The FSA said that, of the 50 closed customer complaint files requested by the regulator in February 2010 as part of ongoing supervision of the firms’ complaints handling capabilities, 27 were altered by staff before they were submitted.
In addition, seven internal documents contained staff signatures forged by one member of staff.
The FSA said that the companies had failed to act with due skill, care and diligence in its responses. However, the FSA noted that most of the changes made were minor and none resulted in any consumer detriment.
The responsibility for paying the £2.17m fine will fall on UK Insurance, Direct Line and Churchill’s parent and a subsidiary of the RBS Group.
Tracey McDermott, acting director of enforcement and financial crime at the FSA, said: “This is a serious breach. The firms’ attempt to ensure that complete files were provided to the FSA backfired.
“The firms failed to give clear instructions resulting in staff making inappropriate alterations, with one individual even forging the signatures of colleagues. The firms’ management did not know what changes had been made or when.
“In this case, the alterations did not impact on the FSA’s ability to do our job. The significant penalty is, however, intended to underscore to firms that it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be.”
By agreeing to settle the case at an early stage, Direct Line and Churchill have been given a 30% discount. Without the reduction, the FSA would have fined them £3.1m.