INSURANCE broker Swinton has been fined £770,000 and told to offer 350,000 customers compensation after being found guilty of mis-selling payment protection insurance (PPI).
The punishment was dished out by the Financial Services Authority yesterday, following an investigation that revealed "serious failings" in the firm's sale of single-premium PPI alongside motor and home insurance policies.
The fine would have rea
ched £1.1 million had Swinton not qualified for a 30 per cent reduction by agreeing to settle early in the investigation.
PPI is designed to cover loan repayments in the event of the policyholder being unable to work as a result of an accident, illness or unemployment.
The Competition Commission this year recommended that providers wait seven days after the loan is taken out before selling the insurance. Single- premium sales, in which the whole policy was paid upfront and often added to the price of the cover, were banned this year.
The FSA's probe, which took place between December 2006 and March 2008, found Swinton took an "assumptive" approach to selling PPI, with the added cover included automatically in premiums even where customers did not want or need it.
It said Swinton, which made some £7.8m from PPI sales, failed to make it clear to customers that PPI was optional and did not properly detail the cost of the cover at the point of sale.
In addition, customers were not told that the PPI cost just £1.21, with Swinton taking the remainder of the £15 or £20 policy cost as a fee.
The firm was ordered by the FSA to stop selling PPI in March 2008, when the findings first emerged. Swinton's PPI customers will now be able to get a full refund, while the broker has promised proactively to review previously rejected claims and to pay compensation where appropriate
Margaret Cole, the director of retail enforcement and financial crime at the FSA, said the firm's PPI sales fell a long way short of its requirements.
"This penalty, the remedial action and Swinton's departure from the PPI market – along with our recent announcement outlining the FSA's tougher measures for regulating PPI – serve as a shot across the industry's bow to remind it to play fair, or not play at all," she said.
But Vera Cottrell, personal finance campaigner at consumer group Which?, claimed the FSA had not gone far enough.
"Swinton is supposed to give tailored advice to its customers. Instead, it saddled thousands of people with unnecessary and unsuitable insurance," she said.
"Customers should get an automatic refund. Too few people are likely to claim back £15 or £20, which would mean Swinton is getting let off lightly, especially given the fine imposed by the FSA is just a tenth of the revenue it generated from PPI sales."
