- Lloyds Banking Group (LON: LLOY) has been fined £91million by Financial Conduct Authority.
- It is one of the heaviest fines slapped on any lender for breach of the watchdog’s guidelines.
- The stocks of the company after witnessing a fall in last session have shown recovery and were up by over a per cent.
Lloyd’s Banking Group (LON:LLOY) has been subjected to one of the heaviest fines slapped on any lender for breach of the Financial Conduct Authority (FCA) guidelines. The bank will have to cough up a whopping £91 million for sending insurance renewal letters to customers that were misleading with an assurance of competitive prices.
The FCA said that millions of Lloyds customers received renewal notices from several of the banker's insurance units, but the letters failed to convey the right information fairly and clearly and mislead customers.
Lloyd’s (LON: LLOY) share performance
The shares of the company gained 1.27 per cent and were trading at GBX 46.20 on 9 July at 11:04 GMT+1. The shares have a market capitalisation £32,372.98 million. The stocks have given a one-year return of 50.23 per cent. The shares reached a 52-week high of GBX 50.56 on 1 June 2021. It is trading 8.59 per cent below its 52-week high and 95.95 per cent above the 52-week low of 22 September 2020.
(Image Source-REFINITIV) The shares of the company gained 1.27% , recovering from previous day’s fall and were trading at GBX 46.20 on 9 July.
Why was Lloyd’s fined?
About nine million letters were mailed to home insurance holders with brands like Lloyds, Bank of Scotland, and Halifax in the period between January 2009 to November 2017. The language of the letters allegedly suggested that the next year’s cover could come at a good competitive price.
FCA also said that a loyalty discount was promised to about half a million customers. However, the discount was neither applied nor was there any intention to be applied, according to the watchdog.
In almost 87 per cent of the instances in which the letters were sent, the policyholders renewed their insurances. However, the FCA stated that Lloyds Bank General Insurance failed to check whether the claim was accurate, leaving customers at risk of harm as the renewal premium was likely higher than in previous years and what was quoted in offers to the customers. It was a more likely scenario for customers who repeatedly renewed with the insurer.
What is FCA saying
Though the FCA admitted that the company began removing the phrase “competitive price” 2009 onwards, but substantial renewals still were done until 2017. According to the regulator, the customers were most likely quoted premiums higher than what was quoted to new ones or those who opted to switch service providers.
The watchdog said that it has not been able to establish whether the competitive price promise changed the behaviour of customers, which is why Lloyds did not have to compensate those who received those letters.
A spokesperson for Lloyds Banking Group reportedly apologised for the error and said that the company wrote and paid the customers who were affected by the issue of discount and hence it would not have to take any further action. The representative thanked the regulator for bringing the matter to the company’s notice which helped the company in improving its processes and better communicate with customers.
The FCA has been investigating insurance premium cases and found that in the period between 2018 to 2020, the majority of existing customers would have ended up getting a quoted higher price for the same product than what was quoted to new customers.