The collapse of Winley Insurance Group in Perth was a major talking point among insurers last week. And no wonder; some of them have found themselves millions of dollars out of pocket. But it’s the manner in which they discovered they had been dudded that has set alarm bells ringing.

The first time several major insurance companies became aware of the collapse of Winley was when they read about it in last week’s edition of insuranceNEWS.com.au.

Yet by the time we published we had been aware of trouble at Winley for a whole nine days. And we were tipped off by people who had known for at least a week longer than that.

What happened to make Winley collapse with such casual ease? In a nutshell, two investors who helped set the company up, Steve and Chandanie Godwin, had access to the broker trust fund, which they allegedly raided at some time in the past couple of months. No one knows yet how much they took, but the figures quoted by some insurers we spoke indicate it is significant. The Godwins are understood to now be in the US.

Why weren’t the insurers informed immediately the alleged theft happened? The company’s remaining principal was MD Jeff Bailey, who was also an AR of the company.

insuranceNEWS.com.au has not spoken to Mr Bailey, who has ignored texted invitations to be interviewed, and has threatened legal action if any information is wrong.

We have not been able to ascertain if Mr Bailey wrote to the insurers at all. One major insurer’s Perth-based manager passed on the news to his head office in Sydney the Friday before we published, but most of that information was obtained verbally.

Last week we reported that ASIC had been informed, but we have been unable to discover if the regulator was actually contacted by Winley, an insurer or just a concerned party.

It’s understood Mr Bailey was contacted by ASIC late last week.

Not surprisingly, the insurers – and at least one underwriting agency – are seething at the way the collapse has been handled.

In the nine days before insuranceNEWS.com.au published information on the collapse, several sources had told us Winley was being “hocked around Perth”. Even then the talk centred on the fact that the Goodwins had allegedly run off with company funds.

By the time we reported the collapse last week a number of Winley ARs – including Mr Bailey’s company, Sunset Coast Insurance Services – had moved to other AR groups.

There they can presumably expect to carry on business as if nothing has happened – except they’ll doubtless be paying higher fees.

Winley was a strange AR company. Its advertising and its website never used names, just phone numbers. Many of its 70 or so ARs were very small-scale – some would say uneconomically so. Its management fees were remarkably low in comparison with its competitors, and it offered many of its facilities free of charge to its ARs.

Late last week Allianz Australia – stung by the fact that it has lost what is understood to be a significant amount of money from the Winley broker trust fund and was never told about it – announced it wouldn’t be automatically accrediting former Winley ARs who have moved to new companies.

Allianz’s action, which it could have taken without informing the market, reveals the level of frustration some of the victims of the Winley collapse are feeling.

Because in this case the insurers are indeed the victims. Premiums paid to the insurance intermediary are deemed in law to have been paid to the insurer. So if a broker’s trust fund is pillaged, it’s the insurer who loses.

While the provision protects consumers, it’s something that insurers and brokers should hope doesn’t happen too often. And insuranceNEWS.com.au is aware of a number of cases in the past year involving brokers using trust funds as their personal facilities.

Most of those cases have been discreetly dealt with by business partners, and while the regulator has been informed, it seems to have decided on an approach of “least said, soonest mended”.

Several AR organisations spoken to by insuranceNEWS.com.au have expressed concern at the ease with which the Winley trust fund was allegedly emptied, and the possible consequences for them if insurers were to seek the regulator’s support to change the trust fund arrangement.

Shaun Standfield, the MD of Insurance Advisernet, says while such issues affect about .01% of premiums, AR groups nevertheless “should do some thinking” about the impact of Winley-type incidents on the AR sector and AR groups’ individual brands.

“There obviously needs to be more probity checks by insurers, and there should have been some attention paid to the fact that [Winley] seemed to have no names of managers, no structure and no real information about who was on the board,” he told insuranceNEWS.com.au.

Mr Standfield says Insurance Advisernet has stringent security in place that makes it virtually impossible for his company’s trust fund to be adversely affected.

For now, the insurers will have to wait a while to ascertain just how big the Winley loss has been for them.

Past incidents like this have rarely resulted in significant recoveries, but the consensus last week was that the insurers should at least consider mounting a united effort to find the perpetrators and get something back from what seems to have been a particularly blatant theft.