£735,000 fine imposed for failing to provide customers with adequate assistance after policy cancellations.
Hastings has been fined a record £735,000 for failing to treat its customers fairly, as the FSA hikes fines to deter other companies from breaking the rules.
The sanction is the largest since general insurance intermediaries came under FSA regulation in January 2005. It comes as IAG, Hasting’s Australian parent company, searches for a buyer for the motor broker.
The fine is a result of Hastings cancelling about 4,550 incorrectly priced car insurance policies. An internal system error was responsible for the problems identified by Hastings in two separate periods between July and September 2007.
According to the FSA, Hastings cancelled those policies but failed to give sufficient consideration to paying the premium shortfall to the insurance provider or investigating other options, such as giving customers greater notice of cancellation.
Margaret Cole, FSA director of enforcement, said: “The FSA has stressed to all firms the importance of treating their customers fairly but it is clear from our investigation that Hastings put its own interests ahead of those of its customers.”
The FSA found Hastings had invoked a cancellation clause which was not intended for use in such circumstances. Firms are permitted to cancel policies but only where customers provide inaccurate or incomplete personal information.The subsequent support given to customers with cancelled policies was deemed by the regulator to be in the company’s own interests and did not consider other options available to customers.
A Hastings spokesman said: “Hastings Direct has reached a settlement with the FSA over cancellation of policies resulting from a pricing error. After assessing the situation, Hastings contacted every affected customer and refunded unearned premiums to those who decided to discontinue their cover.”
As part of the settlement, Hastings will write to every affected customer explaining that they may be entitled to compensation. The company was unable to provide an estimate of the cost of compensation.
The spokesman added: “Hastings is pleased the FSA has acknowledged the breach was not deliberate. The company has taken substantial remedial action in relation to its systems and management.”
The fine would have totalled £1.5m had Hastings not settled at an early stage.