General Insurance Article - FSA and Central Bank of Ireland fine Combined Insurance


 The Financial Services Authority (FSA) has fined Combined Insurance Company of America (CICA) an ACE company, £2.8nm for failing to embed fully a culture that ensured its customers were treated fairly. CICA has agreed to carry out a review of past business to identify any customer detriment and pay redress.
 CICA sold accident and sickness insurance products via self-employed sales agents. During the period investigated by the FSA (1st April 2008 to 26th October 2010) CICA had 542,133 policyholders and received £47m in premiums for new policies sold. Its customers were typically self-employed, small business owners or manual workers.
 In August 2010, as a result of concerns the FSA had about CICA's business, the FSA required the firm to undertake a skilled persons (Section 166) report to examine CICA's governance and controls framework. The firm subsequently agreed to cease writing any new business from 26th October 2010.
 The FSA found that CICA breached FSA Principle 3 (management and control) and Principle 6 (customers' interests) by failing to manage effectively its sales processes, claims handling and complaints handling to ensure the fair treatment of its customers. The FSA identified systemic failings across much of CICA's business.
 Tracey McDermott, acting director of enforcement and financial crime, said "CICA's widespread failures reflect a culture which did not recognise the importance of treating customers fairly. This created a significant risk that customers would not get a fair deal.
 Firms must ensure that protecting the interests of their customers is at the heart of every aspect of their business."
 CICA settled early with the FSA and received a 30% discount on its fine. Without the settlement discount the fine would have been £4m. The FSA also took into account that CICA had already taken steps to address some of the issues raised by the FSA.
 The FSA has worked closely with the Central Bank of Ireland which has taken its own enforcement action for similar misconduct in the Irish subsidiary of CICA, levying a fine of E3.35m.

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