Property maintenance company HomeServe is facing the biggest ever fine from the Financial Conduct Authority (FCA) for problems to do with its insurance products.
HomeServe – which provides insurance against faulty boilers, burst pipes, blocked drains and other household problems – has had to warn investors that it may have to stump up £34.5 million to the regulator as a result of an investigation into historic selling practices.
The firm, which has over three million insurance customers, had previously warned the FCA that it only expected to pay out around £6 million.
The investigation centres on whether the company sold insurance products to customers that were appropriate for their needs. Its sales techniques, the clarity of information it provided to potential customers and complaints handling are all being looked at by the FCA.
Neither HomeServe nor the FCA will comment on the matter while the investigation is ongoing but HomeServe is due to issue its interim management statement to investors on 5 February 2014.
In the statement to shareholders, the company said: "Homeserve will now engage in discussions with the FCA to finalise the notice."
Customers who have been affected will have to wait until then to find out what compensation they may be entitled to.
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In April 2012, HomeServe was fined £750,000 by communications regulator Ofcom for making an excessive number of silent and abandoned calls. The following month, the firm admitted that it was being investigated by the Financial Services Authority (the predecessor of the FCA).
In May 2013, the company said it had set aside £6 million to cover the costs of the investigation including any potential fines.