The UK Financial Conduct Authority (FCA) has imposed a penalty of £2,834,700 against mobile phone insurance broker, Policy Administration Services Limited (PAS), for poor complaints handling of mobile phone insurance policies sold by Phones 4u Ltd.

During the probe, the market watchdog found that PAS failed to identify the real problem and took no action to rectify the problem between June 2009 and September 2011.

PAS was accountable for customer relations, claims and complaints for the mobile insurance policies.

FCA claimed that the company did not probe the complaints completely or resolved appropriately or consistently, while complaints pertaining to mis-selling were often rejected only due to signing a Direct Debit form by the customers.

Due to these malpractices, the company failed to address the issues raised by the customers and it also did not try to trace out the real cause of the problem.

PAS appointed a third party to review its complaints processes and carried out an independent review of 7,099 complaints, and found that 1,438 customers suffered and offered them compensation.

FCA enforcement and financial crime director Tracey McDermott said that proper complaints handling is essential to ensure customers are treated fairly.

"PAS had wide ranging failures across its complaints handling processes – it failed to investigate complaints properly or to keep accurate records," McDermott added.

Since, PAS agreed to settle the case at an early stage of the investigation and consequently qualified for a 30% discount, otherwise the fine would have been £4,049,637.