Two insurance industry veterans took the stand yesterday in a case taken by an Indonesian couple against insurer AIA, over a fake US$5.06 million (S$7 million) policy sold to them by a rogue AIA agent.
Mr Ong Han Ling and his wife Enny Ariandini Pramana, both 77, commenced the legal suit in 2012 against AIA and an AIA-related firm, Motion Insurance Agency.
They sued the firms for negligence and breach of duty of care when handling their insurance matters, as well as asserting AIA's vicarious liability for former agent Sally Low's fraudulent acts. She was jailed in May this year for eight years.
Yesterday, former NTUC Income chief executive Tan Kin Lian was called as an industry expert by Mr Ong's lawyers KhattarWong. Mr Mun Cheong Fai, ex-executive director at Tokio Marine Life Insurance Singapore, was AIA's expert.
The Ongs, who are Singapore permanent residents, are seeking damages of between $4.2 million and $7.2 million. They claim that AIA and Motion breached a duty of care owed to them - thereby causing them loss. These duties included providing a sound internal system to detect and prevent fraud.
In his evidence yesterday, Mr Tan alleged that AIA's procedures were "not robust enough" to catch the fraud that Low had perpetuated.
He told the court he was very surprised the cash Mr Ong sent to AIA was far more than the policy premiums, meaning he was entitled to a big refund. That should have raised alarm bells with AIA, but didn't.
He said: "I find it amazing that in the light of all these transactions where remittances (for the fake AIA Thank You policy) are matched to certain (unauthorised) policies leaving large sums to be refunded, that AIA did not telephone Mr Ong to verify what his intentions were. Why would Mr Ong pay US$5 million in several tranches to be used in this way?"
In fact, one refund cheque was for a whopping $616,991 and was not encashed for more than a year, before it was used as second-year premiums for three policies.
Mr Tan noted that Low also appeared to have been given free rein in managing these funds, allegedly giving instructions to AIA to issue the unauthorised policies.
"My operating premise is: you should not trust any agent totally blindly. And you do need, when circumstances are unusual, to verify."
Mr Mun, in his evidence, said it was not the first time that AIA had received large sums of money from customers, and that the firm was following an industry norm - for insurers to communicate with their customers through intermediaries.
He said that AIA's controls "have been properly exercised" and added that a firm's "gatekeeping" is not really at the receiving end but at the paying-out end.
The trial continues today.