FSA fines insurance companies £2m for altering complaints Published on Thursday 19 January 2012 00:59 Insurance firms Direct Line and Churchill have been fined £2.17 million for fudging complaint files, including signature forgery, the City watchdog has said. Out of 50 complaint files requested by the Financial Services Authority (FSA) for review, 27 were "altered improperly" before they were submitted by the firms, which are owned by Royal Bank of Scotland. The FSA received the files in April 2010 and at the same time was tipped off that some of the paperwork was changed before they were sent, while it also discovered that seven internal documents contained staff signatures forged by one member of staff. Tracey McDermott, the FSA's acting director of enforcement and financial crime, said: "This is a serious breach. The firms failed to give clear instructions, resulting in staff making inappropriate alterations, with one individual even forging the signatures of colleagues. In February 2010, the FSA informed Direct Line and Churchill that it would be reviewing files to assess the effectiveness of the companies" complaint-handling processes. In preparation for this review, the firms asked a major accountancy firm to do a practice review and discovered that 28 per cent of the 110 files submitted failed to meet complaint-handling requirements. Before the two companies sent the 50 files off for the official review with the FSA, they conducted a conference call with staff in which they warned that any similar failure could lead to enforcement action for the firm. Staff were also told that, if they were found not to be operating to the required standard, they could face disciplinary investigation. Following the warnings to staff, the firms sent off the files, which were later discovered to contain the altered paperwork. Paul Geddes, chief executive of RBS Insurance, said: "We very much regret the findings of the FSA investigation. Although no customers were disadvantaged, we are very disappointed that we did not meet the standards we expect of ourselves and which the FSA expects of us. A spokesperson for consumer organisation Which? said: "This is a serious breach and seems to indicate that the firms were not taking complaints handling seriously and failing to record proper evidence about why they came to decisions." The two firms agreed to settle the case at an early stage and qualified for a 30 per cent discount - without the reduction, the FSA would have fined them £3.1m. In August 2010, the watchdog slapped what remains a record fine of £2.28m on the insurer Zurich after the firm lost the personal details of 46,000 of its general insurance customers. The data was on a tape that went missing in South Africa during a routine transfer two years ago. The loss came to light in October 2009. The FSA said Zurich UK had put its customers at risk of fraud and other crime by failing to protect the data, which included sensitive information including credit card and current account details.