The insurance arm of the Lloyds Bank has reportedly been fined £90 million for sending clients insurance renewal letters that claimed they were receiving a ‘competitive price’ without supporting the claim.
According to reports, almost 9 million letters were sent to home insurance policyholders between January of 2009 and November of 2017 under the enterprise’s Lloyds, Halifax, and Bank of Scotland brands.
The phrasing in the letters implied that a good premium pricing was on offer for the coming year's coverage. As a result, in around 87% of cases, policyholders choose to renew their policies.
However, according to the Financial Conduct Authority, Lloyds Bank General Insurance had made no effort to verify the claim's accuracy. It had failed to confirm that the language used throughout millions of home insurance renewal letters was clear, fair, and accurate.
The watchdog stated that there was a 'risk of harm' to policyholders since the renewal charge was greater than what it had been in previous years, and more than in offers that were quoted to those who were switching providers or to new customers. This was especially expected to be the case for clients who had renewed regularly with the insurer.
Mark Steward, the Executive Director of Enforcement and Market Oversight at FCA, stated that millions of policyholders ended up getting renewal letters claiming they were being given a competitive price – which was baseless and risked severe consumer harm.
Meanwhile, the insurer also promised to half a million consumers that they would receive a discount on renewal because they were loyal or valuable customers, but it did not apply the offered discount.
A spokesperson from Lloyds Banking Group has apologized for this case and stated that the bank has written and paid those consumers who got affected by the discount issue, and they do not need to do anything further.
The spokesperson thanked the FCA for bringing this matter to the company’s attention. Further adding that the firm has made major advancements in its processes, and the way it communicates with its customers.