Context
This week, the FCA has publicly censured Alsford Page & Gems Limited (APG), in a long-running case, for a lack of control of its Appointed Representatives; in addition APG will pay compensation totalling £399,902 to customers who purchased extended warranty insurance policies during the period 1st February 2013 to 21st March 2016.
Key points to note
- APG is a wholesale and reinsurance broker which began to sell extended warranty insurance policies to retail customers in 2013.
- The policies were sold on APG’s behalf by six Appointed Representatives. APG was the Principal and therefore responsible for ensuring customers were treated fairly by the Appointed Representatives.
- APG had failed to sufficiently consider or address the risks associated with selling products to retail customers; its systems and controls were wholly inadequate and its oversight of the Appointed Representatives was limited and ineffective.
- APG had no assurance that its customers were being treated fairly or being sold products they understood or which met their needs.
- The breaches are particularly serious as the FCA found that APG had no effective controls in place to identify and protect vulnerable customers who may have needed additional care and protection in their interaction with sales agents.
- APG agreed to resolve the case. The FCA would have also imposed a financial penalty on the firm of £958,100 (£670,600 in light of APG qualifying for a 30% discount for resolving matters) if APG had not established that it was in serious financial hardship and unable to pay this, or any amount. The compensation will be paid by APG out of funds provided by its parent.
Although this investigation has been going on for some considerable length of time, the nature of the findings is absolutely relevant to current FCA regulatory focus and scrutiny in the insurance distribution sector.
Next actions
Firms which act as Principals should review their AR oversight and processes to ensure they have effective controls in place and are formally monitoring AR activity (including file/call reviews) and should make improvements where necessary.