Irish Life insisted last night that it "never has and never will tolerate cases of mis-selling to customers". As the life assurance group faced potentially damaging allegations that it had failed to deal with known instances of mis-selling through which customers lost money, it issued a lengthy statement detailing processes and procedures designed to protect customers.

"Mis-selling is clearly against the interests of customers. It is also against the interests of the company as any policy which is surrendered early, even when it is replaced with a new policy, means that the company loses money." Chief operating officer, Mr Denis Casey insisted last night that allegations that mis-selling practices at Irish Life were widespread and were either condoned or ignored by management were totally without foundation. A clearly angry Mr Casey argued that "the entire content, tone and trust of the correspondence [referred to in the Magill article] is about management trying to keep business on its books. To suggest we turned a blind eye to these types of practices simply is not true". The allegations of mis-selling involved the practice known in the life assurance industry as "churning". This involves persuading customers to cash in existing policies and open new ones so that virtually another whole year's premium payments went to sales staff and not to the enhancement of value of a policy. In some cases it was alleged that policies were "churned" without the customers' knowledge. Customers lose out because 90 per cent of first year premiums go in commissions and costs; opening a new policy exposes them to a second round of commission charges diluting the capital saved.

The Magill article - based on information from a former Irish Life employee - alleges that Irish Life management specifically allowed policy changes in the pipeline to be processed in July 1994 despite knowing that the customers involved would be worse off as a result.

Mr Casey argued that only 30 cases in the pipeline were processed, insisting that it was "a grey area" with regard to whether the customer would be better or worse off.

"It was a judgment situation. If I had to make the same call today I may have made a different decision," he said. Referring to the 644 cases of possible churning in six months of 1994 discussed in an internal company memo and reported in Magill, Mr Casey insisted that these cases of changes in policies were identified as "suspicious" by management and a review was undertaken.

This found that some customers wanted to make the changes, while others looked to restoration to the earlier policy, he said. But because this review was "not fully documented" the company was currently undertaking a second review of the cases concerned, he said. Magill alleged that Irish Life management knew of the churning for two and a half years (from March 1992) but did not stop it and that customers could have lost £4.5 million.

Mr Casey rejected this stating that Irish Life was constantly vigilant for mis-selling practices using both internal and external audits to examine procedures. "We have never discovered a fraud on that scale in our business. That would have required the collusion of the manager. Irish Life has been policing practices on a widespread scale for a long time and the allegations are simply not possible," he maintained.