Hastings fined £735,000 by FSA for cancelling motor policies
Hasting Direct, the car, home and travel insurer, was landed with a £735,000 fine by the Financial Services Authority yesterday, after it cancelled the motor insurance policies of more than 4,500 customers at short notice.
The insurer, owned by the antipodean financial services company Insurance Australia Group, cancelled the policies last summer after realising it had accidentally under-priced them. The customers had to take out new insurance at short notice, and many were deprived of the opportunity to earn a no-claims discount for the period they were insured. The FSA said some may find it difficult to obtain new policies elsewhere, as they must declare that they have recently had a policy cancelled.
Hastings invoked a clause in its terms and conditions to push through the cancellations, but the FSA said such clauses were not designed for use in this kind of circumstance.
The regulator also criticised Hastings for its handling of affected customers. It paid compensation for stress and inconvenience only to those who followed formal complaints procedures. The FSA said the company should have been more proactive, and offered compensation to all of those affected.
Margaret Cole, the FSA's director of enforcement, said: "The FSA has stressed to all firms the importance of treating their customers fairly but it is clear that Hastings put its own interests ahead of those of its customers. The firm failed to consider properly what effect cancelling policies might have on its customers which illustrates that the fair treatment of customers had not been embedded into its corporate culture as our 'Treating Customers Fairly' principle clearly requires." The FSA said Hastings would have been fined a little over £1m had it not agreed to settle the case at an early stage.
A spokesman for Hastings said: "While Hastings does not consider the use of a cancellation clause is of itself unfair, it does accept that in this instance these particular processes and procedures could have been better."
Meanwhile, motor insurers could start to run out of claims reserves in two years if they continue to release reserves to subsidise policy prices under pressure from comparison sites, a survey said yesterday.
Reserves – money held back to meet future claims – are at their lowest since 2001 after insurers released more than £1bn in the past year to subsidise motor policies, EMB, a consultancy, said.
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