Barbon counts the cost of HomeLet mistake

The latest accounts for broker Barbon reveal that it is still being haunted by the FSA crackdown over the selling of contents insurance by one of its brands, HomeLet.

Insurance Times reported back in February how two Barbon executives were suspended over the mishap. Today we revealed that the business has set aside £2.5m to cover the costs of the slip-up.

The cash will be used to compensate customers caught up in the sales blunder, in which letting agents working with HomeLet included clauses in their tenancy agreements that meant tenants were obliged to take out contents insurance for their own possessions when, in fact, it was voluntary. The provision will also be used to cover the costs of its own review into the matter, which came under heavy scrutiny from the FSA. Barbon has been busy contacting affected policyholders to find out how the offending product was sold.

The cost contributed to a £547,000 pre-tax loss in 2011, in stark contrast to the £7.8m profit Barbon made in 2010. It comes as a warning to other brokers that the FSA will not take kindly to blunders that break its rules and hit policyholders in the pocket, whether or not they are genuine mistakes.

Barbon has learnt a tough lesson and is dealing with it at a cost, but other, smaller brokers might not be so lucky should a similar situation arise that results in these kind of implications. This was no PPI scandal, but it’s not one to overlook.

Household on the up, for now

A Deloitte report yesterday revealed some good news for UK home insurers. In 2011 they posted a collective combined ratio of 89%, a huge 10-point improvement on 2010’s result. But the big question is: how long will this last?

Many analysts are predicting another big year of claims from this summer’s floods. In 2007, the last year the UK experienced widespread flooding, the net combined ratio was 120%.