Like many other insurers, Laurentian salesmen failed to collect sufficient information about their customers to justify their recommendations. A sample of cases analysed by Lautro, the life insurance regulator, suggested 64 clients had taken out unsuitable policies, 23 could not afford the commitment, and five had been advised to cancel existing contracts - so-called churning.
Lautro ordered Laurentian to use Tillinghast, the actuaries and consultants, to undertake a larger study of 2,500 customer files, which confirmed these breaches of investor safeguards.
Laurentian said yesterday that the Tillinghast investigation had shown that 'in the majority of cases, the problem was more one of inadequate documentation than bad advice. There were only a very small proportion of cases where we did offer inappropriate advice'.
Laurentian has contacted other groups of its policyholders thought to be at risk and will pay compensation where necessary. The company said most clients had opted for an alternative policy rather than compensation.
Laurentian would not say how many clients had been mis-advised, nor how much it would have to pay out in compensation.
The two serious rule breaches that Laurentian admitted covered the period between April 1988 and July 1992. Lautro is satisfied that Laurentian has taken satisfactory action to prevent a repeat.
The failures seem to have affected a larger number of clients than in other recent cases where life offices were fined much larger sums. Lautro said this was because Laurentian's conduct had not broken any regulatory principle.Reuse content