a cost implication involved.” HomeServe sells insurance policies that cover home repairs related to emergencies.
Tracey McDermott, the chief officer in charge of enforcement at FCA, issued a statement warning insurers that the companies must place customer interests at the heart of their businesses. McDermott also suggested that firms must ensure that customers are treated fairly in order to reestablish “trust and confidence in financial services.”
HomeServe carries policies for about 2.3 million UK households. These policies are designed to cover such emergencies as busted boilers, burst water pipes, blocked drains and electrical failures. Combined coverage can cost as much as £500 annually although many policy holders opt for less coverage that costs less. With the recent fines levied by FSA, many policy owners will begin pondering whether they were mis-sold policies. It’s been suggested by Which? that households may have bought expensive supply pipe insurance that was unnecessary.
The Guardian has reported that HomeService turned itself into the FCA after the company discovered that its call centre sales department may have engaged in mis-selling insurance products back in 2011. HomeServe suspended its entire sales department, according to the Guardian.
Guardian writer Rupert Jones suggested that HomeServe is “guilty of some pretty serious shenanigans” due to the size of the FCA fine. At this time, the details of the alleged mis-selling are still murky and probably won’t be known for several months. HomeServe has stated that problems may exist in the way that “Complete Cover” was sold to households. The company informed investors that its sales team may have been unclear about specific details of the coverage and the price they charged consumers. The sales team operated under cash incentives where they were paid more for each policy sold. The FCA complaint alleges that HomeServe operated a profit-driven culture between 2005 and 2011 that mis-sold nearly 70,000 policies, mainly to vulnerable pensioners.
It’s quite possible that many of these policies sold duplicate coverage already paid for in basic home insurance policies. In addition, burst supply line coverage that companies sold may have already been covered free of charge by water companies. Some water companies offer a one-time free service if the driveway must be ripped up to repair a water pipe.
With the flood crisis heating up, it’s looking like companies offering home emergency insurance will be getting a serious exam at Downing Street.
News broke last week that ministers have called insurance chiefs in for a meeting in order to ascertain their level of commitment to get households back on their feet “as quick and simple as possible,” according to an article in the Independent.
Ministers are asking insurance executives to demonstrate what they are doing to deal with the storms that have pounded the UK. It’s expected that storm damage to households in Wales and the south of England could surpass £1 billion.
To date, £14 million has been paid out in claims with another £24 million spent on emergency accommodations, according to the Association of British Insurers.
Meanwhile, households that may have suffered mis-selling at the hands of HomeServe need not take action now. HomeServe is expected to contact affected households by the end of March. Customers who believe they were mis-sold policies and have not been contacted, may call the company and request an investigation.
FCA Snubs Banks’ Request for PPI Claim Deadline
The PPI claim scandal ravaging the financial world is not going to go away quietly. Banks have been jockeying for a deadline to claims in hopes of cutting loose from their future commitment owed following a rash of mis-sold payment protection insurance.
Banks looking to redeploy their PPI Claims Handlers
Banks that hired additional staff to sort out payment protection insurance (PPI) claims are looking for ways to use these people after claims are eventually settled.
LLoyds PPI claims add another £1.8bn to the total compensation bill
The total amount Lloyds Banking Group will expend to handle PPI (Payment Protection Insurance) claims is now reaching £10 billion.
Consumers need Insurance, but what Insurance after “PPI”?
Banks in Britain are still reeling from the legal ruling that forces them to reopen thousands of claims due to the mis-selling of PPI or payment protection insurance and the possibility of paying up to five billion pounds in compensation
Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim
Latest posts by Tim Capper (see all)
- PPI Claims Currently Show No Sign of Slowing Down - December 10, 2014
- Swaps (IRHP) Determining the Level of Redress - November 3, 2014
- FCA updates PPI redress for 2.5 million old PPI complaints - October 27, 2014