Regulator fines Norwich Union Life
January 3, 2008
According to a recent report Norwich Union Life has been fined by the UK’s financial regulator, the Financial Services Authority, over a major fraud incident that occurred in 2005 in its life insurance division. The £1.26 million fine was imposed on the insurance company by the FSA for failure to carry out adequate checks in order to prevent the £3.3 million fraud that took place a couple of years ago.
The report also states that the original fine that was to be imposed by the financial regulator was £1.8 million, but because officials from the life insurance company co-operated fully with the investigation the FSA decided to apply a discount of 30% to the fine, taking it down to £1.26 million. However, the fine is still the highest one ever to be issued by the regulator over a fraud incident.
The incident occurred after fraudsters were able to access personal information such as names, addresses, and dates of birth of life insurance policyholders, and successfully managed to cash in the life insurance of 74 customers, which came to £3.3 million. Those committing the fraud also talked members of staff into changing details over the phone, such as bank account details, so that the money from the policies went into their own bank accounts.
One FSA official stated that the life insurance company had failed to keep customers’ personal and sensitive information safe and secure, and had let its customers down. She added that the FSA takes the security of personal data seriously, and that this fine is an indication of the seriousness of the matter.
A Norwich Union official 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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