High street insurance broker Swinton was fined £770,000 today and ordered to offer refunds to 350,000 customers after the City watchdog found “serious failings” in its sales of payment protection insurance (PPI).
The Financial Services Authority (FSA) took the action over Swinton’s sales of “single premium” PPI, where the entire policy cost is paid upfront and often added to the price of the cover.
The watchdog found that between December 2006 and March 2008, PPI was automatically included in Swinton’s quotes without finding out whether customers actually needed the cover.
Swinton, which pulled out of the PPI market in March 2008 when the failings emerged, must now offer full refunds on 480,000 policies held by its customers. The firm generated around £7.8m from its PPI sales.
Margaret Cole, FSA director of retail enforcement, said: “These were deliberate breaches. Swinton was fully aware it should establish a customer’s need for PPI before recommending it.”
Swinton also failed to make the optional nature of PPI clear enough and did not properly reveal the cost when selling the policy.
The FSA said the the cost was bundled within the initial insurance quote and Swinton failed to reveal that the policy only cost £1.21 before the sale completed – with the remainder of the £15/£20 charged being a fee taken by Swinton.
“Swinton’s PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly,” Ms Cole added.
Swinton would have been fined £1.1m but agreed to settle at an early stage of the investigation, gaining a 30% reduction.
In a statement, the company said: “Swinton takes the matter very seriously and will be contacting all customers concerned. The company apologises to any customer affected, and has set up a dedicated unit to deal with the PPI cases.
“The company did not deliberately set out to breach FSA rules or to disadvantage customers and acted in good faith in the development of its sales process which it believed was reasonable and proportionate for the low cost of the product.
“Swinton believes that the vast majority of its customers understood that the product was optional when offered to them and in fact, less than 50% of its eligible customers purchased the product.”
