FCA on alert as UK energy giant caught in insurance scandal

In the latest scandal to tarnish the insurance industry, the FCA has been alerted to allegations that ScottishPower has avoided making payments owed to customers who bought warranty cover.

The scandal, thought to affect 625,000 customers, centres on a promise to ScottishPower customers that they could claim back their warranty costs on fridges, washing machines and other electrical goods if they had not made a claim within five years, The Guardian reports.

The warranty was sold by PowerPlan Company Ltd (PPCL), a firm independent of ScottishPower.

PPCL went bust and liquidators are now chasing funds on behalf of out-of-pocket customers.

The liquidators allege that PPCL was a ‘virtual company’ directing almost all cash reserves back to ScottishPower through the group’s insurance arm Domestic Appliance Insurance Limited.

The liquidators claim they were not aware of this new evidence when accepting an original £6m settlement from ScottishPower. They have sent reports to the FCA and criminal authorities.

In a statement, ScottishPower said the main reason warranty holders were left out of pocket was because of the large number of claims made by customers and the collapse of high-street retailer Powerhouse into administration.

Powerhouse bought most of ScottishPower’s stores in 2001, together with Domestic Appliance Insurance Ltd.