Norwich suspends sales staff: Insurer to retrain 800 employees after fears they are not qualified enough to sell policies

NORWICH Union, one of Britain's largest insurers, has been forced to suspend 800 life insurance salespeople for a month because regulators fear that they are not competent enough to advise investors.

Norwich Union had hoped to retrain staff over several months but Lautro, its regulator, last week insisted on a more urgent retraining programme. Lautro has withdrawn the accreditation it gave to Norwich Union's training scheme.

Philip Scott, general manager of Norwich Union's UK life operations, said a breakdown of management control had led to shortcomings in the scheme. He said 17 managers and about 320 salespeople have been asked to leave since he took over last July.

Allan Bridgewater, chief executive, said this was 'a matter of genuine concern for Norwich Union'. His managers had been entrusted with ensuring high standards. For some members of the team, 'that trust was not well placed'.

This is the latest of a series of embarrassments for Norwich Union in recent years. The company was the subject of Lautro's first intervention order in 1990, because of the insurer's inadequate controls over a firm of salesmen.

Some of those who have left Norwich Union have secured senior positions elsewhere in the insurance industry. Ron Calver, Mr Scott's predecessor, has joined Royal Life as assistant managing director after leaving Norwich Union last year with a pounds 267,000 payoff.

Dunlop Stewart, former national sales manager, has taken up a similar position with Standard Life to set up a direct salesforce for the large Scottish mutual. Colin Beevers, who was national sales manager (direct sales), is a regional manager with Laurentian Milldon, the sales arm of a Canadian-owned life insurer.

Despite the inadequacy of its training programme, Norwich Union does not believe any customers have been disadvantaged by receiving the wrong policies. It said its quality control should have ensured that customers received the appropriate financial advice. However, the insurer will compensate badly advised customers.

Mr Scott said he became concerned because of the number of young and inexperienced salespeople Norwich Union had recruited. At one stage, 30 per cent of proposed sales were being rejected by the quality control mechanism.

Norwich Union receives about 10 per cent of its life insurance business from the 600 people in its direct sales force and another 200 who work for its tied agents.

The company hopes to have retrained its salespeople by 25 April.

The suspension of the salesforce does not affect the business Norwich Union receives from independent financial advisers or from Leeds Permanent Building Society.

Norwich Union also reported that its general insurance arm had returned to profits of pounds 131m last year after losing pounds 23m in 1992. Mr Bridgewater said the company had reduced the premiums of policyholders by encouraging the use of alarms and other precautions.

The solvency of the life insurance arm, also a concern, has improved with the excess solvency margin rising from 9 to 10.9 per cent. Mr Bridgewater said Norwich Union's free assets of pounds 3.8bn were pounds 3bn more than was required by the Department of Trade and Industry.

Funds under management rose from pounds 27bn to pounds 33.1bn last year, with total premium income rising from pounds 4bn to pounds 4.3bn.

Godfrey Jillings, chief executive of Fimbra, the regulator for financial advisers, has no job with the Personal Investment Authority in the new watchdog's management team published yesterday.

Other Fimbra executives, such as Richard Cockroft and Jim Gaskin, have been given more junior roles than previously envisaged. The move is likely to worry financial advisers, unhappy about the PIA.

Kit Jebens, chief executive of Lautro, will be in charge of the PIA's member relations, Stuart Willey will be responsible for legal affairs, and David Severn of the Securities and Investments Board will look after policy development.