The health insurance and protection market covered
Insurer fined £2.8m over 'high risk' commission driven staff
The Financial Services Authority (FSA) has fined Combined Insurance Company of America (CICA) £2.8m because its poor management of staff put customers at risk of being treated unfairly.
CICA sold accident and sickness insurance policies via self-employed agents. Between April 2008 and October 2010 it had 542,133 UK policyholders and received £47m in premiums for new business.
The FSA found CICA had failed to properly manage its sales processes, claims handling and complaints handling and was in breach of FSA Principle 3, relating to management and control, and Principle 6, relating to customers' interests.
CICA did not properly ensure its agents had the skills and knowledge to provide advice and focussed on the number rather than the ability of its recruits, the regulator said.
The insurer did not ensure its agents recorded all the relevant information when advising customers on insurance products, the FSA said.
The regulator also found the remuneration structure for the sales force, a commission-only structure, was high-risk as it placed emphasis on sales volumes rather than the quality of sales.
CIVA did not take effective action against agents who had received complaints or broken company rules or properly monitor claims handling, the FSA said.
Tracey McDermott, acting director of enforcement and financial crime, said: "CICA's widespread failures reflect a culture which did not recognise the importance of treating customers fairly (TCF).
"Firms must ensure that protecting the interests of their customers is at the heart of every aspect of their business."
CICA settled early with the FSA and received a 30% discount on its fine. Without the settlement discount the fine would have been £4m.
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A CICA Salesman knocked on my door a few years back
He tried to sell me some income protection. The conversation went like this: NFL: "Sorry mate - I'm an IFA - I organise my own" CICA "IFA? What's one of them?"
Posted by: Neil F Liversidge | Dec 22 2011
Banks
I know everyone on here goes on and on about the banks - but they are a huge culprit for this type of high pressure sales tactics - I used to work for a major high street bank not that long ago and still have friends that work there and the culture has not changed - the sales managers are under severe pressure to hit targets and the sales teams have this passed down onto them - to an extent that a female adviser recently sitting on 97% of target was subject to disciplinary procedures for not being on target - she has taken her case to a tribunal as other advisers who were under-performing were not subject to disciplinary - the whole thing means that pensioners and others are sold innappropriate and unsuitable products eg bonds etc - where are the FSA? whistling and looking the other way? Don;t get me wrong some IFA firms are run alonig the same lines and are not guiltless - but the problem is magnified in the larger institutions.
Posted by: Paul Burnside | Dec 20 2011
Get Real!
" The regulator also found the remuneration structure for the sales force, a commission-only structure, was high-risk as it placed emphasis on sales volumes rather than the quality of sales". What a classic! Don't they realise that every sales force puts the emphasis on sales volumes? In fact usually various layers of management are also paid according to the volume approach, so who is going to apply the 'quality of sales' filter? I once questioned some of the business being transacted with an old life office employer. My sales manager told me it was not my position to question the business. I was told if the underwriting dept accepted the business that was good enough for him, so I was told in no uncertain terms to mind my own business. I guess that attitude still exists. I would be interested in learning FSAs recommendation for incentivising sales staff.
Posted by: Green Eyed Monster | Dec 19 2011
Amazing
Its amazing - Anyone who has worked in Insurance for even a little while knew exactly how CICA sales teams opperate. If I've know this for the last 20 years why have the FSA only just worked it out. Someone in the FSA must have had an interview with CICA at some point - most insurance sales people have.
Posted by: Anon | Dec 19 2011
Insurer fined £2.8m
Tracey McDermot could do us all a favour by immediately turning her sights onto the banks and building societies for their disgraceful bond flogging practices. As well as fining the companies can the FSA start fining and seeking compensation from the greedy managers and directors who set up the remuneration packages and high pressure sales systems. This would surely concentrate their minds.
Posted by: John Smyth | Dec 19 2011
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