Norwich Union’s life and pensions business has been fined a record £1.26 million by the Financial Services Authority (FSA), the City watchdog, for putting its customers at risk of fraud by failing to protect confidential information.

It emerged today that fraudsters attempted to cash in 74 policies worth £3.3 million after gaining access to Norwich Union Life customers' names and dates of birth and, in some cases, were able to ask for details such as addresses and bank accounts to be altered, leading to the attempted theft.

The FSA said today that fraudsters were able to gain access to 632 customer policies, including their full bank account details.

The watchdog also uncovered that on discovering the frauds in 2006, Norwich Union Life informed and then protected present and former directors of its business and its owner Aviva but did not "inform and protect the policyholders who were not connected with the business".

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Norwich Union Life, which is owned by Aviva, agreed to settle with the FSA early on in its investigation and therefore the fine was reduced by 30 per cent from £1.8 million.

The FSA said today that Norwich Union Life did not have “effective systems and controls in place to protect customers' confidential information and manage its financial crime risks".

It added: “These failings resulted in a number of actual and attempted frauds against Norwich Union Life's customers.”

The FSA today published a list of Norwich Union Life's failings.

These include the insurer's failure to address problems with its internal systems and act in an "appropriate and timely manner even after they were identified by its own compliance department."

The FSA said that if Norwich Union Life had acted quickly, "it is likely that the majority of the breaches of customer confidentiality and the majority of the financial losses would have been prevented".

Margaret Cole, the director of enforcement at the FSA, said: "Norwich Union Life let down its customers by not taking reasonable steps to keep their personal and financial information safe and secure.

"This fine is a clear message that the FSA takes information security seriously and requires that firms do so, too."

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