Royal London to pay £15m compensation

Royal London, the mutual insurance society, has been fined £400,000 and ordered to pay £15m in compensation, because of mis-selling.

The Personal Investment Authority (PIA) found that it had breached rules over the sales of investment products to its customers, such as life policies, endowments and savings plans.

It is the third largest non-pensions related fine this year and the fourth largest ever imposed by the PIA and affects 65,000 customers.

The PIA criticised Royal London for giving the wrong advice to customers.

In particular, it made recommendations which did not always take account of the customer's needs. For example, policies with high premiums to people close to retirement.

It also failed to train and monitor its sales force properly.

Peter Bibby of the Financial Services Authority, the chief City watchdog, said: "Customers place their trust in the advice that firms give them.

"Where we find that the advice is not backed by adequate compliance and sales procedures we will ensure that those sales are reviewed and customers receive the proper redress where appropriate."

Hefty fine

The £400,000 fine imposed by the PIA is one of the heaviest penalties imposed by the City regulator which oversees the investment industry.

It is the third largest fine imposed by the PIA over the last twelve months after Royal Scottish, which was fined £2m, and a £700,000 fine against United Friendly.

The problems were identified by the PIA in January 1999 and relate to the period from April 1996 to February 1999.

The fine would have been higher, but the PIA said that Royal London had taken remedial action since then, learning from its mistakes.

Compensation due

Royal London is in the process of writing to customers to notify them of any compensation which may be due.

If you do not hear from the insurer and feel that you should get compensation, you should contact Royal London on 0845 6015384.

But the compensation will be little consolation to those Royal London customers who rely on its home collection service.

One third of the insurer's policyholders pay their premiums in person to a representative from Royal London, who visits their house.

Some people, however, have not had their premiums collected for up to six months, raising concerns over whether they are covered under their insurance.

Stephen Humphreys, head of Corporate Communications told BBC News Online that anyone in this position would be covered.

He said: " I want to make it quite clear that people who have not had their premiums collected are still covered by their policies."