UK Insurance Ltd, the parent company of Churchill and Direct Line, has been fined £2.17m by the FSA for doctoring its customer complaint files.
In February 2010, the regulator conducted a review of 50 closed customer complain files from the two businesses to examine its complaints handling capabilities.
It found 27 of these files had been altered before being sent to the FSA, while seven signatures had been forged by a single member of staff.
The FSA said Direct Line and Churchill breached Principle 2 by acting without due skill, care and diligence in the way they responded to its requests for closed complaint files.
However, the firms' actions did not result in any client detriment, the FSA said.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, said: "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.
"In this case, the alterations did not impact on the FSA's ability to do its 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."
Direct Line and Churchill were taken over by UK Insurance in December 2011.
UK Insurance is a subsidiary of RBS Insurance, a dvision of Royal Bank of Scotland.
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