Money News: Insurers given warning over 'misleading' promotions
Sunday 21 January 2007
Insurers have come under fire from the Financial Services Authority for using "misleading" savings claims in their advertising that cannot be substantiated.
After a review of press ads from 57 firms selling motor, home and travel insurance, the City watchdog called on companies to stop using such claims in their adverts - or face regulatory action.
The FSA found that more than half of the motor insurance ads looked at offered "unclear or misleading" savings claims. It expressed similar concerns with a quarter of the home insurance ads. However, it found that travel insurers had "generally higher standards".
In a statement, the FSA said it was concerned that some ads give the impression that most consumers are eligible for great deals, when in fact only a few will qualify.
"Advertising is a major influence on what [people] choose to buy," said FSA spokesman Vernon Everitt. "So it must be clear, fair and not misleading, leaving people with a balanced picture of what is on offer."
The watchdog said it had contacted the senior management of those insurers whose advertising caused it concern, and would review the situation in three months to decide whether further regulatory action was needed.
Price-comparison service Moneysupermarket.com said it shared the FSA's concerns. "The hugely competitive nature of the market means insurers set strategies to target certain groups through their marketing activity," said spokesman Richard Mason. "But people need to be clear that if they do not fall into these often narrow profiles, they are highly unlikely to get the best deal on the market."
Consumer body Which? criticised the watchdog for not naming the firms involved. "The FSA is consistently reluctant to name and shame firms," said Which? spokeswoman Emma Bandey.
The Advertising Standards Authority - which looks after non-financial promotions - publishes complaints on its website, she added. "It doesn't just tell firms behind closed doors that they have three months to improve.
"The FSA needs to follow suit and name these adverts - first to encourage companies to improve and second to keep consumers informed and protected."
Energy: British Gas hit by switching frenzy
More than four million people switched their energy supplier last year in search of cheaper deals - leaving former monopoly British Gas with less than half of the gas market for the first time.
This is according to new figures from Ofgem, the energy regulator, which says soaring household energy prices prompted the migration; the number of people changing their gas and electricity suppliers was 750,000 higher than the year before.
Ofgem said there was clear evidence that Britain has the most competitive energy market in the world. "Customers have given expensive suppliers the boot, with over four million moving to a cheaper supplier in the first 10 months of 2006," said Ofgem's chief executive, Alistair Buchanan. "This dynamic market is most dramatically illustrated by British Gas.
"Our competitive energy markets have attracted over £10bn of investment in gas-importation projects, which are now beginning to take the heat out of wholesale gas prices."
He added that while British Gas has already indicated it will be cutting its prices this year, Ofgem would be watching all energy suppliers to ensure that, as wholesale prices fall, they compete as hard as they did when prices rose.
But he urged customers who have never switched to act now - to cut their bills by around £150 a year.
Karen Darby from the price-comparison service SimplySwitch said that since January last year, consumers' gas prices had increased by 42 per cent and electricity by 27 per cent.
"As energy prices rose, so did the number of people switching to find a better deal," she added.
Debt: Companies warned over IVA claims
Companies that promote individual voluntary arrangements (IVAs) have been warned by the Office of Fair Trading (OFT) not to use advertising that could mislead consumers - or face formal action.
The OFT has issued the alert to 17 firms promoting IVAs following a compliance sweep last year, when 124 adverts in national newspapers and 57 on websites were checked.
IVAs are plans that, with the agreement of the majority of the creditors, allow borrowers to pay back a proportion of the debt they owe over a set period, usually five years. They are increasingly being used by consumers in debt as an alternative to bankruptcy.
But the OFT said some of the claims made about the plans were in breach of its guidance for consumer- credit licence holders.
The watchdog has warned the offending businesses to take immediate action to remove or amend a number of potentially misleading statements - such as claiming that "up to 90 per cent of your debt will be written off", when the maximum would actually be 60 to 70 per cent.
Other adverts failed to state that set-up and administration fees would be charged, and omitted to mention that an IVA affects an individual's credit rating for six years.
The businesses have been given four weeks to respond and provide evidence of compliance, or run the risk of action being taken against them.
"IVAs are still a solution for many," said OFT spokesman Alan Williams. "But those supplying them must be clear and honest about what they can and cannot achieve for consumers in debt - and the possible negative implications of entering into such arrangements."
He pointed out that IVAs are only one of a number of options for people in debt.
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Weekly Money: Round-up of the personal finance stories you may have missed 19-23 January
- 1 Three-year-old boy shoots pregnant mother and father in New Mexico
- 2 Stephen Fry explains what he would say if he was 'confronted by God'
- 3 Jewish community urged to boycott Cornwall village after residents vote for 'Hitlers Walk' sign to be reinstated
- 4 Gorillaz Phase 4: Cartoon supergroup is back as new artwork is unveiled
- 5 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Stephen Fry explains what he would say if he was 'confronted by God'
9 reasons Greece's experiment with the radical left is doomed to failure
Have we reached 'peak food'? Shortages loom as global production rates slow
The open loathing between Barack Obama and Benjamin Netanyahu just got worse
President Putin is a dangerous psychopath - reason is not going to work with him
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
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