During two periods between July and September 2007, Hastings discovered that an internal system error caused inaccurate insurance quotations to go out to customers. This resulted in some of them paying significantly lower premiums than they should have.
Hastings cancelled the policies and the regulator says in doing so it failed to give sufficient consideration to paying the premium shortfall to the insurance provider or investigating other possible remedies.
The FSA believes that the way the policies were cancelled and the service that the firm gave to its customers following the cancellation showed it focussed on the financial cost to itself and did not properly consider the alternatives or the detrimental effect on customers.
The FSA also found that the firm had invoked a cancellation clause which was not generally intended to be used in circumstances such as these.
FSA director of enforcement Margaret Cole says: “The FSA has stressed to all firms the importance of treating their customers fairly but it is clear from our investigation that Hastings put its own interests ahead of those of its customers.
“The firm failed to consider properly what effect canceling policies might have on its customers which illustrates that the fair treatment of customers had not been embedded into its corporate culture as our TCF principle clearly requires.”