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.