Broker fined £8.4m for mis-selling accident insurance products

The FCA has fined Aegon-owned Stonebridge International Insurance £8.4m for mis-selling accident insurance products.

The regulator found that the broker targeted low and middle income customers without college degrees or professional qualifications with its personal accident, accidental death and accidental cash plan insurance products, which paid a fixed daily sum if an accident left a customer unable to work.

Up to 486,444 customers across the UK and the EU could be affected.

Outsourcing companies sold policies by telephone, with those responsible for sales encouraging people to buy more expensive products, while companies responsible for post-sale support actively discouraged customers from cancelling their policies.

The FCA found that the telesales scripts that Stonebridge designed for its outsourcing companies did not provide clear, fair and balanced information. It also found that Stonebridge’s poor systems and controls, and inadequate oversight of its outsourcing companies, breached the FCA’s requirements that firms treat customers fairly and have appropriate systems and controls in place.

FCA director of enforcement and financial crime Tracey McDermott said: “Customers are entitled to expect firms to provide them with fair and balanced information to enable them to make the right choices about the product that is right for them.

“Stonebridge failed to do this, and when customers tried to cancel, [it] put up barriers to prevent them from doing so. Firms must take responsibility for their outsourcing arrangements and ensure that they treat customers fairly.”

The products were sold over the phone to retail customers in the UK, Germany, France, Italy and Spain.

The lists of potential customers was provided by catalogue sales firms, online retailers, banks and credit card companies. In return, Stonebridge paid the firms a percentage of the premiums.

The FCA said there was a risk that customers agreed to the sale without fully understanding what was covered in the policy.

In one example uncovered by the regulator, a customer explained to a sales person employed by one of the outsourcing companies that she was prone to falling over as her legs were weak due to an historic injury.

The sales person departed from the sales script and told the customer that she would be able to claim on the policy if she fell over and was hospitalised. But the product literature clearly stated that claims would not be paid if the accident occurred due to pre-existing medical conditions and the sales person failed to mention the exclusion during the call.

On the basis of the information provided, the customer agreed to purchase the policy.

Stonebridge is carrying out an independent review of its past sales in the UK and EU. The company is contacting affected customers to determine whether they should be compensated as a result of its poor sales practices.

Stonebridge has already paid redress worth a total of £400,000 to affected customers in the UK.

The broker received a 30% discount on the fine for early settlement. Without the discount, the FCA would have imposed a £12m penalty.

The fine is the second largest the FCA has imposed on an insurance broker. HomeServe was ordered to pay £30.6m for mis-selling and inadequate compliance in February.

In a statement posted on its website, Stonebridge said the fine did not impact its day-to-day operations. “We remain a solvent trading company. We will continue to service our clients as usual. We will meet our obligations to our customers by providing claims and customer services to meet the expectations of our policyholders,” it said.