The Financial Conduct Authority (FCA) has fined Moorhouse £159,300 for failing to oversee and control telephone sales of its commercial vehicle add-on insurance products.
Moorhouse focuses on selling motor and liability insurance products to SMEs and micro-SMEs.
The regulator said the insurer did not disclose appropriate information about the limitations and exclusions of its products to customers before they were sold.
For example, under the firm's key care cover, the policy did not cover keys lost or stolen when not attached to a fob. Under its breakdown policy, it did not cover breakdowns that would have been prevented by routine servicing of the vehicle, or replacing its tyres or windows. These limitations were not disclosed.
Georgina Philippou, acting director of enforcement and market oversight at the FCA said: "Moorhouse had a responsibility to treat its customers fairly and this is true whether they are individuals or small businesses.
"Moorhouse failed to put in place systems and controls to ensure customers were given the right information. This put customers at risk of buying the wrong products and not having the right insurance cover."
The FCA said that during 2012, the firm failed to monitor telephone sales and customer data was recorded inaccurately by staff, potentially affecting whether claims made later were accepted. The regulator also found the board and senior management of Moorhouse did not give sufficient attention to compliance issues and did not take adequate steps to address them.
In April 2013, when conducting a review of the firm's telephone sales, the FCA found the firm did not provide customers with adequate information about the sale of add-on products before completion of sale.
A subsequent review by a skilled person appointed by the FCA found insufficient details about each product were provided to customers in good time.
The FCA is encouraging customers to contact Moorhouse if they have any concerns about the way they were sold a commercial vehicle add-on product.
The firm agreed to settle at an early stage of the FCA's investigation to qualify for a 30% discount. The regulator would have imposed a penalty of £227,670 without the discount.
Lyndon Wood, chairman and CEO at Moorhouse, said: "The firm deeply regrets the FCA's findings and apologises for the failures in its sale of add-on products to new customers during 2012.
"In fact, the issues identified by the FCA were addressed 18 months ago. With a new senior management team taking shape (for which further announcements will be made shortly) Moorhouse is pleased to finally bring these historic issues to a close. While the FCA found no evidence of any claims being refused as a result of the issues it identified, the firm will be contacting any customer who may have been affected."