Six insurance companies are to be investigated by the UK’s financial watchdog amid concerns that some customers weren’t told about charges they would face.
The Financial Conduct Authority (FCA) said it is launching an investigation into Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows.
The move follows a review aimed to make sure that life insurances companies are treating their customers fairly, including those locked into ‘closed-book’ policies – policies that are no longer being sold.
The FCA said it found a ‘mixed picture’ when it looked at 11 firms as part of the review.
Six firms may have failed to inform customers about exit or ‘paid-up’ charges, it said, and it will now investigate them to see if any disciplinary action is necessary.
The probe will focus on the six firms’ behaviour in telling customers about exit and paid-up charges after December 2008.
It won't necessarily result in penalties but could result in a wider review of the life insurance sector, the FCA said.
Tracey McDermott, acting chief executive of the FCA, said: “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.
“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 FCA said it will start an “industry-wide discussion” to try and reach a voluntary solution on capping or removing exit charges and paid-up charges.
The work will come alongside new rules being considered by parliament that could cap exit charges on customers cashing in their pension savings from the age of 55 after the government’s pension reforms.