Sovereign hit hard by commission fraud

Sovereign has been ripped off by about $1 million in the past two years by insurance advisers fraudulently claiming commission.

Friday, March 30th 2012, 6:00AM 4 Comments

by Niko Kloeten

The figure was revealed on Wednesday at the Sovnet conference by Sovereign chief distribution officer David Haak, who said there had been three separate instances of commission fraud during that period.

He said Sovereign’s procedures around commission payment had been upgraded; for instance, the company now requires authorisation from two people to change commission.

Sovereign chief executive Charles Anderson told Good Returns the problem of commission fraud was one faced by the entire industry.

“All players in the industry suffer from fraud, unfortunately. But generally speaking it’s always a very small number of individuals – it’s not endemic in the industry by any stretch.”

“You might have absolutely no fraud for two or three years and then have two or three instances within a year. I haven’t seen anything since these ones last year.”

In an industry that pays upfront commissions there will “always be one or two who will take advantage”.

“Our business is often defined more by the people we don’t do business with than by the people we do business with. We decline more agencies than you might expect.”

Anderson said the company had a range of systems in place to not only vet agencies before any deal, but also keep tabs on them for suspicious activity afterwards.

“We’ve got gate-keeping checks, such as looking at the type of business going in the book, and if that’s unusual in any way it sets alarm bells ringing; if there’s a very rapid increase of policies that don’t need to be underwritten, for example.

“We look for any unusual patterns of activity in internal checks of the portfolio of clients an adviser has.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 30 March 2012 at 11:13 am Kokoda said:

Hmm has tombstoning risen it's ugly head again? or was it some other cunning plan.

On 30 March 2012 at 1:04 pm Paul said:

It is a pity that companies can't have a black list of those advisers who have done this, because they will try again.

On 30 March 2012 at 11:15 pm billy the broker said:

Unfortunately where there is a will there is a way....shame just mucks it up for the rest of us...they will always get caught..there is one from way back..who is now a sports promoter...doing some work for the Breakers....people just don't see it:(

On 2 April 2012 at 11:46 am Barry Milner said:

Not so much a comment, but questions. Have the perpetrators been prosecuted and if so what penalties were applied? If they have not been prosecuted, why not?