Three men were jailed today for terms ranging from three to four years after being convicted of conspiracy to defraud at the District Court.

The defendants, a 50-year-old director, a 33-year-old shareholder and a 34-year-old shareholder of a licensed insurance brokerage company signed brokerage contracts with three well-known insurance companies from January 2003 to July 2004.

Under the contracts, the brokerage company introduced policyholders to the three insurance companies. In return for the introduction of new clients, these insurance companies would pre-pay the brokerages lump sum commissions ranging from 100% to 138% of the annual premium paid by the policyholders.

The brokerage company was required to return or "clawback" part of these commissions if the new policyholders stopped paying their monthly premium instalments within 12 months of the policy subscription.

Since the commencement of the scam in 2003, 2,335 new clients had been introduced through the brokerage firm with a total of $36 million being paid in commissions.

Within a year, about 90% of the policyholders stopped paying the premiums and the brokerage firm was liable to pay the "clawback" percentage to the insurance companies.

However, the brokerage firm closed down in July 2004 causing a net loss of approximately $6.6 million to the three insurance companies.

A police investigation revealed that the insurance policies were often given as prizes in lucky draws, or as staff benefits. The premiums of the "clients" were in most cases settled by the brokerages and the insurance companies were kept in the dark.

In November 2004, the Police Commercial Crime Bureau arrested the three defendants who were charged with conspiracy to defraud. They were convicted on April 21.