Homeserve slumps on mis-selling fears

Shares in Homeserve tumbled by nearly a third yesterday after the emergency repair and domestic insurance group warned that its sales staff may have mis-sold policies to customers and immediately suspended all sales operations.

Britain's self-proclaimed "fifth emergency service" has begun retraining all telesales staff after an investigation by Deloitte found "cases where its sales processes did not meet the company's required standards".

Homeserve insures 3 million people in the UK against burst pipes, broken boilers and electrical problems. It declined to say how staff had breached its standards or how many customers had been affected, but conceded it had been in discussions with the Financial Services Authority.

The company, which closed its sales operation on Friday, said sales staff would resume taking calls today but would not be able to make outgoing marketing calls until they had been retrained. Homeserve wants to ensure the scripts staff use provide clearer information on products and pricing.

The move comes as Homeserve enters its key marketing period for insurance cover on broken boilers and burst pipes, sending its shares down 28 per cent to 350p even though the company said it remained on track to reach the consensus profit forecast for the year to 31 March.

Richard Harpin, Homeserve's chief executive, said: "We will resume marketing once we are confident that our sales processes meet the standards that we and our customers expect."