Liberty Mutual fined £5.3m for unfair claims and complaints handling

The FCA has fined Liberty Mutual £5.3m for its historic handling of mobile phone insurance claims and complaints.

The failures relate to claims and complaints administered through a third party between 5 July 2010 and 7 June 2015.

Prior to the FCA investigation, the third party in conjunction with Liberty had already offered out nearly £4m to customers who may have suffered as a result of claims which may have been unfairly rejected. The FCA said it took this into account when calculating the final penalty.

The fine would have been £7.5m, but Liberty settled at an early stage of the investigation, entitling it to a 30% discount.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Fair, effective, and prompt settlement of claims is a fundamental requirement of mobile phone insurance, and customers should expect that any claim they make, or any subsequent complaint they lodge, will be dealt with fairly.

“Insurers must put in place adequate measures to make sure that claims and complaints and handled fairly, especially where those functions are outsourced.”

“Unfairly declined”

In a statement, the FCA said that while the third party undertook all administrative functions, Liberty “retained regulatory responsibility for ensuring that claims and complaints made by customers were handled fairly”.

It said Liberty ought to have ensured it had in place adequate systems and controls to oversee the activities of the third party, but that it failed to do this.

Subsequently, the FCA says customers were exposed to their claims and complaints not being handled fairly.

“During the relevant period some claims were unfairly declined or not investigated adequately,” the FCA said. “Some customers who complained about this had the original decision overturned which created a de facto two-stage claims process and others had complaints dismissed without a proper investigation having been undertaken.”

In 2013 the FCA published a Thematic Review setting out its expectations for the mobile phone insurance market and followed this up with a further publication in December 2015, having also produced a Thematic Review reiterating insurers’ regulatory obligations for overseeing outsourcing arrangements in 2015.

A spokesperson for Liberty said: “This fine from the FCA relates to activity undertaken by LMIE (our Company market operation), under an arrangement which began in 2010, before the formation of Liberty Specialty Markets. Under this arrangement, a third party administered mobile phone insurance products on LMIE’s behalf.

”Several years ago certain issues came to light around some unfair outcomes for a very small proportion of customers (less than 1%).

”These issues have been addressed and LMIE has worked with the third party to ensure that redress was paid to any customer who might have been affected. LMIE no longer sells mobile phone insurance to new customers.

”At Liberty Specialty Markets, we welcomed the FCA’s focus on coverholder oversight, and responded by setting up a new, best in class Conduct function.

”This ensures that Liberty’s ethos of doing the right thing and putting the customer at the heart of everything we do, is put into practice effectively across all of our product lines and coverholder arrangements.”