Direct Line and Churchill have been fined £2.17 million, for altering customer complaint files before submitting them to regulator the Financial Services Authority (FSA).

Staff at the insurers -owned by the Royal Bank of Scotland - altered data in over half of the 50 electronic closed complaints files they sent to the FSA, in an attempt to improve their appearance. Seven internal documents also contained staff signatures forged by one employee.

Before the insurers collated their files for the FSA, managers had told complaints staff that if they were found not to be operating to the required standards, they would face an internal disciplinary investigation. This message "increased the risk that files would be altered improperly", the regulator said.

In tampering with the files, the companies had failed "to conduct their businesses with due skill, care and diligence", the FSA said. The breaches constituted a major problem.

"This is a serious breach," said Tracey McDermott, FSA acting director of enforcement and financial crime. The "significant penalty" was "intended to underscore to firms ... that material provided to the FSA must reflect the picture as it is - not as they might like it to be."

By settling early, the firms received a 30 percent discount from a potential £3.1 million fine.