Notice of Undertaking

London General Insurance Company Limited

Summary

London General Insurance Company Limited (LGI) has agreed to make changes
to a term in its Extended Warranty Protection Policy (the policy). Nationwide
Building Society (Nationwide) provides the policy to customers who have a
Nationwide Building Society FlexPlus current account. Lifestyle Services Group
Limited (LSG) administers the policy.

LGI has given us an undertaking, under the Consumer Rights Act 2015 (the
CRA), in relation to the term that sets out what items are covered under the
policy. This is because we had concerns that the term was not expressed in a
manner that was transparent, as it was not written in plain and intelligible
language as required under the CRA. As a result, we were concerned that
customers may be confused about whether certain items were covered by the
policy, and therefore whether they could make a claim.

We summarise our concerns and the action the firm has taken below.

Why did we have concerns?

The policy set out a list of items that were covered, preceded by the wording
“Items such as”. In our view, this meant the list contained examples of items
that were covered. However, other information (including information on
Nationwide’s website) indicated that only the items in the list were covered by
the policy.

In our view, the difference between the wording of the term and the other
information consumers could access about the policy meant that the term was
capable of having two different meanings. This could have caused confusion to
consumers about whether certain items were covered by the policy, and
therefore whether they could make a claim.

We also had concerns that LGI had rejected claims made by consumers if the
item claimed for did not appear in the list.

What has the firm done?

LGI has agreed that the relevant term was not as clear as it could or should
have been.

LGI, together with Nationwide and LSG, has reviewed the policy and LGI has
amended the term as follows:


to remove the words “such as” from the term;


to increase the number of items that appear in the list of items covered
under the policy and


make it clear that only the items listed in the term are covered.

LGI has amended their claims process in order to consider claims using a wider
list and broader interpretation of items covered until the new term is in use.

LGI has reviewed past claims and paid redress to consumers where they have
found that claims had been incorrectly rejected because the item claimed for did
not appear in the list. As a result, LGI has paid in the region of £47,000 redress
to approximately 300 consumers.

LGI, Nationwide and LSG have fully cooperated with us in resolving our
concerns.

What does this mean for customers?

LGI has confirmed that:

• The new term gives greater clarity and certainty to consumers about what
items are covered under the policy through removal of the “such as” wording
from the policy. The list of items covered is clarified in an expanded list of
specific items that are covered. LGI has included the new wording in new
contracts from 21 April 2017.

• Until the new term is in use, claims received are being assessed against a
wider description of items covered and that a broad and fair interpretation of the
current policy term is applied.

• It has reviewed all past claims going back to November 2014 (when the term
was introduced) which may have been declined as a result of the way the term
was interpreted. Consumers have received redress where claims had been
incorrectly rejected, based on the wider, non-exhaustive application of the “such
as” policy term.

Nationwide has informed existing customers about the new term.



Undertaking from London General Insurance
Company Limited

London General Insurance Company Limited (LGI) has given this undertaking to
the FCA under the Consumer Rights Act 2015 (the CRA) in respect of the
Nationwide FlexPlus Account Extended Warranty Protection Policy (December
2015).

Term 3A of the policy stated:

Section 3A ‘What you ARE covered for’
“You can cover unlimited eligible appliances or equipment. Items such as:


Cooker hood


Digital TV receiver excluding Sky Boxes


DVD / BlueRay player


Free standing cooker


Fridge, Freezer or Fridge-freezer


Home Cinema / surround sound system


Vacuum cleaner


Laptops / tablets


Microwave oven


Radio / hi-fi system


Washing machines, Tumble dryers or Washer dryers

If you’re unsure as to whether an appliance is covered or not, please contact
us on 0800….”

Applying the CRA

Section 68(1) of the CRA states that firms are required to “ensure that a written
term of a consumer contract…is transparent”. Under Section 68(2) of the CRA, a
term is transparent if “…it is expressed in plain and intelligible language and it is
legible.”

In our view, the term was not in plain and intelligible language under the CRA
because the policy set out a list of items that were covered, preceded by the
words “Items such as”. In our view, this meant the list contained examples of
items that were covered. However, other information (including information on
Nationwide’s website) indicated that only the items in the list were covered by
the policy.

In our view, the difference between the wording of the term and the other
information consumers could access about the policy meant that the term was
capable of having two different meanings. This could have caused confusion to
consumers about whether certain items were covered by the policy, and
therefore whether they could make a claim. Under Section 69 of the CRA, where

a contract term in a consumer contract could have different meanings then it
must be applied in the way that is most favourable to the consumer.

How the term has been changed

LGI and Nationwide have informed us that the wording “such as” was inserted
into term 3A in November 2014. They have also informed us that the items
listed in that term had been applied as an exhaustive list of items covered under
the policy when handling claims.

LGI has agreed that the wording of the policy was not as clear as it could or
should have been and could have caused uncertainty for customers over which
items were covered under the policy.

LGI has agreed to improve the clarity of the term by making the following
changes to it:


remove the words “such as” from the term;


to expand the list to include a wider number of items that are covered by
the policy; and


make it clear in the policy and any supporting materials that only the
items on the list are covered.

The firm was fully cooperative in providing this undertaking.

Undertaking published 12 July 2017.

Legal Information

As a regulator, we, the Financial Conduct Authority (FCA), can challenge firms
using terms that we view as not being transparent under Part 2 of the Consumer
Rights Act 2015 (CRA). We review contract terms that we come across in our
supervision of firms. This includes contract terms that are referred to us by
consumers, enforcement bodies and consumer organisations. This has led to
London General Insurance Company Limited to undertaking to replace the term
that we consider is likely not to be transparent.

We have a duty under the CRA to notify the Competition and Markets Authority
(CMA) of the undertakings we receive. The CMA has a duty to publish details of
these undertakings, which it puts on www.gov.uk. We also publish the
undertakings on our website. Both publications will name the firm and identify
the specific term and the part of the CRA that relate to the term’s transparency.

Even if firms have not given an undertaking or been subject to a court decision
under the CRA they should remain alert to undertakings or court decisions

concerning other firms as part of their risk management. These will be of
potential value in showing the likely attitude of the courts, the FCA, the CMA or
other qualifying bodies to similar terms or terms with a similar effect.

Ultimately only a court can determine the fairness or transparency of a term
and, therefore, we do not recommend terms that have been revised by a firm to
address our concerns as being definitely fair or transparent. We cannot approve
terms for the purposes of the CRA; it is for firms to assess the fairness and
transparency of their terms and conditions under the CRA and in the context of
the product or service in question.

It is important to bear in mind that wording that is fair or transparent in one
particular agreement is not necessarily fair or transparent in another. Where we
accept an undertaking given to us from a firm to revise a term, this means that,
on the evidence currently available we consider the term to be improved enough
that further regulatory action is not required.