The Financial Conduct Authority (FCA) reported on Thursday that it has issued a retail fine of GBP30,647,400 to HomeServe Membership Limited (HomeServe), an insurance intermediary which sells home emergency and repairs insurance cover.
HomeServe has been found to have serious failing in its systems across several aspects of its business by the FCA, which has been responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA) since 1 April 2013.
According to the FCA, during the period January 2005 to October 2011, HomeServe mis-sold insurance policies and failed to sufficiently investigate complaints. The company’s board was not adequately engaged with compliance matters and its senior management were unwilling to address risks to customers if there was a cost implication involved. HomeServe was said to have developed a profit driven culture where profit targets were met by taking advantage of existing customers in pursuit of sales, following its rapid business growth.
The FCA stated that it found that HomeServe breached Principles 3, 6 and 7 of the FCA’s Principles of Business. The company breached Principle 3 by failing to take reasonable care to organise and control its affairs responsibly and effectively, with adequate risk management systems.
The insurance company has agreed that it should re-establish focus on its customers and move away from a culture of prioritising profit over customer service. HomeServe has so far paid approximately GBP12.9m in redress to affected customers and is expected to pay a total of GBP16.8m. These changes made by HomeServe since the FCA investigation are said to meet with the organisation’s objective to protect consumers and will help ensure they are treated better in future.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said:
“This is a serious case, one that has warranted our largest retail conduct fine and generated a sizeable bill for consumer redress. HomeServe is another example of a firm that has acted without proper regard for its customers over a long period of time. HomeServe promises to provide customers with peace of mind when things go wrong. In fact the firm’s culture, controls and remuneration structures meant that staff were focused on quantity not quality and there were customers that paid the price for that.
“Firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services. True change in the culture within the financial services industry will only be achieved when firms and their management accept and deliver on their responsibility to ensure that customers are treated fairly.”