Swinton fined £770,000 by the FSA
HIGH Street insurer Swinton has been fined £770,000 by the Financial Services Authority for “serious failings” in the way it sold payment protection insurance.
The Manchester group, which has 580 shops, has also agreed to refund 350,000 customers.
The FSA described Swinton’s sales process as “flawed” from December 2006 to March 2008 when payment protection insurance (PPI) was automatically included in insurance quotes whether the customer needed it or not.
“This resulted in unacceptable levels of non-compliant sales” said the FSA.
Swinton also failed to make it clear that PPI was optional and its advisers did not properly disclose the cost of the £15 or £20 policies. Much of this fee was Swinton’s own charge on top of the £1.21 cost of the insurance.
Swinton accrued around £7.8m from its PPI sales but left the PPI market in March 2008 following a request from the FSA when these failings came to light.
The insurer has pledged to pro-actively review previously rejected claims and pay compensation where appropriate.
Margaret Cole, FSA director of retail enforcement and financial crime, said: “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.”
By agreeing to settle at an early stage of the investigation Swinton qualified for a 30% reduction on the full fine of £1.1m. In a statement Swinton said it took the matter “very seriously” and apologised to affected customers.
It said: “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. The total cost of the product was disclosed to customers and was in line with prices charged by other providers in the market for similar products. Swinton believes that the vast majority of its customers understood that the product was optional when offered to them and in fact, less than 50% of its eligible customers purchased the product.
“Swinton would also point out that the company itself initially brought issues with its sale of PPI to the attention of the FSA. In 2007, Swinton’s own monitoring identified that it had sold PPI to customers who may not have been eligible. Swinton informed the FSA of this issue and the FSA subsequently launched its investigation into Swinton’s sales process.”
