New Zealand’s Serious Fraud Office is investigating Auckland-based brokerage Herbert Insurance Group over concerns that premiums have not been transferred to insurers, and clients have been urged to check they are covered.

Serious Fraud Office Director Adam Feeley says the group’s account which held clients’ premiums has an estimated shortfall of $NZ2-$3 million ($1.5-$2.2 million). But at this early stage of the investigation that figure could grow or decrease.

“It appears that some client premiums may not have been passed on to the insurers, and may have been diverted for other purposes,” he told insuranceNEWS.com.au.

Herbert has about 4000 clients in NZ and went into voluntary liquidation on March 4. It was placed into receivership on March 7, and on March 17 receiver KordaMentha announced the client base had been transferred to Aon NZ.

KordaMentha receiver Michael Stiassny has urged all Herbert clients to contact Aon as soon as possible to confirm their insurance cover.

He says he recently became aware of irregularities in some of the insurance covers the company had placed.

“Some clients do not appear to have the cover they requested and in some cases they appear to have no cover at all,” he told insuranceNEWS.com.au.

Mr Stiassny says clients will only be covered if some form of binder has gone to the insurer. Aon and insurers are working to ensure clients’ concerns are dealt with as quickly as possible.

Herbert was founded in 1981 by Grant Herbert and provided commercial and personal lines insurance. One of its specialties was bluewater cover for boats.

The company also had a wholesale arm with a Lloyd’s binder that enabled it to offer products to brokers who now find themselves in the same situation as retail clients – wondering if they have cover.

The business employed 40 staff but they were all dismissed when the liquidator took over. Under the receivership, Aon staff have begun working through the client records. 

Aon NZ CEO Geoff Blampied has a team of 15 working on the Herbert accounts, and after publishing a public notice on Friday he says the company is getting hundreds of phone calls from worried clients.

“We are mounting an industry rescue of the clients,” he told insuranceNEWS.com.au. “From an industry perspective we want to try to look after the clients as best we can.”

Mr Blampied says although the Insurance Intermediaries Act is clear in stating that a premium paid to a broker is deemed to have been paid to the insurer, the receivership has raised concerns that some insurers don’t know cover has been placed in their name.

Herbert Insurance expanded to Australia in 2007 when the CEO of the Australian operation, Tony Christian, opened an office on the Gold Coast.

The Australian business is not in receivership, and Mr Christian told insuranceNEWS.com.au the receiver has told him to sell the portfolio.

He has sent the receiver the accounts and explained the finances of the Australian business are completely separate from the NZ operation.

Mr Christian hopes to sell the assets and enable his staff of five to keep their jobs.

He is now a sole director after the receiver removed the New Zealanders from the board. He knew Grant Herbert when they were colleagues in the industry 30 years ago in NZ, but his only recent contact with the NZ business has been through the receiver.