Swinton forced to refund 350,000 PPI customers

Wednesday, 28 October 2009 02:04

Swinton Insurance has been fined £770,000 for "deliberate breaches" of rules over the sale of payment protection insurance (PPI) and ordered to refund 350,000 customers.

The insurer will be contacting the customers directly to offer a full refund on 480,000 policies sold between December 2006 and March 2008.

An investigation by the Financial Services Authority (FSA) found the sales process was "flawed" due to 'assumptive' selling technique - where PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover.

As a result while over 500,000 policies were sold, only 266 claims were paid out.

The eligibility check for PPI was also said to be "defective", while polices offered for free were not so.

Swinton also failed to make it clear PPI was optional, nor did it explain the costs of the policies.

The cost of the policies sold were £1.21 - but the remainder of a total £15 or £20 fee being taken as a 'supervision fee' by Swinton.

Swinton left the PPI market in March 2008 when the failing came to light.

Margaret Cole, FSA director of retail enforcement and financial crime, said: "These were deliberate breaches.

"Swinton was fully aware it should establish a customer's need for PPI before recommending it, yet nearly half a million policies were sold to customers who didn't necessarily require them."

She added: "This penalty, the remedial action, and Swinton's departure from the PPI market serve as a shot across the industry's bow to remind it to play fair, or not play at all."

Swinton sold PPI to customers who chose to pay for motor or home insurance by monthly direct debit.

Vera Cottrell, Which? personal finance campaigner, said: "This is a truly shocking case. As an insurance broker, Swinton is supposed to give tailored advice to its customers. Instead, it saddled thousands of people with unnecessary and unsuitable insurance.

"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."

She added: "What's more, we think the FSA should take action against the senior management responsible for this systematic breach of the rules."

New rules of the sale of PPI were introduced in September and lenders were forced to reassess 185,000 previously rejected PPI complaints.

A spokesperson for Swinton said: "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.

"The total cost of the product was disclosed to customers and was in line with prices charged by other providers in the market for similar products. 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 per cent of its eligible customers purchased the product."

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