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Category — Insurance Industry

Finally, a ban on pensions cold calling

20 August 2017


  • Great to see DWP will act, not just keep consulting
  • Protecting people’s pensions from fraudsters is so important
  • Can give clear message to the public that anyone who contacts them out of the blue about their pensions is a criminal
  • This issue has clear cross-party and industry support

Banning cold calls and tightening protection against transfers to fraud schemes: The Government has bowed to the overwhelming pressure from politicians in all parties, consumer groups and the pensions industry to urgently introduce a ban on pensions cold calling. This is great news. It is also going to toughen rules on transfers out of occupational schemes and tighten HMRC requirements that will make it much more difficult to set up fraudulent schemes.

The case for banning unsolicited approaches seems clear and unequivocal: Currently, any scam company can buy a list of ‘prospects’ and contact them out of the blue to offer them a free pension review that leads to them losing their entire pension in a fraudulent scheme. Cold calling for mortgages was banned years ago and the public needs the same protection for other financial matters. People can only be approached about a mortgage if they have expressly requested contact from the company by name. Just ticking a generic box about financial promotions would not make the approach legal. Doing the same for pensions would be a significant step forward in protecting the public

Banning unsolicited approaches means we can send clear message to the public – JUST HANG UP! No reputable company should need to contact people out of the blue – they can find better ways to generate business. A ban would send a strong signal to the public that if someone contacts them out of the blue to discuss their pension, they should ‘Just Hang Up’. If they receive unsolicited texts or emails, ‘just delete them’. Anyone who does this will be a criminal. Even that friendly person offering a free review will not have your interests at heart. A ban would make the situation clear.

Public needs to be better protected: Since 2014, people have been scammed out of £43million of pensions and just in the first five months of this year they have lost £5million to fraudsters. This is money people need for their retirement and the scams nearly always start with a cold call. Government initiatives so far have not worked. Measures to impose Caller Line Identification and campaigns such as ‘Scorpion’ and ‘Project Bloom’ are not protecting people enough. ‘Action Fraud’ figures show over 2000 frauds reported since 2014, but only 7 suspects have been summonsed or charged and no convictions.

Pension freedoms give people more flexibility but also mean they need better protection: The new pension rules ensure people can use their pensions more freely, but this also increases the risks they face and leaves more people in need of guidance. It is right to give people more flexibility and choice over their pension savings, but the Government is right to ensure that it also increases protection against fraudulent unsolicited approaches.

Government will also tighten rules to stop set up or transfer to fraud schemes: It is also welcome news that the Government intends to tighten HMRC rules that will make it harder to establish fraudulent schemes and also toughen rules on transferring pensions from one scheme to another. Only companies who produce regular accounts will be approved as pension schemes and trustees of occupational pensions will be required to check that receiving schemes are regulated by the FCA, or are authorised as MasterTrusts or have a clear employment link.

Public should always check with PensionWise: Some scammers have masqueraded as a ‘Government approved’ review service. Individuals may have heard that the Government has indeed set up a free guidance service, called PensionWise, but it is vital to let people know that PensionWise will NEVER cold call you or contact you without you approaching them first. So the clear message to the public is that you should always contact PensionWise or your independent financial adviser before reviewing or making decisions about your pension.

The sooner the Government acts, the sooner we can improve protection for people’s pensions: We will never stop such fraudsters completely, but these measures will certainly protect the public better – about time too.

August 20, 2017   No Comments

Banning cold calling

4 July 2017

  • Government needs to urgently ban cold calling not just keep consulting
  • Clear support across political parties and pensions firms for a ban
  • Protecting the public from fraudsters needs higher priority
  • Cold call ban could make it clear for the public that reputable firms will not approach them unless they have specifically asked 

The Government is about to issue yet another consultation on banning pensions cold calling – asking yet more questions about protecting the public, rather than just getting on with it.

The case for banning unsolicited approaches seems clear and unequivocal:  Cold calling for mortgages was banned years ago and the public needs the same protection for other financial matters. To offer someone a mortgage, they must explicitly request to hear from your firm. But any scam company can buy a list of ‘prospects’ and contact them out of the blue to offer them a free pension review that leads to them losing their entire pension in a fraudulent scheme.

