Survey reveals fears that current controls in responents' companies not adequate.
Fraud by rogue brokers could be on the increase as the economy falters, according to law firm Pinsent Masons.
The firm carried out a survey of insurers and brokers which showed that many respondents were worried that levels of fraud may rise, and one third admitted they were not confident that the current controls in their companies were adequate.
Garon Anthony, a lawyer in the insurance sector team at Pinsent Masons, said: “The risk of fraud by rogue intermediaries is a very real issue for both insurers and big brokers in these times of economic uncertainty
“The consequences are very far reaching indeed; not only will it cause financial loss but it will affect hard won market reputation, client relationships and may leave you open to disciplinary action by the FSA.”
Anthony added: “Both insurers and brokers need now more than ever to take decisive action to ensure that they have sound systems and controls in place to deal with the risk of fraud.”
These cases involve brokers diverting premiums to support their own cashflow. The FSA has taken action against a number of brokers committing fraud in the past.
In November 2006, the FSA cancelled ICM Group’s permission to carry on regulated activities after it failed to pass on premiums to insurers. Walsall Bridge Insurance Consultants was found guilty of a similar offence in September 2006, withholding premiums to insurers worth in excess of £140,000.