The Financial Conduct Authority (FCA) has fined Standard Life Assurance (SLA) nearly £31m after its practices led to conflicts of interest and SLA employees putting their financial needs above those of the firm's customers.
SLA did not dispute the FCA's findings, which meant it qualified for a 30% discount on a fine that would otherwise have been £43,989,300.
The FCA said SLA failed to put in place adequate controls to monitor the quality of the calls between its call-handlers and non-advised customers.
At the same time, the life and pensions giant offered its frontline staff financial incentives to sell annuities, which the FCA said encouraged them to put their own financial interests ahead of their customers. During the period of misconduct, more than a fifth (22%) of call-handlers received more than 100% of their basic salary in bonus payments.
On 31 January 2017, SLA voluntarily agreed to identify and pay redress to those customers who suffered a loss as a result of its failures. As at 31 May 2019, the firm had paid out around £25.3m to 15,302 customers in compensation. As many as 80,000 customers were potentially impacted, the FCA said.
As part of the sales process for non-advised annuities, firms are required to explain to customers they may receive a better rate if they shop around on the open market. Customers with issues that may shorten their life expectancy may be eligible for an enhanced annuity. In this case, firms must provide "fair, clear and not misleading" information about the product.
According to the FCA, SLA largely left it up to call-handlers to decide the language they used with customers. The FCA said this meant the firm did not provide customers with appropriate information about enhanced annuities, or inform customers they could shop around for a better deal.
In addition to failing to mitigate conflict of interest risks, SLA did not monitor calls between call-handlers and customers nor provide sufficient management information to enable senior managers to identify the aforementioned failings.
FCA executive director of enforcement and market oversight Mark Steward said: "SLA'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."
SLA was formerly part of the Standard Life Aberdeen group of companies. On 31 August 2018, it was sold to Phoenix Group. The review of its failures is still ongoing at Phoenix, which expects the business review to be finished by the end of 2019.
SLA chief executive and Phoenix Group director of open business Susan McInnes said: "While this is an historic issue and one we were aware of when we acquired SLA, 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. We gave also reviewed and updated our telephone practices as part of this process.
"Whenever we get things wrong, we seek to learn from our mistakes and are absolutely focused on putting things right. Our remediation programme for affected customers is progressing well and we expect it to be completed by the end of the year."
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