Standard Life has been fined £30 million for mis-selling annuities over the phone to consumers.
The Financial Conduct Authority (FCA) said the insurer had ‘failed to put in place adequate controls to monitor the quality of the calls’ and encouraged staff to ‘place their own financial interests ahead of their customers’.
Large financial incentives
It said Standard Life was not acting in the interests of its customers when it offered front line sales staff ‘large financial incentives’ to make the sales.
The fine relates to calls made to customers who may have been entitled to an enhanced annuity between July 2008 and May 2016.
In a statement the FCA said the sale of an annuity required accurate information to be given to the customer because it is a complex financial product.
This is especially the case with non-advised sales where the customer makes his or her own choice based on factual information and is not given advice over which to choose.
The regulator said the large financial incentives offered to sales personnel created a significant risk that they would not provide customers with all the information they needed.
The firm used high level call guidelines which gave call handlers ‘significant discretion’ in how they communicated with the customer, leading to some potential buyers not being given appropriate information about enhanced annuities, including the option to shop around for a better deal.
Investigations revealed that during the years complained of 22% of sales staff received more than 100% of their basic salary in bonus payments while the firm did not have sufficient monitoring in place to spot any potential problems.
Spokesman Mark Steward said: “Standard Life’s controls needed to place fairness to customers at their heart. Here, the financial incentives available to staff for selling non-advised annuities by telephone created conflicts which led to unfair outcomes for some customers.
“Firms must have controls in place to ensure they are prioritising fairness to customers.”
To help consumers make in informed choice about which product is right for them firms are required to provide important information to explain that the customer may get a better rate if they shop around on the open market.
They should also be made aware that if they have health or lifestyle factors which may shorten their life expectancy, they may be eligible for an enhanced annuity.
Overall, they should be providing clear, fair and not misleading information about enhanced annuities to help the customer make an informed decision about what product to buy.
Standard Life, which has since been sold to The Phoenix Group, has contacted consumers who may have been affected as part of a past business review.
The firm has set aside £275 million for possible compensation of which £95 million has already been paid out.
Susan McInnes, a director at Phoenix, said: “While this is a historic issue and one we were aware of when we acquired Standard Life Assurance Limited, we would like to apologise to affected customers, all of whom we have already been in contact with as part of the programme of customer redress.
“Whenever we get things wrong, we seek to learn from our mistakes and are absolutely focused on putting things right [and] our remediation programme for affected customers is progressing well.”