RBS Insurance has been fined £2.17m after staff from Direct Line and Churchill altered customer files and forged signatures in an attempt to pass a regulatory inspection.
The Financial Services Authority said the insurers, owned by Royal Bank of Scotland, had encouraged staff to ensure closed complaint files were complete after 28 per cent had failed a sample review.
In June 2010 the FSA discovered 27 of 50 files sent for a further review had been altered by RBS Insurance staff. Seven documents contained staff signatures forged by one member of staff. The FSA imposed the fine for failure by the firms to conduct their businesses with due skill, care and diligence. The fine would have been £3.1m if RBS had not settled early to qualify for a 30 per cent discount.
Tracey McDermott, acting director of enforcement and financial crime, said: "This is a serious breach. The firms' attempt to ensure that complete files were provided to the FSA backfired."
Paul Geddes, the chief executive of RBS Insurance, said: "We are very disappointed that we did not meet the standards we expect of ourselves."