The FSA has slapped a £500,000 fine plus £57,000 costs on Wintherthur Life over endowment failings.
The life office has set aside £10m for possible redress to as many as 10,000 customers sold endowment policies between March 1998 and December 1999.
The failings centre on a computerised point of sale system called Winteract used by its direct advisers to generate recommendations for customers based on their attitude to risk.
The system allowed customers who listed the certainty of the loan being repaid at the end of the term as a very important consideration to be sold an endowment.
Reasons why letters did not focus on the product recommended but on products not recommended.
The life office withdrew from the endowment market last year.