The Financial Conduct Authority has accused insurers of failing to focus on value for customers.
Britain’s financial watchdog has accused general insurance companies of failing to consider customers’ value for money within their products and services. Insurance CEOs have been warned that the watchdog is prepared to take action against their firms as well as against the senior management of those insurers.
According to the F.C.A., insurance companies are failing to provide policyholders with value.
The Financial Conduct Authority (F.C.A.) issued a letter to the CEOs of several general insurance companies that sell homeowners, auto, travel and pet insurance. The letter told the CEOs that their manufacturing, sales and distribution practices leave the door open for customers to buy the wrong products, receive poor service, or pay too much money.
“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,” said F.C.A. executive director of supervision for retail and authorizations Jonathan Davidson in a statement.
The F.C.A. stated that shopping at general insurance companies is problematic through its intermediary chain.
The F.C.A. pointed to a problem in buying general insurance through the involvement of a chain of various intermediaries. Its letter stated that this chain “can result in customers paying significantly higher prices than the production and delivery costs of the products they are buying.”
It added that there is also a high chance of “unsuitable sales.” For example, when the insurance is sold at the same time as a non-financial product such as a vacation, a major appliance or a car. Furthermore, the F.C.A. said that customers weren’t always the recipients of good service, especially when filing complaints or claims.
In the F.C.A. letter to the CEOs of the general insurance companies, the watchdog stated that it expected them to make the necessary changes to better their distribution processes. It also underscored its own intention to continue with ongoing and expanded supervisory efforts.
“The majority of customers, buying direct from a broker or from a comparison website, should not be concerned with these findings,” said the Association of British Insurers in a Reuters article. “There are clearly remaining problems in some distribution chains, and it is very important that these are addressed.”