The FSA this week banned a general insurance firm for improper conduct of business for the first time since it took over regulation of the industry in January last year.
Travel insurance provider Xsavi was struck off by the regulator for "failing to conduct its business in compliance with proper standards and for having inadequate financial resources".
Between 1 and 25 February 2005, Xsavi claimed to be acting as agent for an insurer and to have authority to bind the insurer when it did not.
As a result, 2,000 customers believed they were covered when there was no insurance in place.
Andrew Honey, head of insurance in the FSA's small firms division, said: "This is an important message for general insurance firms.
"We will take action against firms that fail to comply with our rules."
Xsavi became insolvent in September 2005, and was therefore also found to have breached FSA rules relating to maintaining adequate financial resources.