The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The National Insurance Board (NIB) sought to simultaneously make a company owned by a Cabinet Minister’s mother the ‘broker of record’ for both its group health and property insurance business less than two months after the 2012 general election.

Documents obtained by Tribune Business show that NIB imposed A. Scott Fitzgerald Insurance Brokers and Agents Ltd into the existing medical insurance contract for its employees, which was held by BISX-listed Family Guardian, in late June 2012.

The company, which is owned by the mother and family of Jerome Fitzgerald, minister of education, science and technology, was introduced as the group health insurance broker at exactly the same time as NIB tried to give it the same role for its property and casualty business.

Tribune Business revealed back in 2012 the “grave concern” over plans to make A. Scott Fitzgerald Insurance Brokers and Agents Ltd its general insurance ‘broker of record’, given that the company had not participated in the contract bidding process.

However, what was not exposed then, but has now been uncovered, is that NIB also granted the company the brokerage contract for its group health insurance business - a policy that would provide coverage for its near-600 employees.

There is nothing to suggest that Mr Fitzgerald or his family members have done anything wrong in relation to the NIB insurance contracts, and there is no evidence - unlike in the recent Baha Mar controversy - that the Minister sought to lobby for his mother’s company to get the business.

But letters obtained from an NIB employee, acting under condition of anonymity, emphasised that Family Guardian, not the national social security system, would absorb the costs associated with A. Scott Fitzgerald Insurance Brokers and Agents’ commission.

A June 29, 2012, letter written by then-NIB director, Algernon Cargill, said: “I enclose a copy of our letter to Allardyce Scott-Fitzgerald dated June 29, 2012, and write to formally confirm to your company [Family Guardian] that, effective immediately, A. Scott Fitzgerald Insurance Brokers and Agents has been appointed as representative (broker of record) for NIB at the existing commission rate for NIB’s group insurance business that is currently placed with Bahama Health/Family Guardian under a contract that expires January 31, 2013.

“It is also understood that, as a result of this appointment, there is to be no increase in cost and/or decrease in the existing benefits offered under our group plans and, specifically, no direct cost to NIB.” The letter, ironically, was sent to then-Family Guardian president, Patricia Hermanns, who is now NIB’s director.

It is unclear whether A. Scott Fitzgerald Insurance Brokers and Agents was replacing an existing ‘broker of record’, or whether the role was newly-created for it.

However, insurance industry sources, when informed of the NIB contracts, suggested that the company’s insertion into a group health contract that had already been placed meant it stood to get “thousands of dollars” in commission fees without “doing anything to get it”.

The commission for insurance brokers is typically 3 per cent of a policy’s premium amount and, given the size of NIB’s workforce and multi-million dollar property portfolio, A. Scott Fitzgerald Insurance Brokers and Agents was likely poised for six-figure earnings from these contracts.

“There’s big money, big money in commissions for that account. It would be a substantial commission,” one insurance industry source, speaking on condition of anonymity, said of NIB’s insurance business.

Another insurance industry executive questioned whether A. Scott Fitzgerald Insurance Brokers and Agents, as a relatively small company, would have had the manpower resources to handle an account as big as NIB’s.

“To manage an account like that you need a number of people to assist you as a broker,” the source said, pointing to the number of claims that had to be administered and adjudicated. “There’s no way one person can manage that number of employees.”

Mr Cargill confirmed the company’s appointment in a letter sent to Mrs Scott-Fitzgerald on June 29, 2012, saying NIB had “accepted your invitation to serve as our broker of record for our group health insurance business that is currently placed with Bahama Health/Family Guardian”.

He added that the commission would be paid “at the existing rate” for NIB’s group medical and life insurance business, and would be paid by NIB.

The medical insurance brokerage award to A. Scott Fitzgerald Insurance Brokers and Agents slipped quietly past the concerns over efforts by NIB to also insert the company into its property and casualty business.

That was disclosed as part of the battle between Mr Cargill and then-NIB chairman Gregory Moss, which resulted in both men losing their posts.

NIB had sought to re-tender its general insurance business in summer 2012, largely due to the fact that the existing policy was underwritten by Bahamas First, having been placed through the carrier’s 100 per cent-owned subsidiary, Nassau Underwriters Insurance Agents & Brokers (NUA).

Patrick Ward, Mr Moss’s predecessor, was also president and chief executive of Bahamas First, and the Board appointed by the Christie administration perceived this as creating a potential ‘conflict of interest’.

Mr Cargill, in documents filed as part of is battle with Mr Moss, said Mr Ward recused himself from any Board discussions on the insurance issue, something that could be confirmed by meeting minutes and NIB’s external auditors.

And Mr Ward, in a letter to Prime Minister Perry Christie at the time, warned: “There has been a growing chorus of concern in the marketplace, and one in particular is of grave concern.

“It is my understanding that NIB is intending to appoint A. Scott Fitzgerald Insurance Brokers and Agents as the broker of record for NIB, notwithstanding the fact that this firm did not submit terms in the re-tender exercise.

“If NIB does proceed with this course of action, it will result in a substantial increase in the annual cost of its insurance programme for the year under review, under circumstances that are, to say the least, less than transparent and fair.

“This process, which I assure you is being closely monitored in the local and international insurance industry, will invoke a high level of speculation.”

Other documents filed with the Supreme Court at the time made clear NIB management’s unease, and NUA’s unhappiness, over the A. Scott Fitzgerald Insurance Brokers and Agents ‘broker of record’ plan.

In September 2012 Mr Cargill both wrote to, and spoke by telephone, with Insurance Commission superintendent Michelle Fields to determine if NIB could legally “insist” that a ‘broker of record’ be appointed on its account with NUA despite the latter’s opposition.

For Warren Rolle, NUA’s managing director, received NIB’s request for A. Scott Fitzgerald Insurance Brokers and Agents to become the ‘broker of record’ on June 28, 2012 - just one day before the same company was given this role for the group medical business.

Mr Rolle, in a letter to Phaedra Knowles-Mackey, NIB’s chief investment officer, recounted their conversation in which he recalled the desire to renew its policy “with the caveat that A. Scott Fitzgerald Insurance Brokers and Agents be noted as the broker/producer”.

“As we discussed, NUA does not currently have a contractual relationship with A. Scott Fitzgerald through a sub-agency agreement, which would require prior approval from the Insurance Commission of the Bahamas, nor would we be prepared to consider a co-broking arrangement,” Mr Rolle said.

“Considerable time and effort on our part has been expended in providing competitive terms for both the initial tender and re-tender exercise. Consequently, we would find it highly impractical, at this late stage, to now have to share commissions with an entity with which we have had no previous relationship on this account.”

Industry sources yesterday told Tribune Business it was “standard” practice for the insurance business of government agencies to be switched to companies affiliated with the governing party whenever power changed hands, and regardless of who held it - PLP or FNM.

“These contracts switch whenever the Government changes, whoever it is. It’s standard,” one contact said.

Another insurance broker, speaking on condition of anonymity, told Tribune Business that he had given up bidding on government contracts because of the advantages held by rivals with better political connections.

“That’s why we walked away from any government account; because of the political connections,” they said.

“We know politics is going to enter the fray, and we’re not interested in favours and putting things on the table, only to be handed to political cronies.”