FCA launches probe into six life insurance firms amid concerns of poor practice

The Financial Conduct Authority (FCA) has opened an investigation into six insurance firms over concerns some of their customers might not have been made aware of the charges included in their policies.

Prudential, Old Mutual, Abbey Life, Scottish Widows, Countrywide and Police Mutual are to be investigated by the City watchdog, which has been monitoring whether insurers have treated customers locked into pension and other savings plans fairly compared with new customers.

In its investigation, the FCA analysed how insurance companies dealt with customers who wished to transfer their policies or surrender them altogether and found that six of the 11 firms it investigated might not have informed customers that doing so result in charges being applied.

"The practices at some firms appear to have been poor," said Tracey McDermott, the FCA's acting chief executive. "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."

The City regulator added it was "concerned that as a result, some customers may potentially have been unaware that they would have to pay such a charge or that they have paid or are paying such a charge".

The six firms under investigation will not necessarily face disciplinary action although fines could be inevitable.