Lloyds Banking Group has been fined £ 90 million for misleading millions of its home insurance customers.
Between 2009 and 2017, the bank sent letters to around 2.7 million customers under its Lloyds, Halifax and Bank of Scotland brands using words such as “competitive” to describe the renewal price without verifying the accuracy of the claim.
The city’s watchdog, the Financial Conduct Authority, said doing so risks “seriously harming” customers who, in reality, would likely pay more than new customers to renew.
During the same period, the bank sent letters to around half a million home insurance customers in which they would receive an extension discount. However, such a discount was never granted.
FCA’s Mark Steward said, “Companies need to ensure that their communications with customers are clear, fair and not misleading. Lloyds couldn’t ensure that this was the case. “
The bank said it made voluntary payments of about £ 13.5 million to customers who had mistakenly received letters referring to a discount if none was applied. Lloyds said they should reach out to those affected and customers would not have to take any steps to receive payment.
A Lloyds spokesman said, “We’re sorry we misunderstood. We’ve written and made payments to customers affected by the discount issue and they don’t need to take any further action.
“We thank the FCA for bringing this issue to our attention and since then we have improved our processes and our communication with customers significantly.”
The £ 90 million fine is one of the heaviest penalties ever imposed on a bank for violating insurance regulations. The largest was also imposed on Lloyds, which was fined £ 117 million in 2015 for failing to deal fairly with PPI complaints.
From next year, insurers will have to offer their policyholders a price that is no higher than they would pay as a new customer.
The FCA said this rule would save consumers £ 4.2 billion over 10 years. Previously, the Guardian found that six million loyal policyholders would have paid £ 1.2 billion or £ 200 more for home and car insurance than if they had been charged the average premium.