The Financial Conduct Authority (FCA) has fined the insurance division of Lloyds Bank nearly £90.7 million ($168 million) for “misleading” its home insurance customers about their premium renewal.

The UK regulator says in the nearly nine million letters sent out to existing policyholders between January 2009 and November 2017, Lloyds Bank General Insurance used language to the effect that they were receiving a “competitive price” at renewal.

FCA says the business did not substantiate the “competitive price” language included in the renewal communications by taking steps to check that it was accurate.

Policies were renewed in respect of approximately 87% of renewal communications containing this language.

“Firms must ensure their communications with customers are clear, fair and not misleading,” Executive Director of Enforcement and Market Oversight Mark Steward said. “[Lloyds Bank General Insurance] failed to ensure that this was the case.

“Millions of customers ended up receiving renewal letters that claimed customers were being quoted a competitive price which was unsubstantiated and risked serious consumer harm.”

Mr Steward says the actions caused a risk of harm for the majority of the home insurance customers who received these communications, because it was likely that the premium quoted to them at renewal would have increased when compared to their prior premium.

“Renewal premiums offered to customers would also likely have been higher than the premium quoted to new customers, or customers that chose to switch insurance provider,” Mr Steward said.

“This was particularly likely to be the case for customers who renewed repeatedly.”

While the business did rewrite its renewal communications and began to remove “competitive price” wording from 2009 onwards, the FCA says “the language remained in a substantial number of renewals communications throughout the relevant period despite repeated missed opportunities to address it”.

During the regulator’s investigation into the matter, it was discovered the business informed about half a million customers that they would receive a discount based on either their “loyalty” - on the fact they were a “valued” customer - or otherwise on a promotional or discretionary basis where the described discount was not applied and was never intended to apply.

“This affected approximately 1.2 million renewals, with approximately 1.5 million communications sent by [Lloyds Bank General Insurance],” Mr Steward said.

“The erroneous discount language was only identified and rectified by [the business] during the course of the FCA’s investigation.”

FCA says the business has voluntarily made payments of approximately £13.5 million ($25 million) to customers who received communications that erroneously referred to the application of a discount when none was applied.

It says the refund has been taken into account in the assessment of the financial penalty.

FCA has introduced news rules that will come into effect in January requiring insurers to offer renewing customers a price that is no higher than they would pay as a new customer.

The regulator says removing the “loyalty penalty” will save consumers about £4.2 billion ($7.8 billion) over 10 years.