The Financial Conduct Authority (FCA) has announced a probe into millions of insurance coverage – some up to forty years old – over fears that customers with older contracts are forgotten with the industry.
The regulator said its review will include 30 millionendowments and pensions, investment bonds and life insurance policies sold by firms from the 1970s to the beginning of the decade.
Specifics of the investigation, which is set to be launched in the summer, should be given in the FCA’s annual business plan for the next financial year, which will be released at the beginning of next week.
Regions of concern
The FCA stated it comes after concerns were raised that individuals policyholders who hold older contracts are certainly not being treated using the same priority as those with new contracts.
And instead are faced with high fees and substandard service.
One of the regions of concern identified are so-called zombie funds, that happen to be not open to new customers and they are often neglected by existing ones.
The FCA said it is unfair that some insurers use the returns readily available funds to cover the costs utilizing parts of their businesses.
When a customer tries to switch to a less expensive provider, the regulator also said that a tremendous proportion of insurance policies include exit fees which could reduce a policy’s value by half.
Clive Adamson, the director of supervision at the FCA, told The Daily Telegraph: We wish to find out how closed-book products are being serviced by insurance companies.
We are concerned insurers are allocating an unfair amount of overheads to historic funds.
As firms cut prices and make new products, there is a danger that customers with older contracts are forgotten. We want to ensure they obtain a fair deal.
As part of the review we will collect information to determine whether we need to intervene on exit charges.