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Andrew leads our Operational Team and is our expert when it comes to all the ins and outs of car hire excess insurance.
Concerned about the way bonuses were being paid within Financial Services companies, the FSA published a review of sales incentives and asked for feedback on their proposed guidelines. That feedback is now complete and the FSA have now produced a Final Guidance document titled Risks to customers from financial incentives.
The FSA conducted a review of 22 authorised firms covering large and smaller businesses across sectors including banks, insurers and investment firms. All had in-house sales teams with at least 20 sales staff.
Their review showed that 20 of the 22 firms "had features in their incentive schemes that increased the risk of mis-selling”. Not too bad in itself so long as the firms were properly aware of the increased risks and had taken steps to monitor and control the risks.
Worryingly this wasn't always the case. Five firms "had shortcomings in their approach” but worse, eleven out of the twenty firms "were not properly addressing the increased risk of mis-selling”. Four of these cases had significant failings and one has actually been referred to the FSA's Enforcement and Financial Crime Division.
Sales incentives identified as potentially promoting mis-selling were:
The FSA want to see incentive schemes that reward quality or good compliance rather than sales numbers and include deterrents to penalise poor behaviour or mis-selling. Even when firms had sanctions in place against mis-selling, they were often poorly designed, such as the company that had a "quality gateway” which would stop staff being paid a bonus if certain quality standards weren't met. The system worked on a points basis where staff had to hit a number of points to be paid sales based bonuses. The system was found to be ineffective because it was possible to give a customer consistently bad advice yet still be paid the bonus.
We fully support the FSA in its challenge to drive up standards across the industry. And as we believe in leading by example we:
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