By Lana Clements

The Financial Services Authority (FSA) has fined home insurers Direct Line and Churchill, both owned by state-owned Royal Bank of Scotland, £2.17 million for business failings.

Direct Line, one of the country's largest home and car insurers, and Churchill, were fined after failing to conduct business with "due skill, care and diligence".

As part of a review on the companies', already flawed, complaints handling process, the financial services watchdog requested 50 customer complaint files. But 27 of the files were changed in an effort to meet expected standards.

Alterations included forged staff signatures, but none of the changes apparently caused any customer detriment. The actions followed one failing after another by the two insurers.

In 2009, they were both told customer complaints handling process must improve. To monitor the situation, a review of files was carried out by an independent accountancy firm.

When over a quarter of the files failed the assessment, staff were told the most important thing was to get the right outcome for customers. Despite this, the altered files were sent to the FSA.

In response to the fine, Paul Geddes, the chief executive of RBS Insurance, which owns Direct Line and Churchill, says: "We very much regret the findings of the FSA investigation.

"Although no customers were disadvantaged, we are very disappointed that we did not meet the standards we expect of ourselves and which the FSA expects of us.

"We acknowledge the shortcomings identified in the findings and since becoming aware of this issue well over a year ago have taken action to address these issues and to ensure we avoid such breaches in the future."