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A newly formed insurance company based in a major city centre placed advertisements in local press and trade media offering building, contents and public liability insurance. Members of the public and proprietors of businesses throughout the country responded to these advertisements. Many high street insurance brokers, on behalf of clients, obtained quotes from this insurance company and a large amount of insurance business was transacted, with hundreds of thousands of pounds being paid to the insurance company in premiums.
Insurance documents were issued and passed on to the customers who believed they were insured, either by the insurance company itself, or by other insurance companies to whom the risk had purportedly been passed on.
Instances then started to arise whereby claims were being refused by legitimate insurance companies due to non-payment of premiums, and it transpired that premiums paid by customers had not been passed on to the legitimate insurance companies as required.
Complaints were made to the police and the Department of Trade & Industry that insurance premiums had been paid for worthless cover.
The investigation showed that this fraud was perpetrated principally by three men, one a career criminal, one an international businessman and the third an experienced insurance broker.
A company was bought 'off the shelf' and set up in rented office accommodation in a city centre office block. Advertisements were placed in various publications, particularly in the insurance industry press, and salespersons were recruited to visit companies and businesses to sell insurance packages for buildings and contents and also public liability, a necessary insurance for business or commercial premises.
Quotes provided were, in the main, substantially cheaper than those in the industry and a large amount of business was generated. Some insurance risks were purportedly taken on by the company itself but others were passed on to legitimate insurance companies in the UK, the company, in effect, acting as a broker rather than an insurance company in its own right. Other risks were purportedly passed on to offshore insurance companies, however these were either unaware of the risks or were actually being run by associates based abroad.
With very few exceptions premiums were not used to provide insurance cover, and all documents issued were completely worthless. Some minor claims were paid by the company to continue the perception of legitimacy and to prevent early intervention by the authorities in the case of complaints.
Any customers that did not need to make a claim were unaware that they were, in fact, uninsured, and none the wiser that they had been duped.
All three main principals in the fraud were sentenced to terms of imprisonment for their part in it.
If you have any doubt about an insurance policy you are offered, you may wish to seek the advice or assistance of the Association of British Insurers.
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