FSA fine Direct Line and Churchill for tampering with complaints

Two insurance firms, Direct Line and Churchill, have been fined by the Financial Services Authority (FSA) after submitting customer complaint files for review that had been improperly altered.

Direct Line and Churchill are two of the UKs’ largest insurance companies. Both are part of UK Insurance, which owned by the Royal Bank of Scotland (RBS). RBS have previously been fined £2.8 million for for failing to adequately deal with customer complaints.

The FSA indicated that the changes that had been made to the complaint files were minor and didn’t affect customers. However, some staff signatures were also found to have been forged.

This led them to issue a fine of £2.17 million to UK Insurance.

The FSA indicated that had RBS failed to co-operate with the regulator, the fine would have been £1 million more.
In 2010, the FSA requested a sample of 50 complaints from the insurance subsidiaries of RBS.

This sample complaints were to be reviewed by the FSA to see how the complaints had been handled.

The management of the insurance companies first handed their complaints to some external accountants for review. They indicated that nearly 30% were likely fail the the FSA review.

Both companies then told their staff to make sure that the closed complaints would pass the assessment. The files were then passed on to the FSA.

After a tip off, the FSA found that over half of the 50 files that had been sent for review had been altered. They also found seven cases where staff signatures had been forged.

Tracey McDermott, the acting director of enforcement and financial crime for the FSA, indicated that the alterations did not affect their ability to review the complaint files. However, she pointed out that there had been a ‘serious breach’ of the rules.

Ms McDermott sad: “The firms’ attempt to ensure that complete files were provided to the FSA backfired. The firms 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.”

Ms McDermott went on to point out that the size of the fine that the FSA issued was to make clear that when firms provide material to the FSA, it is important that it must ‘reflect the picture as it is, not as they might like it to be.’

The FSA indicated that they found the insurers had failed to apply the required skill, care or attention when handling customer complaints.

The chief executive of RBS Insurance, Paul Geddes, indicated their regret over failing to meet the standards set by themselves and the FSA. He indicated that RBS had taken steps to avoid any similar breach of the rules in future.

European rules which govern the £45 billion bailout that was handed over to RBS require thatthey sell their insurance businesses. RBS are currently priming the two insurance companies for sale next year.