The Financial Services Authority (FSA) has fined Hastings Insurance Services £735,000 for failing to treat cus- tomers fairly in relation to the cancellation of 4,550 incorrectly priced car insurance policies.
Last summer, due to an internal system error, the broker provided inaccurate quotes that resulted in some customers paying lower premiums than they should have. When it discovered the error, Hastings invoked a clause in the contracts to cancel the policies.
The FSA said that Hastings had been too quick to cancel and should have given "sufficient consideration to paying the premium shortfall to the insurance provider or investigating other possible remedies".
In a damning conclusion, the City regulator added that the way in which Hastings had cancelled policies indicated that: "The firm focused on the financial cost to itself and did not properly consider the alternatives or the detrimental effect on customers."
As a result of the FSA ruling, Hastings has reviewed its service standards and will write to all the customers affected and consider offering compensation.
The broker agreed to settle the case at an early stage of the investigation and therefore received a 30 per cent discount on the fine. Without that, the penalty would have been in excess of £1m.