Insurance industry may feel repercussions of Lloyds failure
The United Kingdom’s Financial Services Authority has fined Lloyds Banking Group for some $6 million this week. The fine is due to the company’s failing to compensate customers who purchase insurance policies or acquired loans and mortgages from Lloyds. The company is accused of mis-selling payment protection insurance. This type of coverage is common throughout the insurance industry and helps ensure the repayment of loans in the event of a borrower losing the ability to handle their loans.
Lloyds fails to compensate consumers
According to the Financial Services Authority, Lloyds did not pay compensation to more than 140,000 customers it was ordered to pay from May 2011 to March 2012. The country’s banks have allocated more than $15 billion to compensate consumers who were wrong sold payment protection insurance in an effort to avoid any of the problems that the insurance industry could see through providing the necessary compensation to consumers. Because Lloyds failed to compensate consumers, it has been fined by the Financial Services Authority.
Long delays in compensation draw ire of UK regulators
When Lloyds was ordered to compensate consumers in 2011, it had to inform its customers that they were due compensation. The company was meant to compensate these customers no more than 28 days after they had been notified. According to regulators, a quarter of the company’s customers received no compensation from Lloyds, with approximately 87,000 receiving payments more than 45 days after being informed they were due compensation. Some regulators suggest that the company’s failure to adhere to its deadline reflects the audacious attitude that many companies in the insurance industry have.
Regulators take a more critical view of insurance industry
More than $8 billion in compensation has been issued so far, according to regulators. Approximately $400 million was reportedly paid to consumers in December 2012, but this represents the third consecutive month in which payouts dropped significantly. The problems with Lloyds are causing regulators to take a more critical look at the country’s insurance industry in an effort to avoid similar problems that could arise in the future.