Public need to be better protected : With the pension freedoms giving people better access to their pensions, the opportunity for scams has increased. It is right to give people more flexibility and choice over their pension savings, but it is also vital that alongside this, the Government does more to effectively protect them against the rising number of fraudulent unsolicited approaches.

Official figures show fraudsters not being caught: In answer to my written Parliamentary Questions last year, the Government’s replies indicated current protective mechanisms are not working adequately. Data from ‘Action Fraud’ (the national centre for fraud and cybercrime) and its National Fraud Intelligence Bureau showed that over two thousand frauds had been reported since 2014, but only 7 suspects have been summonsed or charged in connection with these and no convictions.

Government relying on Action Fraud is not enough: When asked why mortgage cold calling can be banned but not pensions, showed insufficient concern for protecting the public. Its reasons included suggesting it wanted to wait and see whether Caller Line Identification measures would work, but just knowing the phone number of a cold caller is no protection against a scam. The Government’s replies also claim that Action Fraud ensures the public ‘has the information they need to protect themselves from telephone fraud. Action Fraud, for example places an alert on its website when a serious threat or new type of fraud is identified – which members of the public can sign up to receive by email’. This is clearly not much of a protection for the public, especially as many older people are not even on line and would not know to ask for information until after they had been scammed!

More concern for companies than the public: The replies said ‘We are determined to tackle the scourge of nuisance calls especially those of a fraudulent nature. Our efforts are focused on taking action against companies that are deliberating breaking the rules, rather than penalising legitimate businesses who comply with the law.’ But no reputable company should need to contact the public out of the blue – they can find better ways to generate business.

Let’s not miss another opportunity to get cold calling banned: Having missed the chance to do this when the Pensions Act went through Parliament last year, let’s take this new opportunity to finally put in place much needed measures to protect people’s money from fraudulent firms. As the Financial Guidance and Claims Bill is passing through Parliament now, there was strong support across the House for banning cold calling by Claims Management Companies, and for pensions too.

It is important for people to know that no reputable firm will cold call about their pension. A ban would send a strong signal to the public that if someone contacts them out of the blue to discuss their pension, they should ‘Just Hang Up’. If they receive unsolicited texts or emails, ‘just delete them’. The friendly person offering a free review will probably be out to take their money and will not have their interests at heart. A ban would make the situation clear. When it comes to mortgages, customers can only be approached if they have expressly requested contact from the company by name. Just ticking a generic box about financial promotions would not make the approach legal. Doing the same for other financial transactions would be an enormous step forward in protecting the public.

Public should always check with PensionWise:  In the meantime, there are not many effective ways of informing the public. One piece of advice would be to always check with PensionWise or an adviser before handing over pension money to a firm they don’t know. The best advice is to ignore any approaches that come out of the blue, so they don’t fall for such scams.

Act now: If the Government really is serious about protecting the public and stopping more scams, then it could seize the opportunity offered by the legislation to act, rather than endlessly consulting while unsuspecting people lose more money. I will be laying amendments to the Bill to try to get this enacted more quickly. There is no other obvious legislative vehicle in the Queen’s Speech that would enable a ban to be introduced in the next two years and as Brexit legislation will dominate, this Bill is an ideal opportunity to finally act.

Here are links to some of the questions I have asked and the responses provided

August 4, 2017   No Comments

Pension Freedoms need to work better for customers

12 July 2017

I welcome the FCA Retirement Outcomes Review and its focus on the customer but I am disappointed that the pensions industry has so far failed to radically change its approach.

The pensions industry needs to wake up to the tremendous new opportunities offered by pension freedoms and auto enrolment. This is the time to show real, innovative thinking in the customer interest but sadly the industry has so far failed.

Where are the new products or default options? And why are they called ‘default options’ anyway? The word ‘default’ is hardly attractive to non-pensions people!

Customers may be taking money out of brilliant pensions products without realising the benefits they are giving up – and possibly paying unnecessary tax too.

New thinking might include, for example, a concept of ‘Lifetime Pension Accounts’ which stay invested until you really need some income or capital. ‎These could seamlessly run from a ‘growth phase’ to an ‘income phase’ when the customer wants to, without the huge extra charges involved in drawdown. Taking money out of pensions too early is detrimental to your financial well being.

