The Financial Services Authority (FSA) has fined Norwich Union Life £1.26 million for failing to implement the necessary systems to prevent fraudsters from accessing customers' confidential information.
FSA director of enforcement, Margaret Cole, said: "Norwich Union Life let down its customers by not taking reasonable steps to keep their personal and financial information safe and secure."
"It is vital that firms have robust systems and controls in place to make sure that customers' details do not fall into the wrong hands. Firms must also frequently review their controls to tackle the growing threat of identity theft," she added.
The company was targeted because of the lack of controls in place, allowing fraudsters to use customers' names and dates of birth to pose as genuine customers and obtain sensitive customer details from its call centres. The FSA found that, in some cases, fraudsters were able to change confidential details such as addresses and bank account details.
More than 600 policies were targeted and the information was used to request the fraudulent surrender of 74 policies totalling £3.3 million in 2006. And, according to the FSA, the company even failed to deal with the security issues even after they were identified by its compliance department.
"This fine is a clear message that the FSA takes information security seriously and requires that firms do so too," said Ms Cole.
The company admitted it was to blame for the situation and apologised to customers. Chief executive, Mark Hodges, said: "We are sorry that this situation arose and apologised to the affected customers when this happened. We have extensive procedures in place to protect our customers but in this instance weaknesses were exploited and we were the target of organised fraud."
It said that all 74 policies were fully reinstated and that these customers were given help and support. It worked closely with the police to identify and arrest the criminals concerned, which resulted in 11 arrests. Furthermore, an internal review was conducted and improved anti-fraud procedures were introduced.
"Our customers can, however, be assured that we have taken this matter extremely seriously and have thoroughly reviewed our systems and controls as a result. All of our seven million customers are protected by our promise that they will be fully reimbursed and will get help and support if they are the innocent victims of fraud," added Mr Hodges.
Find out more about Norwich Union Life Insurance
and about how to prevent identity fraud
© Fair Investment Company Ltd