The UK Financial Conduct Authority (FCA) has fined a mobile phone insurer more than £2.8 million ($4.68 million) for failing to deal with customer complaints.

It says Policy Administration Services (PAS), which handles insurance sold by retailer Phones 4u, failed to properly record complaints and identify root causes of recurring issues between June 2009 and September 2011.

Complaints about mis-selling were often incorrectly rejected because customers had signed direct debit forms.

“This is simply not good enough – it does not meet our requirements and does not meet the needs of customers,” FCA Director of Enforcement and Financial Crime Tracey McDermott said.

Since the investigation, PAS has employed a third party to review its complaints processes and has paid compensation to 1438 customers.

The fine follows a wider FCA probe into nine mobile phone insurance companies with a majority share of the market. It uncovered many examples of bad practice, including poor product design, unclear terms and inadequate claims and complaints handling.

FCA Director of Supervision Clive Adamson says mobiles are “now essential to our lives” and phone cover is “often many young people’s first foray into insurance, [so] it is important insurance policies provide the level of protection they promise and claims processes are fair”.

“What this review shows is sometimes there is a gap between what the customer thinks they are getting and what they are really getting. Closing this gap will lead to greater trust and confidence.”