The FCA has hit insurance giant Prudential with a fine £23.9m for failures in its non-advised sales of annuities between July 2008 and September 2017.
The City watchdog says Pru failed to act in the interest of customers as it did to inform them that shopping around may get them a better deal. The company was also found to have offered front-line staff incentives to sell annuities.
Prudential’s non-advised annuity business mainly sold to existing Prudential pension holders, but failed to explain to customers that they may get a better rate if they shop around on the open market, despite being required to do so.
When its clients approached retirement, Prudential wrote to them enclosing information about their retirement options in some cases. In other instances, however, Pru communicated with customers via phone and the documentation given to the call handlers raised risks of the firms’ representatives not mentioning the option of shopping around in the open market to the customers. Pru also failed to monitor calls with the customers.
Before the RDR came into effect, sales-linked incentives for call handlers – including the possibility of earning an additional 37 per cent on top of their base salary and winning prizes such as spa breaks or weekend holidays – increased the risk of call operators putting their financial interest ahead of fair outcomes for customers, according to the regulator.
FCA enforcement and market oversight executive director Mark Steward says: ‘Prudential failed to treat some of its customers, who could have secured a better deal on the open market, fairly. These are very serious breaches that caused harm to those customers. Prudential is now rightly focused on redress and today’s financial penalty reinforces the cardinal obligation of fairness that firms owe to customers.”
Pru voluntarily agreed to conduct a past business review of non-advised annuity sales in order to identify any customers who may be entitled to redress as a result of the firm’s failures. Within the review, Pru already contacted the vast majority of potentially affected customers, according to the City regulator.
FCA says that as of 19 September 2019, Prudential has offered approximately £110 million in redress to 17,240 customers (including ongoing annuity uplifts).
Prudential “deeply sorry”
Prudential did not dispute the FCA’s findings, which meant it qualified for a 30 per cent discount. Without the discount the FCA would have imposed a fine of £34,107,200.
A spokesman for Prudential says: “We are deeply sorry for the historic failings in our non-advised business and any detriment this has caused our customers.
“We are working hard to put this right and are on schedule to offer redress to the vast majority of affected customers by the end of October this year.
“Our systems and controls have been significantly strengthened in the past two years through a substantial investment in our business.
“Prudential no longer sells non-advised annuities to most of our customers, following a decision in February 2017 to refer customers to a panel of external providers rather than writing new annuity business.”
In July, in a similar case, Standard Life Assurance Limited was hit with over £30m fine.
I must admit I find this crass and appalling…..
Could you imagine a shop keeper or any business owner (one like me perhaps) getting fined for not telling the customers / clients they could get what they want cheaper or a better deal down the road …..
In fact a statement (i would wager) every consumer in the land knows already
Its little wonder we are a nanny state, who cant get things bloody done through fear of upsetting the meek, accusations of making too much money, and constantly tripping over the tumble weed that is red tape.
There seem to be a growing number of people/organisations who need a short sharp kick up the rear end it might stop them talking out of it and thinking with it.
I understand the shop comparison, it does feel nanny state. However, rules are rules. Pru ( and Stranded
Life) both deliberately mis-led customers to put profits first. The tactics were deceitful, to put customers off shopping around.
Given this is a decision which impacts the rest of your life, I think the rules are appropriate.