In April, Scottish Widows was discovered to have failed to tackle concerns raised about a year earlier after an inspection visit by Lautro, its regulator. Lautro found the life office had not made proper inquiries about 'the character and suitability of the management and controllers of (its tied agents) and individual company representatives which those firms engaged'.
Scottish Widows was ordered to contact 20,000 policyholders because of doubts about the advice they had received from the tied agents. Newton Scott, general manager (marketing and sales), said yesterday that the evidence collected so far suggested that very few people had been sold the wrong policy.
He added: 'People have been slow to respond . . . we've had to write to them again. The inference from this is a lot of (affected policyholders) are very happy with what they've got.'
Mr Scott said Scottish Widows had 'culled' 80 of the 180 firms of tied agents that it had a year ago. He said most of the reduction was due to commercial reasons and only a small proportion left because of the problems identified by Lautro.
Scottish Widows' tied salesmen failed to complete customer information 'factfinds' for most of their policyholders. An initial analysis suggested 3,000 had received incorrect policies while there was insufficient information to verify the advice given to another 17,000.
Although Scottish Widows, Britain's fifth-largest life office with pounds 17bn under management, receives most of its business from independent financial advisers, it remains committed to tied agents.
Mike Ross, Scottish Widows' managing director, recently resigned from the board of Lautro in an attempt to avoid potential embarrassment to his fellow directors.
Scottish Widows said it took even one case of wrong advice extremely seriously. It pointed out it had one of the lowest 'lapse rates' in the industry, with less than 6 per cent of its customers surrendering their policies in the first two years.
Other life offices disciplined by Lautro recently include Guardian Royal Exchange, which was fined pounds 100,000, London and Manchester, which was fined pounds 80,000, and Cannon Lincoln, which was fined pounds 50,000. Lautro is taking disciplinary action against several others.Reuse content