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Court battle costs broker everything

A Napier-based insurance adviser says his reputation is in tatters after being dragged through a court case.

Tuesday, March 22nd 2016, 6:00AM 9 Comments

by Susan Edmunds

David McGuffie

David McGuffie was this month cleared of four charges of dishonestly filing claims with Pinnacle Life, Asteron, Tower and AIA.

He owned Advanced Insurance in Napier, which was put into liquidation early 2014. McGuffie went bankrupt.

McGuffie said his trouble started in 2009 when he had his agency agreement terminated by Fidelity Life after he moved a number of clients to another insurer.

Of an initial $850,000 of annual premium he had placed with Fidelity, McGuffie estimated he moved about $600,000 over a two-and-a-half year period, primarily because clients could get a better deal elsewhere.

He then struck trouble with AIA when it brought out a series of better contract terms for clients. McGuffie said he was told that he needed to rewrite each client’s business to take advantage of lower premiums, even though that meant he would be paid upfront commission again each time. “They were effectively paying me twice.

“Every year it kept cropping up as renewals came up because people could save $200 or $300 a month, I couldn’t not do it.”

Although McGuffie said he was told that was the right thing to do, eventually AIA informed him they were considering cancelling the agency.

He then signed an agency with Tower, which was then bought by Fidelity Life. McGuffie said at this point a former staff member starting photocopying files, trying to get an investigation into his behaviour.

That sparked a three-year process which culminated in an FMA expert brought in to provide evidence saying it was not clear from McGuffie’s files that there had been any wrongdoing.

“There was never anything wrong with the files - there was never anything wrong with what I did or how I did business's - as these charges were brought against me be our [former staff member]. She had photocopied sections of the files to make it look like I had done wrong - she had been in contact with the FMA while she was still working for us. The insurance companies had done their investigations and found nothing wrong.

“The interesting thing was - the police never came to me requesting the complete files of any of the client's they interviewed - had they done this I would never had gone to court and would still be in business.”

McGuffie said a lot of damage had been done to him personally. His contacts within Hawkes Bay thought he had stolen money from insurance companies and others had distanced themselves from him.

Since 2014, he has worked for Brokermatch, a service that introduces potential clients to brokers.

“I was producing $650,000 of income, now I’m earning $50,000 a year.”

McGuffie said he would like to be a broker again but he would need to come out of bankruptcy first, which will not happen until next year.

“[It’s also a matter of whether] any of the insurers would ever give me an agency - for example a good friend of my tried to get me an agency through Sovereign before our company went into liquidation and they turned me down due to being told by another insurer that I was under investigation by the police for tombstoning. This  happened before I even know the police were involved.  I would like to be a broker again - as I believe the concept of insurance is amazing and I have seen it save people's live financially firsthand.”

McGuffie said his books of business were given to other brokers.

Tags: Fidelity Life health insurance Insurance Advisers Life insurance Sovereign

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Comments from our readers

On 23 March 2016 at 6:19 pm WgtnAdviser said:
Any company that gives this guy an agency will never get any business from me again. Moving all your business every few years and you wonder why no one wants to deal with you? Playing naive? This brings the whole industry into disrepute
On 24 March 2016 at 10:38 am Aurora said:
He was told that he needed to rewrite each client’s business to take advantage of lower premiums, even though that meant he would be paid upfront commission again each time. “They were effectively paying me twice" this statement clearly shows the fog through which David looks!
On 30 March 2016 at 12:12 pm Integral said:
If the client has not been affected in anyway other than to receive better terms on their policies or by paying less premium on the same or better terms where is the issue? Isn't that the point of a review to be constantly looking to improve our clients position?

My understanding of the term "churning" is where a book is turned over for the purposes of obtaining new commission but where is there is no benefit to client. This does not appear to be the case in this instance or would the FMA have not brought some action against the broker as well as the insurance company concerned. Neither party have brought claim against this broker. The only party that appears to have affected by this is the insurance company that allowed a commission to be paid again on the renewal of a new policy it owned. I am sure they must be asking some questions in house.
On 31 March 2016 at 11:11 am Drifter said:
If moving 70% of your book to another provider is NOT churning then what the hell is. This guy is delusional to believe he is a good advisor.
On 31 March 2016 at 11:48 am Dirty Harry said:
I spoke last year with an American adviser who does financial planning on a pure fees-only basis. He refers insurance work, because he can't do it on a fee-only basis.

The insurance lobby actually got legislation written that compels advisers to accept commission, if paid. Crediting or rebating commissions to clients in the manner some professionals here would do is actually illegal over there. He was excited about the New Zealand market because we not only can do that, some would consider it the ethical thing to do where a fee has already been charged.

Further, he was almost beside himself with disbelief that we can actually quote the discounts associated with reduced commission.

So poor dear McGuffie was forced to accept AIA's massive upfront commissions all over again to re-write AIA policies in the pursuit of modest discounts? Puh-leez. Just imagine if he declared he didn't need all that commission and would be taking only a portion of the initial commission to cover costs, initiating a lifetime discount in the vicinity of an additional 10-20% !!
On 1 April 2016 at 1:49 pm Karma said:
Mcguffie is blaming his employee and the insurance companies for his latest demise. This is the same adviser who went into bankruptcy in the mid 90s owing monies to Colonial Mutual Life (CML) and NZI among others. Who's he blaming for that ? If as he states he had a regular income of 650K for a number of years, why would he need to go into bankruptcy leaving a list of creditors yet again ? As Wgtnadviser pointed out in a previous comment, Mcguffie "playing naive" shows either his total lack of business skills or a very calculated individual. It will be a sad day if he is given a 3rd opportunity to impose himself on the paying public as an insurance adviser.
On 21 June 2016 at 9:50 am Paul J Burns said:
Going by the stones being thrown from the sidelines, if only I too had total access to both sides of the story (as the other commentators to this article surely seem to possess). Then I'd feel comfortable making an informed comment.
On 21 June 2016 at 9:51 am Paul J Burns said:
If only I too had total access to both sides of the story (as the other commentators to this article surely seem to possess). Then I'd feel comfortable making an informed comment.
On 3 May 2020 at 2:00 pm Asteron1 said:
Well here is an informed comment.I have personally known and worked alongside David for many years and can say without any shadow of doubt that he is of exceptional character. His honesty and integrity are beyond reproach. This has knocked him down but he'll get back up again. Haters watch this space!

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