The UK Financial Services Authority has fined an insurance company £2.8 million ($4.5 million) for failing to develop a culture of ensuring that its customers were treated fairly.

The FSA said that it has sanctioned Combined Insurance Company of America for “failing to embed fully a culture that ensured its customers were treated fairly”. On top of the fine, the FSA says that CICA has agreed to carry out a review of past business to identify any customer detriment and pay redress.

Indeed, while the FSA says that its concerned that widespread failings at the firm may mean that customers have suffered financial detriment, but the regulator hasn’t made any findings of that, nor is it alleging that customers were sold unsuitable policies or suffered detriment. Rather, the regulator found that CICA breached regulatory principles by failing to manage effectively its sales processes, claims handling and complaints handling to ensure the fair treatment of its customers.

Specifically it found that CICA’s recruitment process focused on the quantity rather than the quality of recruits, that there were no minimum qualification requirements for agents and employment references were not always obtained. It said that the firm did not have adequate systems and controls to ensure that its sales agents had the necessary skills and knowledge to provide suitable advice; and that it did not ensure that its sales agents recorded all relevant information when advising customers on the suitability of insurance products. Moreover, the regulator said that the remuneration structure for the firm’s sales force was high-risk, with agents paid on a commission-only basis, based on sales volumes with insufficient emphasis on the quality of sales.

Additionally, the FSA found that CICA failed to take effective action against sales agents who were subject to customer complaints or who had breached company rules; that it did not put in place adequate controls to monitor its claims handling process; and, that aspects of its complaints handling procedure and the accompanying systems and controls were inadequate.

“CICA’s widespread failures reflect a culture which did not recognise the importance of treating customers fairly. This created a significant risk that customers would not get a fair deal,” said Tracey McDermott, acting director of enforcement and financial crime at the FSA. “Firms must ensure that protecting the interests of their customers is at the heart of every aspect of their business.”

During the period investigated by the FSA, April 2008 to October 2010, it said CICA, which sold accident and sickness insurance products via self-employed sales agents, had 542,133 policyholders and received £47 million in premiums for new policies sold. Its customers were typically self-employed, small business owners or manual workers. Amid concerns the FSA had about its business, the firm agreed to cease writing any new business from in October 2010.

The FSA reports that CICA settled the case early and received a 30% discount on its fine as a result; without the settlement discount the fine would have been £4 million. Additionally, the FSA took into account that CICA had already taken steps to address some of the issues raised by the FSA.