Insurance companies were criticised by the financial services ombudsman yesterday for inappropriate sales practices to low-income customers and for insensitive handling of claims.

Joe Meade also said that mortgage brokers who claimed to act in a personal capacity while encouraging customers to buy overseas investment properties were exposing consumers to substantial financial losses.

Mr Meade ordered an insurance company which sold an unemployed single mother of two a risky investment fund to give her back the full €10,000 she had invested after she incurred losses of €1,100.

The ombudsman said that the funds were totally unsuitable for low-income customers and he has asked the financial regulator to review the sales practices of the company concerned.

It is understood that the regulator has uncovered several similar cases of mis-selling by the insurance company as part of a follow-up investigation.

But the regulator could not confirm yesterday how many cases of mis-selling had come to its attention nor if it had embarked on any such investigation into the sales practices of the firm.

A spokeswoman said that the regulator never commented on complaints or sales practices highlighted by the ombudsman except to say that it would take further action if appropriate.

Mr Meade has also told the regulator that complaints received by his office reveal major conflicts of interest where mortgage brokers act as estate agents.

He said he had received several complaints against brokers who told customers that they would never have to complete the sale on an investment property because the property would be "flipped over" before closing. When this does not happen, due to downturns in the market, the customers find that they cannot secure the necessary mortgage and they lose their deposit.

"There is an unhealthy relationship when advice on property and general financial advice is given by the same broker," Mr Meade said.

His office received 2,100 complaints in the first six months of 2007, a 29 per cent increase on the same period in 2006.

The ombudsman made several large awards during the period, including €310,000 in a case where an insurance company claimed that a mortgage protection policyholder did not give full details of her medical condition. Phone records proved that she had done so.