Ongoing exposure of poor practice in the financial services industry has "shattered" the public's trust, an expert has said.
Ros Altmann, an independent pensions expert and savers' campaigner, said: "Too often, insurers rely on customer inertia and take advantage of people's trust.
"Insurance is meant to offer both protection and future growth at a reasonable price, yet all too often its product pricing relies on customer inertia to recoup costs from captive customers."
Shares in a number of insurance firms have recovered slightly since tumbling this morning in the wake of the Financial Conduct Authority's announcement of an investigation into 30 million policies.
Performance since the start of the day for a handful of companies is as follows:
- Resolution was down 7.10%
- Standard Life was down 1.55%
- Aviva was down 2.75%
- Legal & General was down 3.67%
- Prudential was down 3.03%
Insurer Legal & General called on the Financial Conduct Authority to bring forward details of its investigation into 30 million polices sold between the 1970s and 2000 after a "disorderly market" reaction to the announcement.
Legal & General does not outsource customer administration: our customers benefit from the continuity of a single product and service provider.
Our operating practices ensure we provide good value to our customers, and we have operated a programme of ongoing product reviews for more than 10 years.
The City watchdog the Financial Conduct Authority has told ITV News' Business Editor Joel Hills about their inquiry into 30 million policies sold by insurance companies between the 1970s and 2000:
FCA tells me "highly unlikely" exit fees will be wiped out. It's assessing the "fairness" of the 30m policies today not if were missold.
Shares in insurance companies have tumbled this morning in the wake of the Financial Conduct Authority planning an investigation into 30 million policies sold between the 1970s and 2000.
- Resolution was down 11.1%
- Standard Life down by 2.6%
- Aviva was down 4.3%
- Legal & General down by 5%
- Prudential down by 3.5%
The inquiry comes amid concerns that loyal policyholders are not being given the same priority as new customers.
The Financial Conduct Authority (FCA) is planning an investigation into 30 million policies sold by insurance companies between the 1970s and 2000.
The inquiry comes amid concern that loyal policyholders are not being given the same priority as new customers and are facing high fees for substandard service. It will include pensions, endowments, investment bonds and life insurance.
The FCA review, which is to begin this summer, is concerned about insurers using returns from so-called "zombie" funds - which are closed to new customers - to pay bills from other parts of their businesses.
A large number of policies also include exit fees that can halve a policy's value if a customer attempts to switch to a cheaper provider.
Clive Adamson, the director of supervision at the FCA, told The Daily Telegraph: "As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal."
It is "far too early to say" if and by how much insurance premiums will go up after thousands homes and businesses were damaged by the south coast floods, according to the Association of British Insurers.
Malcolm Tarling told Daybreak that insurers would "do the maths" after flood victims had been allowed to safely move back into their homes.
The flood waters may have mostly receded, but for many the distress of being flooded remains raw.
Insurers and loss adjusters are playing a crucial role in the recovery process. A badly flooded property can take months to become habitable again, so insurers continue working around the clock to ensure that the drying out process is completed as quickly and as safely as possible.
While of course this was a serious and significant bad weather event the current flood damage costs remain well below the severe floods of 2007 when insurers paid out £3 billion to customers.
The Association of British Insurers estimates it will be paying out £1.1 billion to customers affected by floods and storms in the wettest winter on record.
£446 million of that figure will be paid out for flood damage alone. Here is how it breaks down:
- £276 million in payouts
- 9,000 flood-hit home owners
- £149 million in payouts
- 3,100 claims were received from this sector
- £22 million will be paid to flood-hit vehicle owners
- 5,400 claims for flooded vehicles
An estimated £1.1 billion will be paid in insurance claims to people whose homes, businesses and vehicles were damaged in floods and storms this winter, according to figures released today by the British insurance industry.