Direct Line and Churchill have been fined nearly £2.2 million by the Financial Services Authority (FSA) for failure to conduct their businesses with due skill, care and diligence.
Complaint files were altered
The FSA has imposed a fine of nearly £2.2 million for failings by car and home insurers Direct Line and Churchill Insurance, both owned by the Royal Bank of Scotland (RBS), to prevent files that the FSA had requested from being improperly altered.
The fine relates to the collation of 50 complaint files requested by the FSA for review, 27 of which were altered improperly before they were submitted.
Management had advised staff to ensure that files were in a state that would pass FSA inspection and they were encouraged to take immediate action.
Fine could have been higher
When the 50 files were submitted to the FSA for review, the FSA received information that some of the files had been altered or created. An investigation by the FSA revealed that 27 files had been altered and seven internal documents were found to contain staff signatures forged by one member of staff.
As the majority of the alterations were relatively minor in nature and none of the changes resulted in any consumer detriment, the fine was lower than it would otherwise have been.
The insurers agreed to settle the case at an early stage and therefore qualified for a 30 per cent discount. Without the reduction the FSA would have fined them £3.1 million.
A serious breach
Tracey McDermott, the FSA’s acting director of enforcement and financial crime, said: ‘This is a serious breach. The Firms’ (Direct Line and Churchill) attempt to ensure that complete files were provided to the FSA backfired.
‘Direct Line and Churchill failed to give clear instructions resulting in staff making inappropriate alterations with one individual even forging the signatures of colleagues. The Firms’ management did not know what changes had been made or when.
‘In this case, the alterations did not impact on the FSA’s ability to do our job. The significant penalty is however intended to underscore to firms that it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be.’