Lloyds fined £91m for beating insurance customers with loyalty fines as they claimed to offer ‘competitive’ renewal quotes
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Lloyds Banking Group has been fined £91million by the City Watchdog for misleading insurance customers.
The High Street lender sent 9 million letters to existing home insurance customers from 2009 to 2017, claiming to offer “competitive” quotes for policy renewals.
At the same time, however, it offered new customers lower quotes for the same product — a practice labeled by critics as “the loyalty penalty.”
Lloyds sent letters to existing home insurance customers claiming to offer ‘competitive’ quotes for policy renewals and offer lower quotes to new customers for the same product
The Financial Conduct Authority said Lloyds’ insurance arm had failed to verify the accuracy of the reports and ordered it to pay a £90.7m fine.
It’s the second largest fine ever handed out to a retail bank in the regulator’s history – and Lloyds was again on the receiving end, forced to pay £117million six years ago for misselling PPI.
The FCA is tackling loyalty fees, with insurers charging higher rates for loyal customers through renewals compared to new customers.
Rules that come into effect in January will ban the practice.
The FCA also found that 500,000 Lloyds customers were told they would receive a discount based on ‘loyalty’ or being ‘valued customer’, but this never happened.
It wasn’t until the watchdog’s investigation started that the bank changed this.
Lloyds has since made voluntary payments of around £13.5 million to customers who received the letters about a discount that was never applied.
A Lloyds spokesperson said: ‘We are sorry we misunderstood. We have written and paid the customers affected by the discount problem.”