Norwich Union Life fined by regulator
January 7, 2008
The financial regulator in the UK, the Financial Services Authority, has fined the leading insurance company Norwich Union over its life insurance division, which fell victim to a major fraud scam in 2005. The major £3.3 million fraud incident took place in the life insurance division t Norwich Union two years ago, and the insurance company was accused of failing to do enough to stop the fraud and protect customers.
As a result of this a fine of £1.26 million has been imposed on Norwich Union Life by the Financial Services Authority. This was a reduced fine that had been cut because the insurance company had fully cooperated with investigations. Originally the fine was set to be for £1.8 million. Although a discount of 30% was applied to the original fine by the Financial Services Authority this is still said to be the most expensive ever to be issued by the regulator over an incident relating to fraud.
The £3.3 million fraud occurred after fraudsters managed to access sensitive information relating to life insurance customers. By finding out the names, addresses, and date of birth of policyholder, and by talking sales staff into changing receiving bank account details, the fraudsters managed to cash in 74 life insurance policies amounting to £3.3 million. Norwich Union was accused of failing to keep customers’ data safe, and letting customers down.
An official from the insurance firm stated: “We are sorry that this situation arose and apologised to the affected customers when this occurred. We have extensive procedures in place to protect our customers but in this case, weaknesses were exploited and we were the target of organised fraud. Whilst the number of customers affected is very small compared to the number of policies we manage overall, any breach in customer confidentiality is clearly unacceptable.”
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