Adviser paying back commissions after dodgy policies issued

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A finance company pulled the wool over its clients eyes buying life insurance cover to make up to $500,000 when they died, leaving an insurance intermediary to pick up the pieces.

Friday, November 5th 2010, 7:05AM 2 Comments

by Jenha White

Guaranteed Finance sole company director and shareholder Andrea Baker allegedly created the scheme where the insurance agreement offered $20,000 funeral cover to families, however the policies were worth between $250,000 and $500,000.

Guaranteed Finance would pay the insurance premiums using commission from insurance companies.

When a client died, the family would get $20,000 and the remaining money would be paid to Guaranteed Finance.

PMW Finance insurance broker Phil Wilson acted as an intermediary between Guaranteed Finance and Sovereign.

"I definitely did not know what they were doing with the agreement itself, I never even met the clients myself, I just provided policies for Sovereign with information from Guaranteed Finance."

Wilson says he first met Baker two years ago when she took out a mortgage with him.

Baker then approached Wilson in 2009 wanting to put life insurance policies on clients with loans. Guaranteed Finance staff would go see clients and have them fill out forms and then Wilson would act as the intermediary to place the business.

"I have no financial interest or any other connection to Guaranteed Finance," says Wilson.

"There's one main person who's ended up with big financial loss out of this and that's me... and Sovereign - but I'm paying them back."

Wilson says Sovereign was paid approximately $109,000 in premiums over one year.

"They knew exactly who the policy owner and premium payer was during that year," says Wilson.

"I am presently repaying Sovereign $4,200 a month from business trail commission to repay the commission debt owed.

"There will eventually be no loss to Sovereign and no clients suffered any financial loss as Guaranteed Finance paid the premiums."

Sovereign general manager of product and marketing David Drillien says in October last year the insurer identified irregular patterns in aspects of the life insurance - it took business between March 2009 and December 2009.

"Sovereign does not have, and has never had, a broker relationship with Guaranteed Finance, or its director Andrea Baker," says Drillien.

Wilson says he talked with Sovereign several times about non-disclosure problems, however initially there was not too much concern because that often occurs with these types of policies.

Drillien says non-disclosure concerns were in regards to the way the business was paid for, as well as particulars about the policies and the amounts applied for.

After an investigation, Sovereign suspended issuing policies written by Wilson earlier this year in January and in August and cancelled Wilson's adviser agreement.

Drillien says all of the Guaranteed Finance policies have since lapsed through non-payment of premiums.

He says Sovereign only received one claim whilst the policies were in force and this was on the last policy issued.

"Sovereign discovered substantial non-disclosure of relevant health information and decided to void the policy and will not be paying Guaranteed Finance any benefit."

Drillien says Sovereign will also be referring any evidence of criminal actions it uncovers to the appropriate authorities for further action.

Wilson says he has not spoken to Baker since April and he is not taking any action on what happened because Baker has no money anyway so it would be a waste of time and effort.

"You can sit and cry and be bitter and twisted about it, or just accept that shit happens and move on - that's what I'm doing," says Wilson.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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