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A probe by a Financial Services Authority has revealed that insurance companies are failing to comply with rules designed to ensure consumers get the best deal.
The City watchdog uncovered the failings in “wake up” letters from insurers targeted at people approaching retirement.
The letters highlighted the “open market option” [OMO] which offers the customer the option to scour the market for most competitive annuity contract, rather than buy it from the insurer with which their pension has been saved.
In a document to insurance companies, FSA says that nearly 40% of the wake-up material reviewed did not meet regulatory standards.
However, FSA also found that materials from 24 firms could be improved to meet a standard of good industry practice.
The regulator said that 10 companies were found to produce letters that clearly spelt out the options, including the benefits of the OMO.
The regulator said that the 10 companies involved breached all regulatory standards.
This is not the first time Insurance companies have come under scrutiny from the FSA, earlier in the week, insurance comparison websites were found to be engaging in bad practice.
The website comparison companies were accused of not providing customers with fair, accurate or honest information on their sites regarding their featured products.
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