The Financial Services Authority (FSA) has issued its joint largest fine over retail activities of £10.5 million to credit card insurer Card Protection Plan (CPP) for mis-selling insurance products.
CPP has also agreed to pay redress to consumers and has estimated a further £14.5 million will need to be distributed, according to the regulator. Taken with the costs associated with the FSA investigation and the fine, CPP is facing a total bill of £33.4 million.
The FSA said it had discovered widespread mis-selling of CPP's two main products, card protection and identity protection, between January 2005 and March 2011. It added that CPP did not provide clear information to its customers or treat them fairly.
The regulator said CPP had emphasised its card protection product would provide consumers with up to £100,000 of insurance cover, when they were already covered by their banks, and that it overstated the risks and consequences of identity theft in selling its identity protection product.
CPP sold the products through its own sales channels and high street banks, generating £354.5 million profit from 4.4 million policies over the period examined by the FSA, and renewed 18.7 million policies, generating an income of £646.5 million.
It has agreed to stop new sales of products, except where they are sold as part of an insurance package, and to stop trying to keep customers who call to cancel their policies. CPP has been ordered to appoint an external 'skilled person' to monitor and report on its claims and complaints handling.
FSA director of enforcement and financial crime Tracey McDermott (pictured) said: 'While CPP's products were relatively inexpensive, they were sold widely and CPP encouraged its sales agents to be overly persistent. We have highlighted before our concerns about low cost insurance that offers little or no value to the customer. This case shows the action we will take if our warnings are not heeded.'