FCA hands out largest ever retail fine of £30m

The Financial Conduct Authority has issued its largest ever retail fine of just over £30m to insurance intermediary HomeServe Membership Ltd, after finding “serious systemic and long running failings, extending across many key aspects of its business”.

The FCA said the firm was fined £30,647,400 as during the period from January 2005 to October 2011 the intermediary mis-sold home emergency and repairs insurance cover policies.

It also failed to investigate complaints adequately, its board was “insufficiently engaged with compliance matters” and its senior management “reluctant to address risks to customers if there was a cost implication involved”, the FCA added.

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Following a rapid expansion in the growth of its business, HomeServe developed a profit driven culture where profit targets were met by taking advantage of existing customers in pursuit of sales.

To date, HomeServe has paid approximately £12.9m to affected customers in redress and is expected to pay a total of £16.8m.

Tracey McDermott, the FCA’s director of enforcement and financial crime, said: “This is a serious case, one that has warranted our largest retail conduct fine and generated a sizeable bill for consumer redress.

“HomeServe is another example of a firm that has acted without proper regard for its customers over a long period of time.

“HomeServe promises to provide customers with peace of mind when things go wrong. In fact the firm’s culture, controls and remuneration structures meant that staff were focussed on quantity not quality and there were customers that paid the price for that.”

Simon Morris of international law firm CMS added: “This astonishing fine shows how seriously the FCA views misconduct impacting retail investors.

“The real interest, though, lies in the small print – the £30m fine is based on 10 per cent of turnover, the figure used for medium-serious breaches. The figure is 20 per cent for really serious breaches, which indicates how high FCA fines can and doubtless will be in the future.”