HomeServe needs £30m to cover fine

The Financial Conduct Authority has told the Walsall business it faces a fine of £34.5 million. It comes two years after the crisis first hit the company, leading to more than 700 job losses nationally as it struggled to rebuild its sales and marketing operation.

As a result, HomeServe's UK business has lost around one million customers.

The company had been expecting a fine from the FCA, but today's figure will be a massive shock. HomeServe had only expected it to come to around £6 million and said today it would have to increase its provision by £30 million to cover the cost following the draft warning notice from the FCA.

It follows a two-year inquiry into sales and marketing issues, complaints handling and the way HomeServe controlled these areas of its business. The problems saw the company, Walsall's biggest private employer, axing around 400 jobs at its Green Lane base, where it now employs around 1,100 people.

HomeServe said today it would now be in talks with the FCA over proposed fine and would not be making any further comment while these discussions continued but added that it would not affect its continuing business in the UK.

The huge mis-selling and complaints cloud has hung over the company since November 2011.

In the space of a few days the company had to reveal an internal investigation had raised worries about potential mis-selling of its policies and then another major probe into how it handled 48,000 complaints during the winter of 20010-11.

The shock announcements came out of the blue, stunning staff and investors at the company that had seen almost non-stop spectacular growth since it was founded by chief executive Richard Harpin 20 years ago.

The company's share price dropped like a stone, wiping hundreds of millions of pounds from its stock value as HomeServe called a complete halt to its marketing operations.

The UK business, HomeServe Membership, involves selling insurance and repair policies, usually through 'affinity' partners such as water companies, to cover domestic emergencies such as fused wiring, damaged carpets or burst pipes.

Non-stop growth had given the UK business around three million customers. With marketing suspended for months before slowly restarting, that number is expected to have fallen to less than two million this year.