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FSA fines insurer £2.8m over TCF failings

The FSA has fined Combined Insurance Company of America £2.8m over treating customers fairly failures in relation to the sale of accident and sickness cover.

Cica has agreed to carry out a past business review and pay redress.

Cica sold accident and sickness insurance products via self-employed sales agents. Between April 2008 and October 2010 Cica had 542,133 policyholders and received £47m in premiums for new policies sold.  

Its customers were typically self-employed, small business owners or manual workers.

In August 2010 as a result of concerns the FSA had about Cica’s business, the FSA required the firm to undertake a skilled persons or section 166 report to examine Cica’s governance and controls framework. The firm agreed to stop writing new business from October 26, 2010.  

The FSA found that Cica failed to effectively manage its sales processes, claims handling and complaints handling to ensure the fair treatment of customers.

The regulator found that Cica’s recruitment procedures were based around the number of the recruits, rather than the quality of the recruits. There were no minimum qualification requirements for agents and employment references were not always obtained.

Cica did not have adequate systems and controls to ensure its agents were providing suitable advice, and did not ensure agents recorded all relevant information when recommending products.

Agents were paid on a commission-only basis according to the number of policies sold.

FSA acting director of enforcement and financial crime Tracey McDermott says: “Cica’s widespread failures reflect a culture which did not recognise the importance of TCF.  This created a significant risk that customers would not get a fair deal.

“Firms must ensure that protecting the interests of their customers is at the heart of every aspect of their business.”

The FSA has worked closely with the Central Bank of Ireland which has taken its own enforcement action for similar misconduct in Cica’s Irish subsidiary.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. I used to come across these guys in the 1990’s, nothing changed in 2008.

  2. EEEERRRRRR!!

    Wasn’t this firm authorised and regulated /

    It seems so, so how were agents allowed to be recruited to sell policies they knew nothing about/

    Seems to be another lack of supervisory control on behalf of the FSA and its staff.

    Just add it to the pile of failures

  3. About time – they have been ripping off customers for years!

  4. The Fine Farmer is having a bumper harvest – where does the money go? The FF fines the public ultimately – nice carpets!

  5. It is blatantly obvious that fines are not effective on corporations – we’ve had 25 years of regulation and fines are growing.
    Yet the FSA continue to hand them out. This is either insanity or self serving their own bonus schemes. Either way it suggests the current regulatory model is not working. Parliament, please wake up.

  6. One area that must be explored is the provision of personal responsibility by company directors and supervising staff.

    Of course, this concept should also be transferred to the FSA/FCA. What a btransformation that would encourage.

  7. Edward Elliott 25th June 2012 at 1:27 pm

    and they are still trying to take money out of my uncles account even though they have been stop by a Power of Attorney so why is this still happening my uncle had a masive stroke 4 months ago and they are setting up new Direct Debits with out a signiture.these people are no better than parisites they havent heard the last of this nore the bank thats letting do it and i,ve got evidence to prove it

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