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FSA bans and fines broker £195k for insurance fraud

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The FSA has banned and fined a mortgage and insurance broker £195,117 for submitting at least 54 fraudulent applications for protection policies.

The penalty is made up of a £70,000 fine and the disgorgement of £125,117 which the broker obtained through commission.

John Folan was a director and adviser at Key Mortgage Associates, a small mortgage and insurance intermediary in Brentwood, Essex.  Between January 2008 and September 2009 Folan submitted at least 54 applications for life assurance and protection policies in his name, his wife’s name and in the name of family members. He made these applications without their knowledge and in three of them he also falsified signatures of family members.

In each case Folan provided his own bank account details so that direct debit payments could be taken by the insurance providers. Folan aimed to keep up with the premiums, but when his money began to run out he took out further policies to secure more commission to cover the outstanding payments. The FSA says this churning made providers suspicious and they contacted the FSA.

Folan used his own address for correspondence so that the people he was impersonating would not become suspicious when they received insurance documents out of the blue. When documents were occasionally sent to family members he lied to them to conceal his true intent by saying he was submitting ‘sample policies’. Folan destroyed policy documents as soon as he received them so that he kept no audit trail of his wrongdoing.

FSA head of retail enforcement Tom Spender says: “This is a significant fine to reflect significant failings. Folan took advantage of his position as an FSA-approved individual for his own personal gain, and at the same time took advantage of his close family. The FSA concluded that he lacks honesty and integrity.

“Folan’s actions tarnish the industry’s reputation, and that is why we continue to pursue these cases and publish the findings. Anybody working in the industry who is tempted to commit any type of insurance fraud should note the consequences of their actions.”

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Readers' comments (5)

  • Good riddance to him we don't need his type in financial services.

    Where is the prosecutions for Senior Bank directors responsible for fraud in connection with PPI insurance?

    At the last count this amounted to nearly £7 billion and no prosecutions, fines, or banning orders.

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  • So why dont they take this approach with banks?

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  • how did he ever think he was going to get away with this? or was it a kamikaze job never intended to get away with it??, the money already hidden away, the fine may never get paid as he will just go bust.

    No amount of regulation and TFC box ticking will stop this type of criminal act, well at least they have stopped him now.

    How the product providers didnt spot it after the first few applications with the same debit details is worrying.

    Technology should have stopped this in it's tracks, tut tut FSA you should have seen this one coming and set out guide lines to providers a decade ago. You can pull your pants up now.

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  • This is an old old tactic to keep the Merc, house hols, image.

    I wonder how many CIC policies were churned by similar types who told the policyholder that the level tern with terminal illnesshe/she was offering was exactly the same but cheaper, how many providers flagged that one up?

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  • The systems are not to blame. The behaviour of advisers is.

    Exasperated Me - I think you'd be pleasantly surprised at how effective providers are at monitoring this type of activity. The problem - as with all types of financial fraud - is that it takes time to gather data to prove a case and then act upon it. It also costs a lot of money.

    I have seen first-hand evidence of activity by so-called respectable IFA firms on online systems, and it is frankly despicable.

    There's a lot of self-righteous talk on this website from the adviser community, and they are quick to attack providers for minor malpractices, but it only takes one case like this to make them look rather foolish and out of touch.

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