'RBSI now needs to closely watch its step'

What an earth was going on at Direct Line and Churchill?

The two RBSI-owned direct insurers have been hit with a £2.2m fine and verbally rapped on the knuckles for tampering with customer complaint files.

Crucially, the FSA says that management had no clue what changes were made to the files and when. This is an appalling error when you consider that RBSI spent nearly a year reviewing its customer complaints handling systems before the crucial FSA spot check of 50 files.

When it came to the crunch, middle management was left severely wanting. It looks like the tampering was done by low-level customer relations staff. They either misunderstood instructions or, perhaps, were so worried about disciplinary action that they tried to cover up potential errors in files.

Can Paul Geddes be blamed for these transgressions? They took place on his watch: Geddes was parachuted in as RBSI’s chief executive in August 2009 and the file tampering took place in April 2010.

But, remember, RBSI is a vast company - the largest personal lines insurer in the company. Geddes can’t be expected to oversee every single file and document, but instead must have faith in his management.

This time he was let down, and you would imagine that he’s swung the axe on the culprits.

Geddes, with many millions in support from his state-owned banking parent, has got the profits rolling in once again at RBSI. He’s done a good job in turning the company around. The City will be pretty forgiving about this fine and instead focus on the financials of the company for the flotation in the second half of 2012.

That’s dependent, of course, on this being the final skeleton to drop out of the closet. Any more howlers like this and investors will start asking serious questions about the top management and corporate governance.