Financial Conduct Authority 

Regulator drops Scottish Widows probe

Regulator drops Scottish Widows probe

The Financial Conduct Authority (FCA) has dropped its investigation into how Scottish Widows treats longstanding customers, but its probe of four rival firms is ongoing.

The regulator announced today (12 June) that its investigation into Scottish Widows has been concluded and “there is insufficient basis for taking any enforcement action”.

The watchdog said, however, that it “will be raising a number of issues uncovered as part of the investigation with the firm in its supervisory engagement”.

In March 2016, the FCA said it was looking into six firms, which also included Police Mutual, Prudential, Countrywide Assured, Old Mutual and Abbey Life, after finding a lack of transparency around the fees they charge customers.

This was a result of a thematic review into the fair treatment of long-standing customers.

In September 2017, the regulator stated the investigation into Police Mutual was closed with no further action.

In today’s update, the watchdog said the investigations into Prudential, Countrywide Assured, Old Mutual and Abbey Life are continuing, and “no decisions regarding these firms have been reached by the FCA at this stage”.

The regulator added that “no inferences should be drawn from the closure of the Scottish Widows case concerning the continuing investigations”.

It said: “The FCA will update the market when decisions are made regarding the status of the remaining investigations.”

One of the purposes of the initial FCA review was to investigate levels of exit and paid-up charges being incurred by long-standing customers, and firms’ behaviour in applying those charges.

It found that even where customers are aware of these charges, their impact on the returns customers receive can be significant, and they may present barriers to customers shopping around.

Where charges were applied, the FCA found the providers may have failed to inform customers of their cost at the time they were incurred.

The regulator was concerned that as a result, some customers may potentially have been unaware that they would have to pay such a charge, or that they have paid or are paying such a charge.

This led to a probe of the market to find out how widespread are the practices it has uncovered, and if they have led to customer detriment.

The FCA’s thematic review assessed the treatment of closed-book customers against four high level customer outcomes:

1) Does the firm’s strategy and governance framework result in the fair treatment of closed-book customers;

2) Do the firm’s closed-book customers receive clear and timely communications about policy features at regular intervals and key points in the product lifecycle that enable them to make informed decisions;

3) Does the firm give adequate consideration to, and take proper account of, fund performance and policy values in a way that ensures it treats its closed-book customers fairly and proportionately; and

4) Are the firm’s closed-book customers able to move from products that are no longer meeting their needs in a fair and reasonable manner.