This concern was highlighted after the regulator conducted a thematic review of non-advised annuity sales practices which it published on 14 October, looking at more than 1,200 non-advised sales at seven firms representing around two-thirds of the annuity market.
The focus was on enhanced annuities, otherwise known as impaired annuities, and whether firms made customers aware of their potential eligibility and whether they encouraged them to shop around in order to potentially get a higher income from another provider.
The FCA had concerns when significant communications took place orally – normally over the phone – which it said was likely to have caused some customers to purchase a standard annuity when they may have been eligible for an enhanced product.
The “failings” identified at the small number of firms were strong enough the FCA asked them to review all non-advised sales from July 2008 and, where appropriate, provide redress.
In addition, the FCA’s enforcement division be getting involved to “determine whether further action is necessary”.
No evidence of systematic failure
Megan Butler, director of supervision – investment, wholesale and specialist at the FCA said: “While we have found particularly poor behaviour at a small number of firms, there is no evidence that firms have systemically failed to provide customers with the information required by our rules. Firms, particularly those outside our sample, should look at the report we have published today and consider whether they can make improvements.”
The FCA also highlighted a number of areas of concern found as part of its review, including:
- call handlers sometimes being heavily reliant on call scripts, which meant that they were often unable to respond to the clients’ needs or clarify areas of misunderstanding
- customers were not always made aware that they could obtain a higher income by shopping around, even when enhanced annuities were discussed
- clear messages about enhanced annuities were sometimes undermined by subsequent comments which included call handlers under-playing the level of increase which a consumer may obtain by shopping around
- where firms do not sell enhanced annuities, they did not always inform customers of this or may not even mention enhanced annuities at all when speaking to customers.