FSA fines Swinton Group £770,000, offers 480,000 refunds
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The FSA has fined high street insurance broker Swinton Group £770,000 for serious failings in their advised sales of single premium payment protection insurance.
Swinton must also refund over 480,000 PPI policies, held by 350,000 customers.
Between December 2006 and March 2008 the FSA found that the firm’s PPI sales process was flawed.
PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover. The FSA says this resulted in unacceptable levels of non-compliant sales.
Swinton failed to make it clear that PPI was optional and did not properly disclose the cost of PPI at the point of sale.
The cost was bundled within the initial insurance quote and Swinton failed to disclose, before the sale completed, that the policy only cost £1.21. The remaining £15 to £20 charge was a fee taken by Swinton.
The FSA says Swinton’s PPI customers will now be able to get a full refund. Swinton will also pro-actively review previously rejected claims and pay compensation where appropriate.
Swinton accrued approximately £7.8m from its PPI sales before the regulator forced it out of the PPI market in March 2008, when the failings came to light.
By settling at an early stage of the investigation Swinton qualified for a 30 per cent reduction on the full fine, which would have been £1.1m.
FSA director of retail enforcement and financial crime Margaret Cole says: “These were deliberate breaches. Swinton was fully aware it should establish a customer’s need for PPI before recommending it, yet nearly half a million policies were sold to customers who didn’t necessarily require them.
“Swinton’s PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly. This penalty, the remedial action, and Swinton’s departure from the PPI market - along with our recent announcement outlining the FSA’s tougher measures for regulating PPI – serve as a shot across the industry’s bow to remind it to play fair, or not play at all.”
Swinton has released a statement saying: “Swinton takes the matter very seriously and will be contacting all customers concerned. The company apologises to any customer affected and has set up a dedicated unit to deal with the PPI cases.
“The company did not deliberately set out to breach FSA rules or to disadvantage customers and acted in good faith in the development of its sales process which it believed was reasonable and proportionate for the low cost of the product.”
Which? personal finance campaigner Vera Cottrell says Swinton has been let off lightly.
She says: “This is a truly shocking case. As an insurance broker, Swinton is supposed to give tailored advice to its customers. Instead, it saddled thousands of people with unnecessary and unsuitable insurance.
“Customers should get an automatic refund. Too few people are likely to claim back £15 or £20, which would mean Swinton is getting let off lightly, especially given the fine imposed by the FSA is just a tenth of the revenue it generated from PPI sales.”
“What’s more, we think the FSA should take action against the senior management responsible for this systematic breach of the rules.”
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Readers' comments (8)
John Wood | 28 Oct 2009 11:29 am
It will be surprising if Swinton do not get caught over other mis-selling of insurance and overcharging.
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Julian Stevens | 28 Oct 2009 11:31 am
My only experience of Swinton was an incorrect quote for my car insurance, which only came to light when I visited their local office to complete the application form, so I've never used them since.
That aside, the folk at Canary Wharf must be congratulating themselves on yet another successful hindsight review. What rules and regulations were in place at the time these crimes were committed? Answers below please.
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Ewart Matthias | 28 Oct 2009 11:37 am
Question: on a scale of 1-10 where do the Banks flawed sales process fall and why have they so far got away with it when many especially elderly have been treated shabily?
Another soft target, although large, not big enough to get away with it, i.e. not a bank.
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Anonymous | 28 Oct 2009 11:40 am
Quite rightly fined. The FSA should follow up on the banks. The last bank I worked for quickly stopped all PPI business as soon as they heard that the FSA was investigating the area. I wonder why that was? They obviously were not sure that they were selling it compliantly or they would not have anything to worry about. I bet they won't get investigated now.
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Phil Castle | 28 Oct 2009 12:22 pm
To anon 11.40 - If you are in the industry, then the FSA have a whistleblowing policy and I can send you a copy if you can't find it as you have an obligation to blow the whistle. If you are too scarred to blow the whistle to your compliance officer (as you think teh company is complicite) or the FSA, then send the info to a journalist and let them investigate or just post the name of the firm with FACTS which cannot be disputed.
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John Harding | 29 Oct 2009 9:58 am
Message to FSA director of retail enforcement and financial crime Margaret Cole.
With regard to the sale of PPI the UK's large retail banks have for many years now been knowingly involved in 'deliberate breaches' (of compliance), '(they have been) fully aware (they) should establish a customer's need for PPI before recommending it'.
Not only this but their lending officers have, under pressure from sales 'targets', insisted customers take PPI as part of the loan 'package', the implied and often actually stated pressure being that the loan will not be available without their in-house PPI, even when the customers circumstances, such as self employment, often make the PPI policies virtually worthless.
Swintons' half million PPI policies is relatively small beer compared to the millions sold by the large retail banks, so when are we going to see action on these Margaret?
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Duncan Jones | 29 Oct 2009 2:31 pm
Another product sold without establishing need by general insurance brokers is uninsured loss recovery policies adding typically £15 to a car insurance policy annual premium.This only comes to light after you have paid the premium and the documents arrive in the post.Until we clean up our act consumer trust of the whole financial sector will remain in short supply.
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james p | 1 Nov 2009 10:47 pm
swinton has been a soft easy target for the fsa.
my retired mother was sold a ppi policy on a loan from barclays that would have ended up costing her £10,000 with the interest had i not challenged them on her behalf. when are the fsa going to get onto the likes of these. Thankfully my mums money has been refunded but she has endured 3 yrs of hardship paying a premium she should not have been paying as she could neverhave gained benifit from in except on death and shes a 63 yr old healthy non smoker.So yes Swintons sales technique probably was a bit cheeky but wake up and smell the coffee fsa there are people being ripped off for a lot more than a £20 toytown policy.
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