Norwich Union Life Get FSA Fine

The Financial Services Authority (FSA) has fined Norwich Union Life almost £1.3m for failing to protect its customers properly from financial fraud.

As a result of the failings there were a number of actual and attempted frauds against customers of Norwich Union Life, which enabled fraudsters to make use of information that was publicly available such as names and dates of birth, giving them the opportunity to impersonate customers and obtain even more sensitive details from the insurer's call centres.

The fine follows an internal investigation and report by Norwich Union in the early part of this year which discovered that training at its Indian call centres was outdated and, even worse, the managers in the call centres did not have a full comprehension of their responsibilities under City rules.

This tale of woe had examples of fraudsters asking for confidential customer information to be changed; these included addresses and bank account details. Armed with this information they could use it to request surrender of customer policies. In 2006, 74 customer policies were surrendered for a total of £3.3m.

The FSA investigation found that Norwich Union Life had failed to adequately assess the risks to its business by potential financial crimes, which would include fraudsters attempting to get hold of confidential customer details.

Even after some frauds had taken place, the safety net for investors wasn't tightened sufficiently and its own compliance department had to highlight the issues.

Director of enforcement for the FSA, Margaret Cole, said: "Norwich Union Life let down its customers by not taking reasonable steps to keep their personal and financial information safe and secure. It is vital that firms have robust systems and controls in place to make sure that customers' details do not fall into the wrong hands. Firms must also frequently review their controls to tackle the growing threat of identity theft. This fine is a clear message that the FSA takes information security seriously and requires that firms do so too."

Norwich Union Life co-operated fully with the FSA during the investigation, and the watchdog took this into account with the fine, giving the insurer a 30% discount on the fine for agreeing to an early settlement.

Now Norwich Union Life has carried out a review of security procedures and has fully reinstated all policies that had been incorrectly surrendered.

The initial revelation at Norwich Union Life came amidst complaints about its operations in India and the company had moved 150 jobs back to the UK. At the time the NU team significantly found that senior managers did not fully understand their responsibilities under FSA rules. The company feared at the time that the watchdog could step in and fine the company for breaches.

The possibility of fraud in India was considered, according to the report compiled back in February 2007. It admitted that its call centres in the sub-continent were not using the standard NU sales and customer advice training material.

The company's fears have now been realised by the FSA fine.

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Published on December 21, 2007