Ban Order Hits 2 Insurance Brokers
Two insurance brokers have been banned by the Financial Services Authority (FSA) from working in the financial services industry after committing misconduct in dealing with their clients.
Andrew Porter was the sole shareholder and the only broker at Porter Insurance that specialised in providing insurance policies for businesses and individuals. Alexander Brincat was the sole director and a shareholder of Wise Owl, a small firm specialising in insurance policies for buildings and life insurance.
Porter allegedly underinsured clients by retaining the surplus money for his benefit and misled them to pay for cover that was in fact inappropriate for their business, exposing them to potential financial losses.
The FSA further claimed that the insurance broker falsified documentation in the names of companies to mislead those clients and recipient insurance companies.
Porter’s “dishonest conduct” was considered damaging both to consumers and to insurance companies, and to confidence in the financial system.
Porter Insurance charged its clients a mixture of fees and commissions, but was remunerated mainly through commission.
Porter Insurance was an insurance brokerage company established by Andrew Porter, who owns 100% of shares, in October 1991 dealing mainly with wholesale brokers rather than dealing directly with a particular insurer because of the size of the firms for which it was seeking to place insurance.
Tracey McDermott, acting director of enforcement and financial crime commenting on both cases, said: ”Andrew Porter deliberately underinsured clients, many of whom were involved in high risk trades.
“He provided them with policies he knew were potentially worthless and would not payout if they suffered an accident. This is not only a dishonest and deliberate failing in his responsibility as an approved person, but a complete breach of trust with his clients.”
On the other hand, the FSA found that between September 2009 and August 2010 Brincat had failed to monitor adequately the high cancellation rate of life insurance policies sold by Wise Owl,and to disclose to Wise Owl’s insurance providers that it had a sales strategy of offering free life cover to customers.
Wise Owl was a small mortgage and insurance mediation firm, whose main business concerned building and life insurance. With effect from 24 November 2008, Wise Owl was authorised and regulated by the FSA.
One of Wise Owl’s insurance company providers petitioned for Wise Owl to be wound up on 3 December 2010. This petition was granted on 3 March 2011 and Wise Owl is now in liquidation.
The insurance broker allegedly left the UK for prolonged periods without putting in place adequate compliance arrangements at Wise Owl.
The FSA added that Brincat failed to ensure that Wise Owl had sufficient resources to pay premiums due to customers who had agreed to the free life cover offered by Wise Owl, and repay sums of commission claw back owed to insurance providers when such cover was cancelled; and failed to monitor Wise Owl’s financial position, including the extent of Wise Owl’s liabilities to insurance providers.
The FSA has banned the insurance broker from performing any function in relation to any regulated activity.
It has also withdrawn the permissions of Brincat’s insurance firm; Wise Owl Services Limited (Wise Owl)
McDermott said: ”Alexander Brincat’s incompetence at Wise Owl posed a risk to other market participants and to confidence in the financial system. In order to remove this risk Brincat has been banned.
“We will continue to take action against individuals who, either through incompetence or fraudulent activity, allow their firms to cause such losses to other market participants.”