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Penalty imposed

Lloyds fined £90m for unclear insurance claims

Lloyds Banking Group

The group’s insurance business misled customers (pid: Terry Murden)

Lloyds Bank’s insurance business has been fined more than £90m for sending renewal letters that gave misleading information to customers.

Between January 2009 and November 2017 almost 9m letters were sent to home insurance policyholders suggesting they were receiving a “competitive price” at renewal.

The Financial Conduct Authority said Lloyds Bank General Insurance did not substantiate the “competitive price” language included in the renewal communications by taking steps to check that it was accurate.

Almost nine in ten (87%) of renewal communications containing this language were renewed.


The FCA said it had fined LBGI, St Andrew’s Insurance, Lloyds Bank Insurance Services and Halifax General Insurance Services £90,688,400 for failing to ensure that language contained within millions of home insurance renewals communications was clear, fair and not misleading.

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 there was a “risk of harm” to customers because it was likely that the renewal premium was higher than had been the case in previous years, and higher than in offers quoted to new customers, or to those who were opting to switch provider. This was particularly likely to be the case for customers who had renewed repeatedly with the insurer.

Separately, the insurer told half a million customers that they would get a discount on renewal, because of their “loyalty” as “a valued customer”, or on a promotional or discretionary basis, but then did not apply the discount.

About 1.2 million renewals were affected and the “erroneous discount language” was only identified and rectified by LBGI during the course of the FCA’s investigation.

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The FCA has not established whether individual customer behaviour would have been different had the communications been clear, fair and not misleading. It has not required LBGI to pay redress to those customers who received a renewal letter that included the claim the renewal premium was ‘competitive’.

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.”

LBGI has voluntarily paid about £13.5 million to customers who received communications that erroneously referred to the application of a discount when none was applied, and this has been taken into account in the assessment of the financial penalty.

LBGI is contacting customers proactively, meaning customers do not have to take any steps to receive payment. The FCA continues to engage with LBGI on the voluntary payments process.

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