Interlife allowed the abuses to continue for three years, despite an early warning from Lautro, its regulator. The fine might have been bigger but for Lautro's concern that Interlife should be left with enough money to pay compensation to the nurses and students who suffered at the hands of Richardsons, a firm that sold Interlife policies in the Manchester area.
Sid Paine, finance director and one of Interlife's founders, said the company's weak financial position was the reason behind its intended sale to 'a major European financial institution'.
Richardsons' salesmen used deceitful methods to gain access to nurses' homes and students' halls of residence, persisting despite specific requests not to do so. They sold unsuitable long- term savings policies, allegedly misrepresenting the impact of early surrender penalties. They are also accused of making inaccurate criticisms of the NHS pension scheme.
Lautro's investigators found 13 breaches of its rules when they inspected Interlife in March 1990. When they returned nearly two years later, many of the same problems remained among a list of 15 rule breaches that included inadequate monitoring of salesmen, inadequate record-keeping and a failure to deal with complaints.
Mr Paine said he could not comment on Interlife's failure to correct its problems, nor on the plight of the nurses who had suffered.
Mr Paine founded Interlife with Boris Sackville, a South African who claims to have been Sir Mark Weinberg's first salesmen when his compatriot founded Abbey Life. Mr Sackville has resigned to concentrate on an insurance software business.