Simon Read: The fear factor leads to poor management at financial firms

Motor insurers Direct Line and sister company Churchill were fined £3.1m this week after staff at the firms forged signatures on files in the hope they would meet rigorous regulatory standards. The fine was reduced to £2.2m because of early payment by the insurers, both owned by Royal Bank of Scotland.

But the Bank's agreement to settle early is almost the only happy thing to come out of the affair. The other consolation is that the tampered files involved complaints that had already been dealt with, so no customers suffered because of the companies' rule-breaking.

Otherwise the background to the fine by the Financial Services Authority reveals a shocking tale of ineptitude and fear. The ineptitude comes from the insurers which allowed almost three out of 10 of its complaints files to be inadequate, according to an independent review of a selection of them by outside accountants.

The actions of Direct Line and Churchill then proved to be heavy-handed. Managers warned staff that if the files weren't brought up to scratch, they could be sacked.

It was in this climate of fear that staff resorted to forgery. And you can understand why. The way the situation was handled led to 54 per cent of the files sent to the City Watchdog for review being altered. So the initial relatively minor problem of inadequate record-keeping was inadvertently exacerbated by poor management into file-tampering and forgery, a much more serious offence.

I'm not going to criticise Direct Line and Churchill for this any further as I believe that the problem of poor management is endemic across the financial services industry and encompasses banks, building societies, pension and investment companies as well as insurers.

So many firms seem to have completely failed to cope with the tighter regulations that have crept into law in recent years that it's clear that many more fines are in the offing for similar cock-ups.

Part of the problem is that many are using antiquated and outdated computer systems that have been worsened by being bolted together during the many mergers and takeovers we've seen in the last decade or so.

And that legacy is likely to be felt through problems for many years to come. The solution? I'm afraid it'll need a revolution in financial services to change and improve things.

New banks and insurers could find the fact they have modern up-to-date systems could give them a huge competitive advantage over traditional rivals stuck with creaking technology that they can't really afford to replace. Which could mean the battle for our custom moving to service, rather than price.

Millions of people are cutting back on fuel and food bills to help pay their rent or mortgage, housing charity Shelter warned this week. It's not the first time we've heard such warnings and it sure won't be the last. But the latest figures are particularly alarming.

Shelter's research suggests that in the last year more than one in five people have spent less on gas and electricity to help pay their rent or mortgage. Frighteningly, more than a third have spent less on food because they are struggling to cope with housing costs.

Families should not be forced to make such tough choices. What would you do if you had to choose between heating your house or flat, putting a decent meal on the table or paying for your home?

Here's a statistic that is simply unacceptable in 2012 – every two minutes someone in Britain is at risk of losing their home. We should all be ashamed by that. It's time to urge the government to restore basic help to the needy. Before more of them are thrown out on the street.

Finally a word about SEO, or search engine optimisation, to give it its full title. This is the process where online firms put words in articles on their websites that they know will help them get to the top of Google searches.

So if I wanted to attract more readers to this article online, I might mention Justin Bieber or superinjunction, for instance. It's marketing trickery. But it's not always harmless.

Last week two payday loan firms were forced to take down inappropriate articles encouraging students to take out short-term credit. Both blamed SEO. It's something for the regulators to look at I reckon.

s.read@independent.co.uk