Home insurance Updated:
Swinton is to contact over 350,000 customers who paid for single premium payment protection insurance (PPI) and offer a refund.
The Financial Services Authority (FSA) said there were serious failings in the high street insurance broker's advised sales of PPI between December 2006 and March 2008 and has also fined the firm £770,000.
Between the dates in question, the regulator said the firm's PPI sales process was flawed, with problems arising as a result of an "assumptive" selling technique, in which PPI was automatically included in insurance quotes without first establishing whether the customer had need for the cover.
It was also found that Swinton had not made it sufficiently clear that PPI was optional and did not properly disclose the cost of the insurance when it was sold.
As a result of the findings, the broker's PPI customers will now be able to get a full refund, while 185,000 previously rejected claims are to be proactively reviewed and compensation paid where appropriate.
"These were deliberate breaches. Swinton was fully aware it should have established 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," said Margaret Cole, FSA director of retail enforcement and financial crime.
"Swinton's PPI sales fell a long way short of our requirements and the firm clearly failed to treat its customers fairly. This penalty, the remedial action, and Swinton's departure from the PPI market - along with our recent announcement outlining the FSA's tougher measures for regulating PPI – serve as a shot across the industry's bow to remind it to play fair, or not play at all."
Swinton left the PPI market in March last year following a request from the FSA when the failings came to light.
PPI was designed to cover monthly direct debit payments for home or motor insurance, if the customer was made redundant or unable to work through disability, injury or sickness.
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