It was two years ago this week that Michael Bright was imprisoned for a fraud that sent Independent Insurance to the wall. The saga is a unique and compelling story of how the system failed at the expense of the greed and ambition of one man, but its lessons shouldn’t be lost in the aftermath of the seismic events of the last 12 months. After all, there are an awful lot of good ex-Independent people still working across this market with long memories, who fell victim to the crime.
At the inaugural Insurance Times Breakfast Club, reported in our last issue, Michael Bright’s QC, Ian Winter, gave a revealing account of the case. He detailed the scandal from the day he first received a phone call from a businessman who thought he may have a problem. He explained how the combination of the leadership traits of a control freak, with the fuel of rapid growth at the centre of a complex fraud, brought an organisation to its knees. Independent became a busted flush based on the reserve gambling of a chief executive who did not want to take a backward step.
Winter’s defence had to determine the intent behind Bright’s actions and for how long he kept on gambling based on the pretence of stability. It would also have to factor in the bravado of a bullish businessman and the loyalty instilled in senior staff on inflated salaries.
But for the market, and the regulator, there were other poignant questions; many of which have become very familiar as they have been repeated ever more loudly since the global economy went nuclear last Autumn. To recap: at what point should a management team raise the alarm? Where were the controls of a powerful scrutinizing committee of non-executive directors? How can transparency be instilled? Should there be a whistleblowing procedure? And how can so much control and deceit lay in the hands of such a powerful few?
These now fairly age old questions are likely to form the basis for debate of regulatory reform for many months to come. And whichever way you look at it, any new regime is likely to come at the expense of additional bureaucracy, time, cost and headaches. In the meantime, whilst the insurance market obsesses over how opportunistic and organised fraud impacts on its bottom line, the internal scrutiny for the executives at the very top will only intensify. IT
