A phone insurance provider has been fined £5.3m for unfairly denying customers’ claims over a five-year period.
Liberty Mutual Insurance, which provides a broad range of cover including mobile phone policies for Tesco Mobile, didn’t adequately ensure that claims and complaints were handled fairly between July 2010 and June 2015, the City watchdog said.
The Financial Conduct Authority (FCA) criticised Liberty for failing to adequately oversee mobile phone insurance claims handled by a third party that dealt with retail customers. The FCA refused to name the third party and would not state reasons for withholding that information.
The third party dealt with customers and did all administration of the mobile phone insurance on Liberty’s behalf including processing claims and complaints.
But Liberty was ultimately responsible for making sure claims were properly dealt with, which it failed to do, the FCA said.
The regulator added: “Liberty’s customers were exposed to the possibility that their claims and complaints would not be handled fairly.
“During the relevant period some claims were unfairly declined or not investigated adequately. Some customers who complained about this had the original decision overturned which created a de facto two-stage claims process and others had complaints dismissed without a proper investigation having been undertaken.”
A spokesperson for Liberty said less than 1 per cent of customers were known to have received an unfair outcome to their claims.
The issues were discovered “several years ago” and have since been rectified, the company said.
Mark Steward, executive director of enforcement and market oversight at the FCA, said:
“Fair, effective and prompt settlement of claims is a fundamental requirement of mobile phone insurance, and customers should expect that any claim they make, or any subsequent complaint they lodge, will be dealt with fairly.
“Insurers must put in place adequate measures to make sure that claims and complaints and handled fairly, especially where those functions are outsourced.
“Prior to the commencement of the enforcement investigation, a voluntary redress and remediation exercise was undertaken by the third party in conjunction to Liberty in relation to claims which may have been unfairly rejected.
“The total amount of redress offered to customers who may have suffered detriment was nearly £4m. This has been taken into account in calculating the financial penalty.”
Liberty settled at an early stage of the investigation and therefore qualified for a 30 per cent discount. Without the discount, the financial penalty would have been £7,544,000.
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