The Financial Conduct Authority (FCA) has fined insurance intermediary HomeServe Membership Limited (HML) £30.6m for breaching a series of principles including incentivising sales over quality .
West Midlands-based HML, which advises on home emergency and repairs insurance cover, was found to have breached Principles 3, 6 and 7 between 2005 and 2011.
HML's board was found to have failed to keep adequate oversight and to detect widespread misselling, which later led to the firm suspending all its telephone sales.
The FCA said the firm had effectively created a "culture that placed more importance on generating profits".
There was also a bias within the remuneration structure for the complaint handling teams, which, the FCA found, incentivised staff to close as many complaints as possible, creating a risk that complaints were not handled fairly and that 8,481 customers did not receive appropriate redress.
The FCA said: "HML failed to embed a robust culture with adequate focus on compliance and treating customers fairly. In particular, it incentivised volume over quality in sales and complaints handling through its remuneration policy, and its senior management were insufficiently engaged with compliance matters."
HML's senior management did not undertake adequate regulatory training, while its antiquated IT software failed to detect errors occurring in pricing calculations and in checks for any duplication of insurance cover.
This resulted in 34,859 customers being overcharged and 8,796 customers being charged for duplicate cover that they did not need, the FCA said.
It also found that between 2006 and 2011, HML failed to provide clear, fair and not misleading information to customers about two of its insurance policies at the point of sale, which led to an estimated 69,000 customers being mis-sold the policies.
The FCA said it considered that the failings identified at HML were "serious, systemic, long running and extending across many key aspects of the business".
HML's failings were particularly serious given that a significant proportion of its customers were of retirement age and therefore more vulnerable, the FCA said.
Failings at HML started after it developed a profit driven culture after a rapid expansion in the growth of its home emergency and repair
insurance business, the FCA found.
However, the firm has now accepted that it needs to restore its customer focus and move away from a profit-driven culture, the FCA said.
The firm has voluntarily ceased new sales and marketing activity and also strengthened its board.
HML is expected to pay a total of £16.8m in customer redress from the identified failings, £12.9m of which has already been paid out.
Caring for children and elderly relatives
Similar to June 2007
Square Mile’s series of informal interviews
Fine reduced to £60,000
Two roles created