FCA fines Lloyds Bank £90.7m for failings in home insurance renewal letters

Bag of money

The regulator says LBGI sent renewal communications including misleading language between 2009 and 2017.

The Financial Conduct Authority (FCA) has fined Lloyds Bank (LBGI) £90.7m for failing to ensure that language contained within millions of home insurance renewals communications was clear, fair and not misleading.

The regulator stated that, between January 2009 and November 2017, LBGI had sent nearly 9m renewal communications to home insurance customers claiming they were receiving a “competitive price”.

However, the FCA argued that LBGI did not substantiate this claim by taking steps to check that it was accurate, adding that this caused a risk of harm for the majority of the company’s home insurance customers.

The regulator stated that it was likely that the premium quoted to customers at renewal would have increased when compared to their prior premium, and that renewal premiums offered would also likely have been higher than the premium quoted to new customers, or customers that chose to switch insurance provider.

According to the FCA, LBGI rewrote its renewal communications and began to remove the misleading language from 2009 onwards, however it remained in a “substantial” number of renewals communications throughout the relevant period.

Separately, the FCA stated that LBGI had told around 500,000 customers that they would receive a discount based on their “loyalty” or because they were a “valued customer”, or otherwise on a promotional or discretionary basis.

However, it found that this discount was not applied and was never intended to apply.

This affected approximately 1.2m renewals, with around 1.5m communications sent by LGBI. The FCA noted that this was only identified and rectified by LBGI during the course of the regulator’s investigation. 

The watchdog noted that it has not established whether individual customer behaviour would have been different had the communications been clear and fair.

It explained that it has not imposed a requirement for LBGI to pay redress to those customers who received a renewal letter that included the misleading language.

The FCA detailed that LBGI has voluntarily made payments of approximately £13.5m to customers who received communications that erroneously referred to the application of a discount when none was applied.

According to the regulator, this has been taken into account in the assessment of the financial penalty and the FCA continues to engage with LBGI on the payments process.

Mark Steward, executive director of enforcement and market oversight at the FCA said: “Firms must ensure their communications with customers are clear, fair and not misleading. LBGI failed to ensure that this was the case.

“Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm.”

A Lloyds Banking Group spokesperson stated: “We’re sorry that we got this wrong. We’ve written and made payment to those customers affected by the discount issue and they don’t need to take any further action.

“We thank the FCA for bringing this matter to our attention and since then we’ve made significant improvements to our processes and how we communicate with customers.”

LBGI comprises Lloyds Bank General Insurance, St Andrew’s Insurance, Lloyds Bank Insurance Services, and Halifax General Insurance Services.

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