The Government’s free guidance service could also help customers understand the benefits of staying invested for longer especially if still working. So perhaps we should make PensionWise free guidance mandatory or at least the default option.   Ideally people need advice but at least PensionWise can steer them away from dangerous decisions

This FCA study is another wakeup call‎ for the pensions industry to up its game and look after customers.

July 12, 2017   1 Comment

Great news on Chancellor banning cold calling and protecting pensions better

19 November 2016

  • Treasury set to ban pension cold calling in Autumn Statement
  • Well done Philip Hammond – this is a great start to help clamp down on scams
  • Clear signal for people that such calls are illegal so they should Just Hang Up or delete email
  • Further measures to stop scam schemes setting up and clamp down on transfers also welcome
  • We must do all we can to protect people’s precious pension savings and this is a positive step


The Chancellor is going to announce that pension cold calling is to be made illegal.  He may also be announcing additional measures to help protect customers, by making it harder to set up scam schemes and to transfer money into them.

Well done Philip Hammond – we have to do whatever we can to protect the public against fraudsters.  Vulnerable elderly people are being called and offered free ‘pension reviews’ which lead to them losing their entire life savings.  We need to be able to give the clear message that if someone contacts you out of the blue about your pension, they are breaking the law, they are criminals.  By making cold calling illegal, it is much clearer for the public that they just should not engage with such people.

So far, the government has tried a number of initiatives, such as Project Bloom, Project Scorpion, Action Fraud and cross-Departmental taskforces that aimed to warn the public and catch the fraudsters.  Unfortunately, the Government admitted in response to Written Parliamentary Questions that nobody has been convicted and only a handful have even been charged.  The current indirect approaches are very well-meaning, but just don’t work for the people who need protecting.

A ban on cold calling is obviously not going to stop all scams, but it gives people a fighting chance of recognising the dangers before they engage and also ensures that we can give the public the clear message that such approaches are dangerous and should be avoided at all costs.

Ideally we would want to find ways to stop pension firms transferring people’s pensions into scam schemes, however that is far more difficult.  A ban on cold-calling is something that can be done more quickly.

I worked hard as Minister to try to achieve this and am delighted to see it looks as if this will finally happen.  Officials and other Ministers tried to caution against banning cold calls because they did not want to stop bona fide businesses being able to contact customers.  That argument is false.  No bona fide company should contact people out of the blue offering free pension reviews or investment schemes for their pension savings.  If a firm wants to generate new customers, they will have to find better ways than just buying up lists of contact details and cold calling people.

A number of advisers have set up a petition which has helped to focus attention on this issue and the media has been great in supporting the ban on cold-calling.

A victory for common sense and for customer protection. Well done to all.

November 19, 2016   1 Comment

FCA study of annuity selling highlights worrying failings

14 October, 2016

FCA finds clear evidence of annuity mis-selling to customers in poor health but process of investigation and redress is painfully slow

  • Seriously ill customers short-changed for the rest of their shortened life – need swift action
  • Tens of thousands in line for redress
  • At least one in three firms have failed customers and will have to compensate
  • FCA findings welcome but customers need urgent action not still more reviews

FCA findings from its investigation of whether annuity customers in poor health were treated fairly: The FCA has just released its findings following an investigation into how annuities have been sold. Link here . The results are further proof that the annuity selling process has failed customers.

Customers in poor health have been short-changed on their pension income for the rest of their shortened lives: In 2008, the FSA first reported that annuity companies were not treating customers in poor health fairly. Since then, companies were supposed to change their practices to ensure they treated customers fairly, but here we are, eight years on, and not enough has been done.

At least one in three annuity companies has been found guilty of serious failings: Seven firms were investigated and a ‘small number’ were found to have seriously failed customers and will be required to pay redress. If this ‘small number’ is two firms that still represents 30% of the firms. If it is three firms, that represents over 40% of the sample.

FCA is only just starting to look at others, but still not the whole market: On the basis of its findings so far, the FCA is now going to investigate some of the other providers. Of course it is good that this issue is receiving more attention, but we are already another two years on and it will still not be looking at all of them. Many of the smallest companies may have had the worst practices, yet their customers are not being helped at all. The FCA’s Report today will still not help all the customers who were sold inappropriate annuities in past years.

