The Central Bank has fined an insurance firm a record sum of €3.35 million after it uncovered 28 breaches of regulatory guidelines.
The fine against Combined Insurance Company of Europe Limited relates to consumer protection failures which the Central Bank said not only caused “detriment to a firm’s customers but also eroded the special trust customers place in regulated firms”.
The insurer was said to have allowed unregistered tied agents to sell insurance policies on its behalf, to have wrongly obtained customers’ bank account details and used them to set up policies in other peoples’ names; and to have failed to ensure that staff handling complaints had the necessary qualifications.
Some tied agents of the firm were said to have “recklessly, negligently and deliberately misled customers” as to the real or perceived advantages of the firm’s products.
The agents were also said to have exerted undue pressure on customers to purchase policies and to have failed to recommend the most suitable products to consumers.
The Central Bank said the firm established a remuneration and rewards system for its tied agents which led to the creation of a high pressure sales environment.
The breaches of the rules occurred between August 2006 and April of this year and some €560,000 has already been refunded to customers.
“The penalty imposed demonstrates that we will not tolerate breaches of this nature,” the Central Bank said.
“Insurance companies can cause significant consumer detriment through mis-selling, through their remuneration arrangements and having inadequate systems and controls. The level of consumer detriment in this case arising from the firm’s non-compliance and behaviour, will not be tolerated by the Central Bank.”
The UK Financial Services Authority has also fined the company £2.8 million (€3.3 million) for not effectively managing its sales processes or how it handled claims and complaints.
The €3.35 million penalty exceeds the previous record €3.25 million fine handed to Quinn Insurance for lending money to the Quinn family to cover losses on their investment in Anglo Irish Bank in 2008.
Combined Insurance stopped selling policies to new customers in April. The company specialises in insuring customers against accidents and illnesses. It employs a staff of 15 and sold policies through a network of “tied agents”, self-employed salespeople.
The company is owned by Ace Insurance, which is based in Switzerland and Bermuda and listed on the New York Stock Exchange. It is part of the Ace Group of companies.
Combined Insurance Company of Europe made a profit of €8.5 million in 2010 on gross written premiums of €76 million, a decline of 16 per cent on the previous year.
In a statement, Combined Insurance Company of Europe said it had taken decisive action to correct the issues raised by appointing a new board of directors and management team, improving processes and controls and suspending new sales.
“We take our corporate governance and regulatory responsibilities seriously and accept responsibility for past practices,” it said. “The company is strong financially and committed to serving all its existing policyholders, including the renewal of policies and the ongoing payment of claims.”
The current directors are listed on records at the Companies Registration Office as Ian Moffatt (who is chief executive), Michael Trainor, Dermot Gorman and Michael Greene who have addresses in Dublin, and Chris Harrison, Abraham Hollenberg and Duncan Green who have addresses in England.
