MSE News

Mobile insurance firm fined £5.2m for claims failures

The financial watchdog has fined an insurance company £5.2 million due to failures in handling mobile phone insurance claims and complaints.

The Financial Conduct Authority (FCA) says that Liberty Mutual Insurance Europe SE entered into a relationship with a third party to provide mobile phone insurance to customers, but between 2010 and 2015 some claims were unfairly rejected or not adequately investigated. 

It says some customers who complained had the original decision overturned, but others had complaints dismissed without a proper investigation having been undertaken.

The third party – which the FCA has not named – undertook all administrative functions associated with the mobile phone insurance on Liberty's behalf, including all claims and complaints handling.

But the FCA says Liberty was responsible for ensuring claims and complaints were handled fairly, and ought to have ensured there were adequate systems and controls to oversee the activities of the third party. 

During the FCA investigation, Liberty settled at an early stage, qualifying for a 30% discount. Without the discount, the financial penalty would have been £7,544,000.

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What does the FCA say?

Mark Steward, executive director of enforcement and market oversight, said: "Fair, effective and prompt settlement of claims is a fundamental requirement of mobile phone insurance, and customers should expect that any claim they make, or any subsequent complaint they lodge, will be dealt with fairly.

"Insurers must put in place adequate measures to make sure that claims and complaints are handled fairly, especially where those functions are outsourced."

What does Liberty say?

A Liberty spokesperson said: “This fine from the FCA relates to activity undertaken by LMIE (our Company market operation), under an arrangement which began in 2010, before the formation of Liberty Specialty Markets. Under this arrangement, a third party administered mobile phone insurance products on LMIE’s behalf.

"Several years ago certain issues came to light around some unfair outcomes for a very small proportion of customers (less than 1%). These issues have been addressed and LMIE has worked with the third party to ensure that redress was paid to any customer who might have been affected. LMIE no longer sells mobile phone insurance to new customers.

"At Liberty Specialty Markets, we welcomed the FCA’s focus on coverholder oversight, and responded by setting up a new, best in class Conduct function. This ensures that Liberty’s ethos of doing the right thing and putting the customer at the heart of everything we do, is put into practice effectively across all of our product lines and coverholder arrangements.”