Swinton to offer refunds on over 480,000 PPI policies following FSA intervention

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Swinton to offer refunds on over 480,000 PPI policies following FSA intervention




FSA/PN/145/2009
28 October 2009
The Financial Services Authority (FSA) has fined Swinton Group Ltd, the high street insurance broker, £770,000 for serious failings in their advised sales of single premium payment protection insurance (PPI).
Following discussions with the regulator, Swinton has also agreed to contact over 350,000 customers who paid for the PPI and offer a full refund.
Between December 2006 and March 2008 the FSA found that the firm’s PPI sales process was flawed. The problems arose as a result of an “assumptive” selling technique in which PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover. This resulted in unacceptable levels of non-compliant sales.
In addition, Swinton did not make it sufficiently clear that PPI was optional and did not properly disclose the cost of PPI at the point of sale. Firstly, the cost was bundled within the initial insurance quote and secondly, Swinton failed to disclose before the sale completed that the policy only cost £1.21 with the remainder of the £15/£20 charged being a fee taken by Swinton.
Swinton’s PPI customers will now be able to get a full refund. Swinton will also pro-actively review previously rejected claims and pay compensation where appropriate. Swinton accrued approximately £7.8 million from its PPI sales.
Swinton exited the PPI market in March 2008 following a request from the FSA when these failings came to light.
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; were it not for this discount, the FSA would have imposed a financial penalty of £1.1 million.
Notes for editors

1. The Final Notice for Swinton Group Ltd can be viewed in full on the FSA website.
2. The PPI was designed to cover monthly direct debit payments for home or motor insurance, if the customer was made redundant or unable to work through disability, injury or sickness.
3. In September 2009 the FSA unveiled measures to protect consumers in the PPI market and ensure they are better treated. The measures also required firms to reopen 185,000 previously rejected PPI complaints and reassess them.
4. In October 2009 the FSA and Mortgage Payment Protection Insurance (MPPI) firms agreed an industry-wide package of measures for consumers, including refunds of around £60 million.
5. In December 2008, the FSA fined Egg Banking plc £721,000 for serious failings in its sales of credit card payment protection insurance (PPI).
6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.

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1.4.
Swinton has agreed to carry out a redress exercise contacting over 500,000 customers who paid for PPI, and offer them a refund in the terms of the letters attached. In the absence of agreement, the FSA would have taken steps to exercise its powers under section 384 of the Act.


Whilst over 500,000 policies were sold, only 266 claims were paid out;


part of the letter which will be coming out to customers

We have attached a copy of an overview document and a copy of the PPI policy. Please read these documents carefully. If you have concerns about the PPI policy or the way it was sold to you, we will provide a refund. Please contact us on [XXX XXXX] between 9am – 5.30pm, Monday to Friday or 9am - 1.00 pm on Saturdays.

YOU MUST REPLY

http://www.fsa.gov.uk/pubs/final/swinton.pdf

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Swintons response

28/10/2009
Statement Re Financial Services Authority

Swinton has responded to the Financial Services Authority’s announcement today of a fine of £770,000 in relation to sales of low cost Payment Protection Insurance policies.
Swinton takes the matter very seriously and will be contacting all customers concerned. The company apologises to any customer affected, and has set up a dedicated unit to deal with the PPI cases.
The company takes the view that the simple, low-cost PPI product it sold, (which cost £15 or £20), was different to that more commonly sold for many hundreds or even thousands of pounds alongside mortgages and loans in the rest of the financial services industry.
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. Swinton proactively undertook a customer redress plan at this time writing to around 40,000 potentially ineligible customers reminding them of their purchase and offering a refund. Very few customers responded. Swinton believes that while there may have been breaches of the FSA requirements most customers were content with their decision to buy the policy. The company ceased all sales of PPI in March 2008.
The FSA acknowledges that “Swinton has worked in an open and co-operative way with the FSA throughout the investigation”, that the company “pro-actively implemented a remedial action plan to provide redress” and that “the impact of any individual customer detriment from a non-compliant sale of such a product would have been low”.
-ENDS-
For further information regarding Swinton please contact Anoushka Foster and Michael Travers at SKV Communications on 0161 838 7770
About Swinton • With 580 branches nationwide Swinton is the largest high street insurance broker; • Unlike many other companies in the financial services industry, Swinton is committed to keeping its branches open for business, and part of the community; • Swinton offers a ‘clicks and bricks’ approach to insurance - online prices with a high street presence.