A Dublin gardener and his wife lost more than £20,000 almost their entire life savings when they were "churned" by an insurance broker.
The broker persuaded the couple to put a £22,000 lump sum into an Irish Life life assurance single premium bond. But within a year he encouraged them to break the money up and place it with a variety of insurers, including Irish Life and Friends Provident, in smaller lump sums.
However, he redirected the funds into annual bonds where the company expected similar lump sum premiums every year.
Because of the high commission associated with setting up the individual policies paid up front to the broker in each case most of these lump sums were depleted from £5,000 investments to sums well under £1,000 within a year. Overall, between October 1990 and December 1992 the broker had persuaded the couple to part with £30,255 and the life companies expected similarly high premium payments in successive years. The surrender value of the policies in 1993 was just £2,237 but with a refund of £5,700 and other credits the family's total loss was more than £20,500.
The man said he and his wife had asked for a blue-chip investment where their money would be totally safe. "For the first year everything went okay. But by the next year when it became obvious our money may have been making losses he repeatedly insisted that it was a simple administrative error and we were not to worry." The broker was not a member of the Irish Brokers Association and the case cannot be examined by the Insurance Ombudsman Ms Paulyn Marrinan Quinn as it does not involve an insurance company employee.
Mr Paul Carty, chief executive of the IBA, described the case as "absolutely appalling" and insisted that any reputable broker would be reluctant to surrender a policy, even at the client's request, and would normally advise the policy holder in writing that the transaction was contrary to best advice.
However, the policy holder has not been able to retrieve his money. The company the broker worked for has ceased trading.
According to the policy holder, the life offices have also refused to accept responsibility so far. Mr Michael Kemp of the Insurance Industry Federation (IIF) said the relationship is between the broker and the client.
But the policy holder says the life offices should have suspected something and has complained unsuccessfully to them.
On April 1st, 1992, for example, two annual products for £5,000 each were taken out through Friends Provident. A third for £3,000 was opened in June of that year. A spokesman for Friends First, as the insurer is now called, told The Irish Times the company will now re-examine the case.
He added that the life office now ensures that all brokers are registered with the IIF's Insurance Intermediaries Compliance Bureau and that they have an indemnity bond.
An Irish Life spokesman said the broker legally represents the client in a transaction. But he added that all brokers dealing with Irish Life have to be registered with the IICB.
However, it is understood that the broker in question was not registered personally with the IICB at the time, although the company he worked for was. When contacted by The Irish Times the broker said he has not worked in the industry for the past few years and that it was unethical to telephone him. He declined to make any comment on the allegations and referred queries to his solicitors.
The Irish Life spokesman added that the company treats any complaint from a broker's customer in the same way as it handles complaints about its own sales staff. It was now examining this case thoroughly.
