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Investigation blows open alleged 'premiums misappropriation' insurance scandal

13 May 2021 6:58 PM
Tags:
The Money Show
Bruce Whitfield
Insurance
VBS Mutual Bank
Old Mutual
Insurance industry
Pauli van Wyk
santam
vbs
Financial Sector Conduct Authority
FSCA
Hollard
Guardrisk
Insure Group Managers
Charl Cilliers
Diane Burns
financial service providers
Insure Group

Investigative journo Pauli Van Wyk says four SA insurance giants have lost R944m in total by using Insure Group as intermediary.

An alleged insurance scandal has led to huge losses for at least four South African insurance giants.

A Daily Maverick investigation has found that Santam, Hollard, Old Mutual and Guardrisk lost R944-million between them due to the actions of intermediary Insure Group Managers.

Insure Group collected insurance premiums from customers and invested cash it was meant to pay over to the companies into its own "illiquid, high-risk and ultimately loss-making assets" writes Pauli van Wyk.

© Mikhail Dmitriev/123rf.com 

Van Wyk reports that these “investments” included a mining rehabilitation plant in Gauteng, a deepwater port in Mozambique, a property portfolio in KwaZulu-Natal, and a stake in an asset management company.

"It also used the cash to build its own business, by financing brokers and intermediaries."

Bruce Whitfield interviews the investigative journalist from Daily Maverick's Scorpio unit.

Van Wyk says it's taken her years to piece the puzzle together.

It was quite a difficult story to look into because... the insurance sector is closed off and fairly conservative because they work with other people's money, and panic is never a good thing.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

Fortunately the money is not, for a single insurer, so much that it is material to their liquidity or their ability to pay out claims.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

It says something about the precedent of any criminal action against some wrongdoing in the sector and it says a lot about a financial intermediary and how much money, collectively, they can misappropriate.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

We're talking about a collective R1.7 billion here.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

The Financial Sector Conduct Authority (FSCA) has described it as “tantamount to a misappropriation of the premiums collected”.

Insure Group directors Charl Cilliers and Diane Burns have been debarred as financial service providers, based on their lack of honesty and integrity says van Wyk.

Both of them plan to appeal their debarment.

What they should have done... is collect the premiums from the public, hold on to the money for up to around 45 days and then pass it on to the insurers. They can keep the money in liquid investments like a high-interest bank account.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

What they did is collect the money from the public, then bought their own assets with it without consent from the insurers... in breach of the Short-term Insurance Act... The intention with this pool of money was to make larger profit than was possible with liquid assets.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

It didn't work out that way because the investments were badly-conceived says van Wyk.

To counter the cash shortage they started using the next month's premium money to pay the previous month's debt, but when that wasn't enough they got a R250 million credit facility from VBS. When VBS... suddenly imploded in March 2018, it meant the end of their credit line.

Pauli van Wyk, Investigative journalist - Daily Maverick's Scorpio unit

Listen to van Wyk unpack the details of Insure Group Managers' dealings and the implications:




13 May 2021 6:58 PM
Tags:
The Money Show
Bruce Whitfield
Insurance
VBS Mutual Bank
Old Mutual
Insurance industry
Pauli van Wyk
santam
vbs
Financial Sector Conduct Authority
FSCA
Hollard
Guardrisk
Insure Group Managers
Charl Cilliers
Diane Burns
financial service providers
Insure Group

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