Lloyds fined for sending nearly nine million misleading insurance letters
By Matt Hall | 9th July 2021
Lloyds Bank General Insurance Limited (LBGI), the insurance arm of Lloyds Banking Group, has been fined more than £90m for failing to ensure that language contained within millions of home insurance renewals communications was clear, fair and not misleading.
Between January 2009 and November 2017, the business sent nearly nine million renewal communications to home insurance customers which included language to the effect that they were receiving a 'competitive price' at renewal.
But the Financial Conduct Authority (FCA) found that LBGI did not substantiate the 'competitive price' language by taking steps to check that it was accurate.
Insurance policies were renewed in respect of approximately 87 per cent of renewal communications containing this language.
Although LBGI rewrote its renewal communications and began to remove 'competitive price' wording from 2009 onwards, the language remained in a substantial number of renewals communications throughout the Relevant Period despite repeated missed opportunities to address it.
The FCA said this caused a risk of harm for the majority of LBGI's home insurance customers who received these communications, because it was likely that the premium quoted to them at renewal would have increased when compared to their prior premium.
Renewal premiums offered to customers would also likely have been higher than the premium quoted to new customers, or customers that chose to switch insurance provider. This was particularly likely to be the case for customers who renewed repeatedly.
Separately, Lloyds informed approximately half a million customers that they would receive a discount based on either their 'loyalty', on the fact they were a 'valued customer', or otherwise on a promotional or discretionary basis, where the described discount was not applied and was never intended to apply.
The FCA therefore found that LBGI breached Principle 3 and Principle 7 of the FCA's Principles for Businesses between 1 January 2009 and 19 November 2017.
Totalling £90,688,400, the fine is thought to be one of the largest fines ever handed out to a bank by the regulator.
Mark Steward, executive director of Enforcement and Market Oversight at the FCA, said: "Firms must ensure their communications with customers are clear, fair and not misleading.
"LBGI failed to ensure that this was the case. Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm."
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