The UK’s financial regulator has fined insurer Standard Life £30m for mis-selling annuities to customers over the phone.
The Financial Conduct Authority said that the company had “failed to put in place adequate controls to monitor the quality of the calls” and had also encouraged front line staff “to place their own financial interests ahead of their customers”.
The fine relates to sales practices between 2008 and 2016. According to the FCA, the company failed to tell customers with health problems that they could have bought a better “enhanced” annuity elsewhere.
The regulator said that at least a fifth of Standard Life’s telephone sales staff were paid more than 100 per cent of their salaries in bonuses, and that the insurer had failed to manage the risks this created.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: “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.”
The fine will be paid by Phoenix, which bought Standard Life’s annuity business last year, but Phoenix will recoup the money from Standard Life Aberdeen.
Phoenix also has a £275m provision to fund compensation for customers, of which £95m 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.”
However lawyers described it as “significant” and said that there could be more to come as the FCA takes a closer interest in the insurance and pensions industries.
Standard Life is not the only insurer facing compensation payments over annuity sales. In 2017, Prudential took a £400m provision to cover the same problem. It expects most of the provision to be used in 2019.