Insurance giants face major FCA probe into hidden fees

Six life insurance companies including the Prudential and Old Mutual face unlimited fines after the City regulator found evidence they had mistreated long-standing customers.

Acting Financial Conduct Authority chief executive Tracey McDermott declared: “The practices at some firms appear to have been poor.”

The watchdog particularly honed in on how the firms communicated with their customers what charges they would face if they sought to surrender or transfer their policies.

It has now opened a formal investigation into the Prudential, Old Mutual, Police Mutual, Abbey Life, Scottish Widows and Countrywide Assurance.

Such investigations can lead to major fines and penalties or bans on individuals if wrongdoing is found.

The investigations will focus on so-called “zombie” funds — collections of decades-old policies also known as closed-book products.

The watchdog unearthed “poor” communications with customers about exit charges and other neglectful practices between 2008 and 2015.

Policies sold during the 1980s and 1990s are under the spotlight. The average value of a policy ranged from £18,000 in an endowment to £23,000 kept in a personal pension.

Eleven firms were probed, serving 9.4 million customers with £153 billion of policies.

“Given the long-term nature of closed-book products, it is vital that customers are treated fairly and given the right information on an ongoing basis in order to help them make important financial decisions,” McDermott said.

The six firms facing further investigation will see enforcement officers from the FCA conduct regular trips to their offices over the next few months to probe their practices.