IF ANYONE was in doubt that the Central Bank would be turning its focus solely to the big firms in its new risk-based approach to regulation, yesterday provided clear evidence that all firms will be subject to the same tougher, no-nonsense approach.

Matthew Elderfield, the Central Bank deputy governor in charge of regulation, warned at the start of this month that the new approach would not mean that “low impact” firms could fly beneath the radar and have an easier time. The Central Bank followed up Mr Elderfield’s comments with action yesterday, imposing the biggest fine in the history of financial regulation in Ireland on a relatively unknown insurance company.

Combined Insurance Company of Europe, which has been owned by the Swiss and Bermuda based insurance giant Ace since April 2008, was slapped with a fine of €3.35 million by the Central Bank.

It must refund a further €2.15 million to customers in respect of almost 8,000 policies sold by an aggressive team of “tied agents”.

The company has since parted company with this nationwide team of sales agents and cleared out its board of directors and senior management last year.

The main reason for Combined Insurance’s problems was that it operated an aggressive sales culture driven by pay and rewards. A “high pressure sales environment” pushed the agents to produce large volumes of sales and this led them to act “dishonestly, unfairly and unprofessionally”.

The bank noted insurance companies can cause “significant consumer detriment through misselling, through their remuneration arrangements and having inadequate systems and controls”.

The penalty imposed is sufficient given the scale of what the Central Bank discovered in relation to issues going back to 2006.

Diarmuid Kelly, chief executive of the Professional Insurance Brokers Association, said the fine was “richly deserved” given what was uncovered at the insurance company. “It gives the lie to the belief that the bigger companies might be better regulated,” said Kelly.

The findings that agents used customers’ bank account details to set up policies in other names and the selling of certain products to unsuitable clients are damning.

The insurer was also found to have “over-insured” customers by selling them policies they did not need to the tune of €130,000.

The Central Bank had asked the company to introduce a quality control system to monitor its “tied agent sales force” but when “red flags” were raised, the company failed to investigate them.

This led to the company refunding a total of €434,000 in respect of 2,377 policies sold.

The simultaneous fine of £2.8 million (€3.3 million) against an affiliated Combined Insurance company in the UK shows that the Central Bank can co-operate with other regulators in cross-Border operations.

Central Bank's top fines

Combined Insurance Company of Europe: €3.35 million (Dec 2011)

Quinn Insurance: €3.25 million (Oct 2008)

Merrill Lynch International Bank: €2.75 million (Oct 2009)

AIB: €2 million (Dec 2010)

MBNA Europe Bank: €750,000 (June 2011)

ILP: €600,000 (Sept 2009)

Scotiabank (Ireland): €600,000 (June 2011)

Depfa ACS Bank: €250,000 (Dec 2009)

Goldman Sachs Bank (Europe): €160,000 (Sept 2011)

NCB Stockbrokers: €100,000 (Dec 2010)