Homeserve to be investigated by FSA

Homeserve, the company that sells emergency repair services for householders, is to be investigated by the Financial Services Authority.

The firm revealed the investigation to its investors as it reported a 32% rise in annual profits to £138m.

In October, the firm suspended its call-centre sales force after allegations that they had been mis-selling the firm's policies.

Homeserve now plans to shrink its business in the UK.

"We took swift and comprehensive action to address the issues that we identified in the UK and are totally committed to restoring our customer focus," said Richard Harpin, Homeserve's chief executive.

"We are strengthening our management teams, retraining staff and continuing to make significant investments in customer service.

"In the UK we are planning to create a smaller, more focused and sustainable business from which to grow," he added.

However, the admission of a forthcoming FSA investigation, of what the company called "certain historic issues" and which could lead to a substantial fine, saw the firm's share price dive 66.5p, or 29%, to close at 160p.

Last year, in the UK the firm undertook 900,000 emergency home repairs for 2.7 million customers, who have 6.7 million policies between them.

Homeserve cut 200 jobs from its UK workforce in February and said it would cut a further 250 posts in line with the fall in the number of its UK customers.

Adam Scorer of Consumer Focus welcomed the FSA investigation.

"Homeserve has to make sure its sales and marketing practices treat consumers fairly and with respect," he said.

"Consumers should also be compensated appropriately for any problems they have experienced."