The firms being investigated are Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows, and will be scrutinised by the regulator’s enforcement division.
The FCA’s report into fair treatment of closed-book customers in the life insurance sector included 11 firms varying in size, type and business model to gain a representative picture of the sector as a whole.
A key purpose of the review was to explore the levels of exit and paid-up charges being incurred by long-standing customers and how firms applied those charges.
While the policies of the six firms being subject to further investigation did not include such charges in the majority of their policies, the FCA found that where these were applied firms may have failed to inform customers.
The FCA will now consider whether remedial and/or disciplinary action should be taken against these firms or others across the market. No conclusion has yet been reached as to whether there have been breaches of regulation.
The implementation of Treating Customers Fairly (TCF) rules from December 2008 means that the investigation will focus on disclosure of exit and paid-up charges after this date.
Abbey Life and Old Mutual will also be investigated by the FCA on whether they breached regulatory requirements across a number of other areas assessed in the thematic review from December 2008.
Tracey McDermott, acting chief executive of the FCA said the practices at some firms appeared to have been “poor”.
“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,” she added.
“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.”
Depending on the outcome of the investigation, the FCA may extend this work to more firms in the life insurance sector.