Lincoln is paying about £500,000 in compensation to clients of a tied agent.
The case is now the subject of a Metropolitan Police investigation.
The move is part of a year-long inquiry by Lincoln into its tied agent City Financial Partners, which has led to a police investigation into three salesmen.
Lincoln is paying compensation to clients of CFP consultant Jerry Robertson who was suspended last February. He was interviewed by the Metropolitan Police on December 10 but has not been charged.
It is understood that Rob- ertson was placing clients' cash into a Fidelity account held in his own name. Fidelity spokesman Paul Kafka says: "We are co-operating with the police in the furtherance of their enquiries."
Lincoln says two other sales consultants have been suspended following its investigations. These are David Noyes, who was suspended last week pending an inquiry, and Anthony Molderhill, who was dismissed a year ago.
Lincoln is expected to buy CFP, which has a self-employed salesforce of 700, in the near future. But the life office refuses to comment on whether this is an attempt to take firmer control of the tied agent and clamp down on compliance problems.
Marketing communications manager Ian Crowder says: "We have completely revised our auditing procedures to ensure that nothing like this ever happens again." Crowder refuses to comment on how many clients are involved. He claims that no other CFP agents are facing suspension and that Lincoln has learnt from its mistakes. He says: "There are bad apples in any bunch."
The life office says it has kept the PIA informed of its investigation but it is thought that the PIA is working on its own probe into CFP. Crowder says: "Investigations are ongoing and we have an ongoing relationship with the PIA."
City Financial Partners
Lincoln's biggest tied agent with 700 salespeople.
Lincoln, which has a direct salesforce of 1,000, refuses to reveal CFP's sales figures but admits it is an "important percentage of total sales".
Salesforce self-employed and work mostly by cold-calling.
CFP became tied when Lincoln bought Citibank Life in 1993.
CFP has eight offices across the UK, including three in London, under managing director Simon Ingram.