Regulator fines insurer for add-on failings

Regulator fines insurer for add-on failings

The Financial Conduct Authority has today fined Moorhouse Group £159,300 for failures in relation to the oversight and control of its telephone sales, particularly the sale of commercial vehicle add-on insurance products during 2012.

Moorhouse is a general insurance broker whose business is focused on selling motor and liability related insurance products to small and medium enterprises, including very small businesses known as micro-SMEs.

Moorhouse failed to disclose appropriate information about the limitations and exclusions of commercial vehicle add-on products to consumers before they were sold, meaning there was a risk consumers were not able to make an informed decision.

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For example, under the excess waiver add-on policy, cover was provided only when the damage exceeded the excess agreed under the core policy. The breakdown add-on policy did not cover breakdowns which would be prevented by routine servicing of the vehicle, or replacing its tyres or windows.

During 2012, Moorhouse failed to ensure that a consistent and effective quality assurance process was in place to monitor the telephone sales process and failed to identify that customer data was being recorded inaccurately by sales agents, potentially affecting whether any claims later made by those customers were accepted.

The FCA found that the board and senior management failed to give sufficient attention to compliance issues and did not take adequate steps to address them.

In April 2013, the regulator conducted a review of telephone sales of commercial vehicle core insurance products and related add-on products by Moorhouse, finding it appeared to provide customers with inadequate information in relation to add-on products before completion of sale.

A subsequent ‘skilled persons’ review found that insufficient details about each product were being provided to customers in good time.

Moorhouse will be required to communicate the outcome of the FCA’s investigation to customers who purchased commercial vehicle add-on products during 2012.

Georgina Philippou, acting director of enforcement and market oversight at the FCA, said that the firm failed to put in place systems and controls to ensure customers were given the right information.

“This put customers at risk of buying the wrong products and not having the right insurance cover,” she added.

The firm agreed to settle at an early stage of the FCA’s investigation and therefore qualified for a 30 per cent discount. Were it not for this discount, they would have imposed a penalty of £227,670.