N Brown to compensate customers after identifying 'flawed' insurance

N Brown Group said it would take a £35-40m one-off charge this year to cover expected customer compensation after finding it had sold 'flawed' product protection insurance to customers between 2006 and 2014.

The retailer, which operates through brands such as Simply Be, JD Williams and Jacamo, said potential mitigating actions to reduce the overall net cost would impact cashflow from its next financial year, and management anticipate they will be able to fund the full cost of customer redress from existing resources.

Following an industry call from City watchdog the Financial Conduct Authority for companies to examine historical general insurance products, N Brown felt there had been "flaws in certain general insurance products which were provided by a third party insurance underwriter and sold by the group to its customers" up until 2014.

The products were product protection insurance historically sold by the company, with an issue identified due to the small ratio of claims that have been made which would lead it to fall outside the FCA’s parameters for offering value for money, a spokeswoman for the company explained.

N Brown said the potential customer compensation will not impact its underlying operations, nor the risk profile of the group's current and future customer or debtor balances.

Selling of the flawed products was not categorised by the FCA as mis-selling, the spokeswoman said, as it was a product issue related to the product being considered “valueless” by the FCA, rather than “unsuitable”.