Study found ‘relatively high incidence’ of failure of process and breach of FCA rules: It is worrying that the FCA study found that most of the firms were not selling annuities properly. Such failures are of concern, even if the FCA concludes that people may not have suffered losses in the majority of cases. Given the huge numbers of people involved, even a small proportion of customers is a large number of people.

Tens of thousands already in line for redress but may be many more to come: The FCA indicates that its findings could mean at least 90,000 people will need compensation for wrongly sold annuities, but it is still investigating more firms and there is bound to be more redress due. This is taking many years. Urgent action is so important because the annuity market since 2008 has covered over three million people. Many of those worst impacted by any failure were in poor health and will have been living on much lower incomes than they are entitled to, some may have already died. At the moment, these annuities are completely irreversible so customers will be poorer for life if they receive no redress.

There were no proper suitability checks or requirements to ask about health: The way annuities have been sold, without any suitability or ‘know-your-customer’ checks, makes it inevitable that many people will not have had the chance to make best use of their hard-earned pension savings. Companies were not required to ask customers about their health. They did not have to tell customers that a standard annuity assumes they are in excellent health and will live longer than average. So customers often had no idea that if they had past health issues, such as heart trouble, high blood pressure and so on, they could have obtained higher income by buying a different type of annuity.

Just sending a leaflet is not enough to address customer detriment on annuities: The FCA only requires firms to send written communications i.e. an official leaflet that describes the different types of annuities, or something equivalent. But most people do not know anything about annuities. Most customers, who will only ever buy an annuity once in their life, have no idea what the words ‘enhanced’ or ‘impaired life’ annuities mean for them. The asymmetry of knowledge and power works against customer interests in this market more than most others.

Frustrating that it is taking so long for redress for those affected: It is very sad to see that so many years have already passed and redress is only just now being considered. And this will not apply to all customers, with other firms only just starting to be investigated. I would like to see much quicker action, given the importance of annuity income to pensioners in poor health

FCA must monitor how second line of defence is working for annuities sold since 2015: The requirement for most people to buy annuities was thankfully abolished in the 2014 Budget, but many people are still buying an annuity to secure a lifetime guaranteed income. The Government promised there would be better checks to protect annuity customers, and the FCA needs to investigate how this so-called ‘second line of defence’ is working in practice. The proportion of customers buying from their existing provider has been rising and that suggests there may still be a need to improve selling processes. In particular, the FCA needs to ensure customers who are not in excellent health do not just buy a standard annuity. Greater use of PensionWise free guidance would help give customers a better chance to buy the right product.

October 14, 2016   No Comments

What’s wrong with UK insurance industry


28 March 2014

  • Insurance industry under fire – what’s gone wrong?
  • Insurers failed to realise who their customers were – relied on inertia
  • Flawed profit models rewarded intermediaries then recouped costs from end-customers
  • Now is the time for change – modernised, flexible products and services

UK insurers have been under fire in the past few days and many must be reeling from the shock of it all.  Suddenly the landscape seems to have changed.  As an observer who has for so long campaigned on behalf of customers, it is quite astonishing to witness such regulatory action.  Of course the insurance industry is systemically important, so we do need to be careful to act in a considered manner, but there are significant issues which need to be addressed.  The hitherto captive annuity market was a classic example of how insurers fail to recognise the needs of their customers and have stayed stuck in the past when it comes to product design and customer service.

What has gone wrong in the UK insurance sector?

Failure to understand end-customers and flawed profit models:  It seems to me there are two fundamental issues.  Firstly, insurance companies have failed to recognise who their customers are and secondly, their profit models are flawed as they rely on consumer inertia and high initial selling costs being recouped over many years with often unfair charges. 

Insurance is traditionally ‘sold’ not ‘bought’ so companies considered intermediaries as their customers:  The standard mantra is that UK financial products are ‘sold’, not ‘bought’.  Whether it was ‘the man from the Pru’ or the commission-driven salesmen, insurance companies considered the intermediaries who actually brought in the funds to their products as the customers.  Salesmen, financial advisers and even employers were the ‘gatekeepers’ who collected and directed the money, so products were designed to be attractive to them.  The insurance sales force was handsomely rewarded, while the end-customer was all-too-often forgotten.

