Churning is an unfortunate fact of life in the insurance industry. The companies may insist that it does not exist to any significant extent but in every year since 1994 the Insurance Ombudsman has found evidence of it.

Many people never realise they have been churned and thus do not contact the Ombudsman for the Insurance Industry, Ms Paulyn Marrinan Quinn. In addition, the ombudsman has no jurisdiction over brokers and can only refer cases to the Irish Brokers' Association if the broker is registered with that body.

Most churning, according to former life assurance sales staff who spoke to The Irish Times, involves what is called industrial branch business. This is the poorest end of the market in which policies usually only provide for funeral expenses. The policyholders involved are targeted because of the ready cash flow provided by door-to-door cash collections and what is perceived as a general lack of understanding of the policies.

Magill magazine reported last week that Christmas was a popular time of the year for sales staff to instigate churning as policyholders, who were short of cash because of seasonal commitments, could more easily be convinced to cash in their policies.

Churning involves persuading policyholders to cash in existing policies and take out new ones, the result of which is a whole year's premium payments going towards sales and management commissions, along with some charges, and none towards the enhancement of the policy. It also arises where policyholders are persuaded to reduce their premiums on an existing policy and open a new policy.

The former sales staff who spoke to The Irish Times also admitted forging signatures to set up new policies without the customers being aware. Unwitting policyholders would have been paying for policies they did not know they had bought through their payroll or through altered payment books. In all of these cases, the customer would have been the loser. But in some cases the repercussions were more extreme. One man (see panel) lost practically his entire life savings and others ended up without life cover which they had been expecting to meet the cost of funeral expenses.

According to Ms Marrinan Quinn, there has been mis-selling across the board within the life sector and there ought to be monitoring of it. She says churning can be included in both maladministration and misrepresentation and both together make up just under 30 per cent of all complaints to her office every year.

Actual insurance industry guidelines are quite tough, but the volume of complaints indicates that at least until recently they were regularly ignored.

They state that "advice to cancel an old policy in favour of a new one must only be given if the old product was unsuited to the policyholders' requirements".

Nevertheless, over the past few years the Insurance Ombudsman has found against life offices for effecting policies using photocopied forms and altering amounts of premium and life cover, without the consent of those being insured. In one case, a couple had been sold numerous policies, to be replaced by others and the ombudsman found that there was evidence of churning.

And in 1995, according to Ms Marrinan Quinn, many more disputes arose around churning. In one instance, additional cover was sold to a mother to cover a son who was serving a sentence in Mountjoy.

But the ombudsman can only accept complaints where the sales person was either on the staff or a tied sales person who can only sell that company's products. Many others are independent brokers. The Insurance Brokers Association (IBA), which regulates a number of mainly larger brokers, insists that it has not had complaints about churning.

According to Mr Paul Carty, IBA chief executive, larger brokers are at a different end of the market and have little incentive to churn. "They do not need the same front-end loading," he says.

He says the association insists on a speedy response to complaints and is not slow to bring members to disciplinary hearings. About one member a year has been involved in such hearings over the past few years.

In recent years the association has tightened its approach. The IBA says its requirements go further than the legislation actually requires. All sales staff are required to take exams, as in Britain. There is also a register of all sales people. However, this can only be checked with a sales person's permission.

All IBA brokers also have professional indemnity insurance, although even this minimum requirement is not mandatory here.

Non-IBA brokers do not belong to any organisation with real disciplinary power. The Insurance Intermediary Credit Bureau (IICB), a branch of the Irish Insurance Federation, vets the brokers before they are allowed an agency with life offices, but they are in no way responsible for future conduct. Nor do they vet individual sales people, only directors of companies.

And life companies whose policies are being sold do not take responsibility for the actions of these sales staff. The Department of Enterprise Trade and Employment has overall responsibility for the industry, but under the Insurance Act 1989, the procedure involved is essentially one of self-regulation.

Ms Marrinan Quinn strongly believes: "The whole area of brokers ought to be taken into account as well."