FCA to investigate six life insurers over exit fees

The Financial Conduct Authority has launched an investigation into six insurers following a review of the fair treatment of long-standing life insurance customers in relation to what they disclose about exit fees.

The City regulator said on Thursday that Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows will be referred for a full enforcement investigation and their practices will be examined as far back as 2008.

In addition, it will also investigate Abbey Life and Old Mutual to see whether they have contravened regulatory requirements across a number of other areas assessed in the thematic review.

One of the purposes of the FCA’s review was to understand the 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 were aware of the charges, the impact the charges can have on the returns customers receive can be significant and they may present barriers to customers shopping around.

Acting chief executive Tracey McDermott said: “Given the long-term nature of closed-book products, it is vital that customers are treated fairly and given the right information on an ongoing basis in order to help them make important financial decisions. We expect all firms with closed-book customers to take into account the findings we have published today and ensure they are treating their closed-book customers fairly.”

“The practices at some firms appear to have been poor. We have particular concerns regarding how some firms communicated with their customers about exit and/or paid-up charges. We are now doing further work to understand the reasons for these practices, whether customers may have suffered detriment as a result and, if so, how widespread these issues are.”