Flawed profit model relied on high initial sales commissions and customer inertia to recoup costs: The long-term savings profit model of the insurance sector was based on paying huge up-front fees to salesmen and then recouping those outlays over many years from the unsuspecting end-customer who had trusted others to look after their money.  Exit penalties were often levied because the initial commissions paid to sales staff would not be recouped if customers did not keep paying fees for many years.

Commission bias led to successive mis-selling scandals:  Commission-based sales have already spawned a succession of mis-selling scandals in the pensions and bancassurance industry, with perhaps more yet to come.  Designing products with an intermediary’s interests in mind is hardly likely to result in an industry that understands the end-user and treating customers fairly is quite a challenge if you do not know who your customer actually is.

RDR did not stop commission bias:  RDR has ended commission-driven ‘independent’ advice, but the insurance industry continues to by-pass advisers and pay commission to others who can sell their products without any advice or quality checks.  Whether it is workplace auto-enrolment schemes that force workers to pay the costs of setting up their employer’s scheme through ‘adviser charges’, or annuity sales where ‘non-advice’ brokers were rewarded with handsome commissions or tied deals to sell potentially unsuitable annuities to pensioners, the commission model has been kept in place, to the detriment of end-customers in too many cases. 

The annuity market is a classic example:  Even the most basic of concern for end-customers would have required at least cursory suitability checks, including health and marital status, before selling a standard annuity.  Yet, the insurance industry has fought for years to protect its right to foist annuities on unsuspecting end-customers at continually worsening rates without any attempt to understand their needs.  Insurers even offered ‘brokers’ a significant percentage of customers’ pension savings just for making the sale – without worrying about whether it was an appropriate sale – even though this product is completely irreversible. This is all such a shame. 

Insurance the potential to deliver so much good to so many people:  The insurance industry can provide vital products to enhance people_s lives, yet the ongoing exposure of poor practice has shattered trust in financial services.  Customers need protection against events they hope will not happen _ with insurance at fair price.  They also need savings for events they hope will happen, managed by experts who are on their side and can offer them honesty, transparency and risk control.

Too often, insurers rely on customer inertia and take advantage of people’s trust with loyalty penalties:  Insurance is meant to offer both protection and future growth at a reasonable price, yet all too often its product pricing relies on customer inertia to recoup costs from captive customers.  Even on basic house insurance, let alone complex financial products, the best deals are reserved for new customers, while existing loyalty is penalised with higher premiums.  How many of us have called our insurer at renewal time to tell them we have a better quote elsewhere, only to be immediately offered a discount.  Does that not suggest the price was too high in the first place?  The industry does not reward loyalty, quite the reverse.  That is not a sustainable model for long-term success.

Some products offer expensive guarantees – cross subsidies within the business:  Some of the legacy products sold many years ago are actually very good value for customer.  They contain guarantees that have become extremely expensive to honour and there are many parts of the insurance company  business that must cross-subsidise losses elsewhere.  Guaranteed inflation-linked returns, guaranteed bonuses, guaranteed annuity rates are all likely to result in some losses which need to be offset by charging more in other parts of the product chain.  This leaves some customers out of pocket while also making it hard for insurers to treat all customers fairly.

Financial products are not just about money, they are about people: In order to serve customers properly insurers need to understand their lives.  They are not all the same.  They need flexibility and value for money.  That means fundamentally reappraising insurance company profit models, modernising operations and delivering more flexible products and services that individuals can relate to, without jargon and reams of confusing paperwork.

The annuity market is a good place to start:  As the FCA continues its investigation into the annuity market, this would be an excellent place to look for hidden charges that have caused consumer detriment and force the insurance industry to reappraise its profit models.  Nobody should be paid commission for selling an annuity and fees should only be paid to those who have made some checks on whether that product is suitable or not.  These problems are much more recent than policies from the 1970s.

Customers need new solutions and fair treatment:  As the traditional practices of hiding fees and charges are surely at risk of being choked off by regulatory challenge, I appeal to the insurance industry to recognise its customers’ interests.  The FCA is shining lights into the dark recesses of industry practice to force modernisation.  Customers need new solutions, on-line information, apps that engage them and far more flexibility.  I believe the insurance industry can – and will – rise to this challenge.



March 28, 2014   No Comments