Mis-selling scandal costs Homeserve £10 million

| November 22, 2011
Mis-Selling scandal costs Homeserve £10 million

Homeserve revealed today that it expects to spend around £10 million on overhauling its sales practices following the recent mis-selling scandal.

The decision by repair and insurance group Homeserve to suspend sales activity after problems with its selling practices came to light will also result in significant costs.

The reduction in marketing is expected to lead to a 5 per cent fall in customers, cutting renewals income in 2013 by around £15 million.

The group has suffered a number of market downgrades since it was forced to close its telesales activities, with its value falling by 50 per cent.

Homeserve says it has made progress in retraining call centre staff and re-writing sales scripts and has received feedback from the Financial Services Authority (FSA) on the changes.

The FSA has identified faults in the way Homeserve handled complaints, which are now being rectified.

A problem with pricing transparency on complete cover policies is being addressed but it is not yet know how many customers were affected.

Chief Executive Richard Halpin said: “We were disappointed to have found evidence of a shortfall in standards in our UK sales and marketing procedures.

“We are taking decisive action to address these issues to ensure that our practices meet the high standards that both we and our customers expect.”

Homeserve revealed the costs associated with the mis-selling scandal as it announced its first half results.

The company recorded a 10 per cent increase in pre tax profit to £23.5 million for the six months to the end of September and says it is confident of the outlook for 2012 and beyond.

First half revenue increased 25 per cent to £213.1 million and UK customer retention rates remained stable at around 82.5 percent.

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