For three years from January 2005 to December 2007 A&L sold approximately 210,000 PPI policies to customers seeking a personal loan at an average price of £1,265, but there was a general failure by advisers to give customers details of the cost of PPI. In addition A&L sought to find reasons to sell PPI without properly considering what customers needed.

A&L did not make it sufficiently clear that PPI was optional and it trained its staff to put pressure on customers where they queried the inclusion of PPI in their quotation or challenged advisers' recommendations. These failings resulted in unacceptable levels of non-compliant sales and a high risk of unsuitable sales over the three year period.

Margaret Cole, FSA Director of Enforcement, said: "The failings at A&L are the most serious we have found. This is reflected in the record PPI fine. It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.

"This case shows that we will continue to step up the action we take when firms do not sell PPI properly. Customers should be able to rely on impartial advice based on their individual needs and demands. It is particularly unacceptable for a firm to train its advisers to put pressure on customers when recommending insurance cover which they have not asked for and may not need. Firms cannot rely on paperwork sent out later as an excuse for unclear or misleading statements given on the telephone.

"As we said in our recent update on our PPI work, firms must ensure their PPI sales processes are up to the required standards. They must change their behaviour where necessary and if they are either unwilling or unable to sell this product in a compliant way, making sure that customers are treated fairly, they should not be selling it at all."

A&L has agreed to implement a substantial and comprehensive customer contact programme, overseen by third party accoty accountants. It will write to all customers who took out policies by telephone in conjunction with an unsecured loan between 14 January 2005 and 31 December 2007 prompting them to review their policy against product information sent to them. It will also review any relevant rejected complaints and claims and has committed to pay redress where appropriate.

This remedial action has been taken into account by the FSA and has reduced the level of penalty which would otherwise have been imposed on the firm.

In addition, A&L qualified for a 30% reduction in penalty by settling at an early stage of the FSA's investigation. Were it not for this discount, the FSA would have imposed a financial penalty of £10 million.