The shady dealings of brokers Ideal Insurance forced at least one customer into near bankruptcy, but the most startling twist in the tale is the FSA’s inability to act on tip-offs about the firm for over a year, and the ease with which a broker with a prison record could practise

How did they get away with it? Despite repeated warnings to the FSA, insurance brokers Faron Wilson and Neil McKay swindled at least £1m from customers.

The two insurance brokers face up to five years in jail when they are sentenced at Southwark Crown Court on 14 April. Wilson was found guilty of conspiracy to defraud at Southwark Crown Court last month and McKay pleaded guilty to conspiracy to defraud.

The two directors of Ideal Insurance created bogus insurance certificates, pocketed premiums without passing on the money to insurers and skimmed off cash from cancelled policies for three years before being caught in April 2008, the court heard earlier this month.

While one victim lost his savings and nearly went bankrupt, the pair splashed the cash. They bought a string of luxury cars including a £27,000 Audi, parked outside their tiny offices in Chorley, Lancashire.

Critics say the disastrous outcomes for clients could have been avoided if the FSA had acted with more urgency.

The FSA had three warnings about Wilson and McKay’s suspicious behaviour before finally taking enforcement action in April 2008.

McKay also continued to practise as an insurance broker, despite having previously been jailed for eight months in 1996 following a conviction for obtaining property by deception.

First warning in 2006

The pair started the firm in 1997 but the first warning came in December 2006 when Sylvia Rushbrooke complained to the FSA.

Rushbrooke’s home in Battersea, London, was burgled and Ideal refused to settle the claim of £8,000, despite loss adjusters giving the green light. Ideal even refused to tell her who underwrote the policy.

Rushbrooke says she made dozens of calls to the FSA, but was told that the FSA does not take complaints from individual customers.

Next to become suspicious was Beech Underwriting director Geoff Stilwell.

Following a battle to get premium payments from Ideal, Stilwell told the FSA in November 2007 that McKay and Wilson were displaying suspicious behaviour.

He was asked to email the details, which he did, but he received no acknowledgement.

But the net was closing on Ideal Insurance, and when the broker failed to pay the insurer Primary General an outstanding sum of £62,000, the game was up.

Primary’s head of compliance and risk management Steve Blott, working with departments across the group, worked around the clock to build a case against Ideal, which was presented to the FSA in February 2008.

Two months later, McKay and Wilson received an FSA enforcement notice.

Blott says: “We felt obliged, as part of a wider industry, to do something. We could have written off the £62,000 and put it down to experience, but we took a decision that even though this was happening at a smaller level, we felt it was important enough to pursue.”

FSA rejects criticism

The FSA strongly rejects any criticism. It did not go into detail about how it responded to the complaints from Stilwell and Rushbrooke. But it says it took action within two months of being tipped off by Primary.

A spokesman said: “Enforcement acted quickly when referrals of Ideal Insurance and Mr McKay were made to stop the firm from doing business and subsequently to cancel the firm’s permissions and impose a full prohibition on Mr McKay.”

With regard to McKay’s previous conviction – he had served a jail sentence in 1996 but not disclosed this in his application for FSA approval to sell insurance in 2005 – the FSA says it is companies’ responsibility to carry out criminal background checks on employees.

Directors’ applications must be co-signed by another senior individual within a firm.

The spokesman added: “Our assessment process includes undertaking criminal records checks on a sample basis and if we have reason to believe that relevant information has not been disclosed.

Where candidates countersign their own application, which is often the case for sole trader and single director applications, they too will be selected for a criminal records check.”

But if the FSA’s checks are so rigorous, how did McKay get away with simply lying on his application form?

That question has still not been answered properly by the FSA.

And what about the lack of action over tip-offs from Rushbrooke and Stilwell?

Rushbrooke says: “The FSA say they are there to protect people and give the impression that they are interested, but they’re really not. They were hopeless.

“And what about the fact that McKay had a previous conviction but still continued in his business? I’m very angry and feel very let down.”

Stilwell says: “In my view, they should have a fast response team, so that when something clearly doesn’t add up, they can go in at a moment’s notice. That’s what they should have done.”

It’s clear the FSA have a lot of questions still to answer if they want to catch criminals early. IT

‘It has really shattered our lives’

Thomas Price had worked tirelessly since taking over a hotel and restaurant in 2002, in the hope of adding to a nest egg to see him through his retirement.

The 65-year-old needed good, reliable brokers to insure his business, the Elms Hotel and Restaurant, near Chester, which was steadily pulling in customers.

So when he received a phone call from Ideal Insurance, offering him cheaper premiums and quality service, Price believed he was in good hands.

Little did he suspect that his relationship with crooked brokers Neil McKay and Faron Wilson would drive him dangerously close to bankruptcy, cost him his savings and force him to postpone his retirement.

Price said: “It’s shattered my life. I’ll never go to an insurance broker ever again. I’ll be going through a bank in the future.”

Price’s relationship with Ideal Insurance began when he swapped from Clear Insurance to Ideal in 2003, attracted by the fact that he could talk directly to the owners of the business.

Price and his sister Esther Bradley, 66, who acted as bookkeeper for the Elms, said they trusted Ideal.

When Price received a public liability claim after an elderly customer was knocked over by a dog in the hotel car park and needed a subsequent operation costing £3,000, Ideal promised to handle it. “I thought Ideal were dealing with it and were completely trustworthy,” Price said. “Every time I called, we got placated.”

Price and Bradley kept calling Ideal, who kept promising to pay, but a bailiff turned up at the Elms without warning looking to take goods worth £3,000. Price got the bailiff to call Ideal. Ideal reassured the bailiff, who went away. The case eventually ended up being disputed in court in 2008. Price did not attend on Ideal’s advice not knowing that Ideal didn’t turn up either, or even organise legal representation, leaving the case undefended.

Price lost the case, and was faced with a gigantic bill for £41,500 to pay for legal costs and damages besides the bill for the operation.

Ideal eventually paid the £3,000, but Price was still left with the rest of the financial burden and the nightmare continued.

He was told he had three weeks to pay the outstanding sum before bailiffs turned up at his house.

“I could have lost everything,” Price said. “I could have been sent to prison.”

Afraid of losing his home, he took the case to an appeal in Chester Civil Court in 2008 and won. The judge ruled that Price should not have to pay.

But the claimant solicitors reappealed, and the case went to the Civil Appeal Court.

This time, Price lost. Even after hiring a costs draughtsman

to cut the legal fees, Price was faced with a bill that, including skyrocketing legal costs, had now ballooned to more than £100,000. He had to borrow money, use his own savings and rely on loans from friends and family to meet the costs. He nearly lost everything.

“There’s no way we can retire,” Price said. “It has really shattered our lives. I never thought anything like this could snowball into such a big thing.”

Ideal ways to defraud

Wilson and McKay used a variety of tricks to con customers and underwriters out of money. Their favourite was to create bogus insurance certificates, using names such as Willis, RJ
Kiln and Lloyd's of London, to make customers believe they had real policies. Then they would pocket the premiums and refuse to pay out claims.

Another tactic was to take a large lump sum premium payment from the customer (between six months and a year's premiums), cancel the policy with the underwriter after a couple of months and then simply pocket the difference.

Their most brazen trick was to simply not pay the instalments that were due to the underwriters.