The Central Bank of Ireland has imposed a fine of €675,000 on AXA Insurance Ltd for not living up to 'minimum competency' standards and for breaking the Consumer Protection Code of 2012.

The Central Bank repremanded the firm for failing to ensure that individuals operating a prescribed script function between January 2008 and April 2012 referred requests for information and advice to an appropriately accredited individual, in contravention of the MCR and the MCC; for failing to ensure that individuals operating a prescribed script function between January 2008 and April 2012 were supervised by an appropriately accredited individual, in contravention of the MCR and the MCC; for failing to maintain a register of accredited persons in the format prescribed by the MCC; and for failure to comply with the Complaints Resolution provisions of the code of 2012 over a six-month period between January and June 2014. The firm has owned up to its transgressions.

The MCR and its successor as of December 2011, the MCC, were introduced to establish professional standards for financial service providers, with particular emphasis on areas dealing with consumers. They are designed to compel people who act for or on behalf of regulated entities in the provision of advice and associated activities are competent enough to deal with consumers. In accordance with the standards, regulated entities must ensure that staff who provide advice to consumers about retail financial products hold qualifications of the regulator's choosing or have gained appropriate levels of experience on the job. This is the first enforcement action to be taken against a firm for breaches of the MCC since it replaced the MCR. The protection of consumers of financial services remains a reasonably high priority for the Central Bank.

AXA is a non-life insurance undertaking, authorised by the Central Bank under the European Union (Insurance and Reinsurance) Regulations 2015 to carry out non-life insurance business. Motor insurance is a large part of its business and it is the second largest insurance provider in the Republic of Ireland. In November 2014 it fell foul of the Central Bank’s Consumer Protection Supervision Division when it conducted on-site inspections at the firm’s branch office in Derry and head office in Dublin, paying special attention to the claims department processing motor and property claims. Members of that team followed a script and had little autonomy.

Breaches of the MCC and MCR

The MCR required firms to ensure that people who followed such a prescribed script had to refer requests for additional information and advice to an appropriately accredited individual and be supervised by such a person; between January 2008 and November 2011, this was not happening. Meanwhile, sections 1.6(d) and (e) of the MCC require firms to ensure that script-readers refer requests for information and advice that are outside the specific content of the script to a person who qualified or 'grandfathered in' for that function, while operating under the supervision of one of those two types of people; between December 2011 and April 2012, the firm failed to do this as well.

A 'grandfathered' arrangement exists when an experienced individual who was carrying out accredited activities before 1 January 2007, continued to do so after that date.

Section 2.3.1 of the MCC requires firms to maintain a register of all accredited persons acting as, for or on behalf of the firm. The register must include specific details as set out in (i)-(vii) of Section 2.3.1 (i.e. name and qualification details of the accredited person). As at 4 November 2014, the firm’s register was woefully lacking.

Breaches of the code

Chapter 10, Provision 10.9 of the code of 2012 requires firms to have written procedures in place for the proper handling of complaints. Provision 10.10 requires them to maintain up-to-date logs of all complaints, done to a certain format. In the first six months of 2014, the firm transgressed by failing:

•     to provide complainants with an acknowledgement of their complaint within five business days of the complaint being received;
•     to provide written updates to complainants about the progress of this-or-that complaint investigation at 20-day intervals at the longest;
•     to resolve a complaint within 40 business days (or if not so resolved, to inform the complainant for the resolution of the complaint); and
•     on the completion of an investigation, to provide complainants with all of the required information within a five-day time-frame.

The effect of the misconduct

As happens so often in regulatory cases, the regulator could fine no harm done to any consumer. In deciding the appropriate penalty to impose, however, it had to take into account the long duration of the breaches of the MCR and the MCC, i.e. four years and four months in total). By co-operating immediately the firm obtained the maximum settlement discount of 30%, which is modelled on the UK's.