FSA fines Royal Liver £550,000 for policies mis-selling

The with-profits policies were bundled together with life insurance contracts, which were not suitable for the majority of customers. As a result of the additional life insurance premiums payable, some customers ended up getting back less from their policies than they had put in.

The FSA said the situation was made worse by the fact that a significant proportion of those affected were over 59. The life insurance policies were almost certain to be totally unsuitable for these customers. Margaret Cole, the FSA's director of enforcement, said: "This was a serious case of mis-selling, particularly as a significant number of Royal Liver Assurance's customers were nearing retirement age and did not need the cover they were sold.

"The failings were systemic and arose from weaknesses in the firm's sales and compliance processes and persisted over a long period of time. Firms must make sure that they take account of all products which may be suitable when making a recommendation."

Royal Liver said in a statement: "The relevant contracts were withdrawn in the UK in 2004 and all policyholders affected have been contacted and offered a full refund of premiums plus interest at an appropriate rate.

"Royal Liver has worked closely with the FSA on this issue to ensure that the appropriate lessons have been learned and controls have been strengthened as a result."

The regulator said the fine would have been higher were it not for Royal Liver's co-operation.

Royal Liver is one of the country's oldest life insurers, founded in 1850. Its headquarters on the Liverpool docks is one of the oldest buildings in the city.

The £550,000 fine is the 22nd largest to be handed down by the FSA, and is relatively large in comparison to the company's size. Shell's £17m fine for overstating its oil reserves in 2004 remains the largest FSA penalty.