Broker at centre of doctors insurance scam highlights sticky issue for insurers

The FSA says it does not know of any insurers that have been affected by Hazelwood’s illegal scam. However this saga highlights some of the complexities surrounding contract law. Under slightly different circumstances, an insurer could have found itself liable – even if it knew nothing of these so-called policies and had never received a penny in premium.

The law tends to protect the consumer. If a consumer acted in good faith and had good reason to believe that the broker in question was acting with the authority of the insurer, the insurer may have to honour the contract.

Such good reason might include a previous agency – so if a broker has previously acted on behalf of an insurer, and paid over the premium, the client has every reason to believe they will do so in future.

This highlights the need for insurers to be vigilant both in selecting their broker partners and in monitoring them. Ultimately, there will always be the odd rogue looking to make a quick buck – it is up to the rest of the industry to make sure innocent customers don’t suffer.

See story: Broker struck off following 400k GP surgery fraud