A recent enforcement case highlights the importance of firms sending clear, fair and not misleading communications.

Four subsidiaries of a major high-street banking group have collectively been fined £90 million by the Financial Conduct Authority for sending misleading communications to customers regarding home insurance renewals.

The misconduct continued for almost nine years, between January 2009 and November 2017, and applied to almost nine million customer communications. These communications all included language which suggested that the customers were receiving a competitive renewal price. However, the FCA believes that this claim could not be substantiated, especially as, in many cases, the renewal premium quoted was higher than the previous premium and was also higher than the premium quoted to new customers.

The FCA notes that policies were renewed in respect of 87% of the suspect communications.

The banking group also incorrectly informed around 500,000 customers that they were receiving a discount on their renewal premium. Although no discounts were actually being applied, the communications often said the customers were being rewarded for their loyalty, or for being a valued customer, or that they were benefitting from a promotional discount.

Although the case specifically concerns home insurance and a banking group, all firms in all sectors should take note, as they have a responsibility under the FCA Principles to send communications that are “clear, fair and not misleading”. In this case, the bank has also been deemed to have breached the principle relating to taking reasonable care to organise and control the firm’s affairs responsibly and effectively.

The bank has voluntarily paid approximately £13.5 million to customers who received erroneous communications about a discount being applied. However, the FCA is not asking the bank to pay any further compensation, as it says there is no evidence that customers would have made different decisions had their renewal letters not referred to them receiving competitive prices.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA said:

“Firms must ensure their communications with customers are clear, fair and not misleading. [name of firm] failed to ensure that this was the case. Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm.”

A spokesperson for the bank said:

“We’re sorry that we got this wrong. We’ve written and made payment to those customers affected by the discount issue and they don’t need to take any further action.

“We thank the FCA for bringing this matter to our attention and since then we’ve made significant improvements to our processes and how we communicate with customers.”