The Financial Conduct Authority (FCA) has referred six firms to its enforcement division for investigation after it found problems with the way they treated their closed-book life insurance clients.
The regulator said in its thematic review published on 3 March it was concerned the firms had failed to inform their customers about exit or paid-up charges on certain policies.
The firms being investigated, which make up more than half of the eleven firms sampled, are Abbey Life, Countrywide, Old Mutual, Police Mutual, Prudential and Scottish Widows.
The FCA will investigate the firms' behaviour around disclosing exit and paid-up charges to customers after December 2008, when regulatory rules around treating customers fairly took effect.
It wants to establish the reasons for the practices within firms, whether customers have suffered detriment as a result and how widespread any practices are within the six firms.
For Abbey Life and Old Mutual it will further examine whether they "contravened regulatory requirements across a number of other areas assessed in the thematic review".
Depending on the outcome of this action the FCA may extend this work across the market, it said.
The regulator will also undertake further guidance work in the area and wants to facilitate industry-wide discussion with a view to industry reaching a "voluntary solution to capping or removing exit and/or paid-up charges", it said.
FCA acting chief executive Tracey McDermott said: "Given the long-term nature of closed-book products, it is vital that customers are treated fairly and given the right information on an ongoing basis in order to help them make important financial decisions.
"We expect all firms with closed-book customers to take into account the findings we have published today and ensure they are treating their closed-book customers fairly."
"The practices at some firms appear to have been poor. We have particular concerns regarding how some firms communicated with their customers about exit and/or paid-up charges.
"We are now doing further work to understand the reasons for these practices, whether customers may have suffered detriment as a result and, if so, how widespread these issues are."
Media blunder
The regulator formally announced its review in its 2014-15 business plan.
The regulator was later subjected to an independent review assessing its behaviour, which accused it of having given "seriously inadequate" response to the blunder and falling "short of the standards expected of those it regulates".
It was also assessed by MPs in a report by the Treasury select committee, which found its standards were "poor, reflecting deep cultural problems" and following which it implemented a number of changes to the way it governs itself.
'Significant' detriment
The review focused on how customers are being treated now by firms; it did not assess how individual policies were originally sold.
It looked at the levels of exit and paid-up charges being incurred by long-standing customers, and firms' behaviour in applying those charges.
It also assessed communications firms provided to long-standing customers.
The regulator found the impact the charges can have on the returns customers receive can be "significant" and may present barriers to customers shopping around, even where customers are aware of them.
The majority of policies it looked at did not include the charges but where they did, they were poorly communicated, the FCA found.
