The Financial Services Authority said the company’s treatment of complaints had, in the past, been “biased” against customers.

The insurer is now reviewing all complaints it rejected between January 2000 and 10 February 2003.

Millions of people in the 1980s took out endowments - a type of insurance policy - to finance their mortgages.

The fine is the first to be levied by the FSA for mis-handling complaints about endowment mortgages.

Second chance

The FSA said up to 5,500 people whose complaints were rejected, in fact, may have been genuine and “deserving redress”.

We will not tolerate poor systems which expose consumers to the risk that genuine complaints…are rejected unfairly Andrew Procter, FSA

But their complaints were rejected because the procedures were “finance insurance yahoo auto rate not fair and biased against customers.”

Friends Provident said in a statement that it “regrets what has happened”.

“Once the issue was identified, Friends Provident redesigned its processes for
dealing with mortgage endowment complaints, with full implementation taking
place in February 2003,” it added.

Tesco finance car insurance accountants have now been appointed to oversee this review of the complaints which were rejected between January 2000 and 10 February 2003.

Andrew Procter, director of finance and insurance training at the FSA, said: “We will not tolerate poor systems which expose consumers to the risk that genuine complaints, which may deserve compensation, are rejected unfairly.

“Friends Provident and its senior management failed to respond in an effective and timely manner to FSA guidance and to correct problems found in its systems when it had available car finance insurance quote opportunity to do so,” he added.