Don't get stomped by insurance fraud
If you think that insurance fraud is just about dishonest
policyholders filing false claims, think again. You may already
have bought a policy from a fraudulent seller. If you have, you
won't realize it until the time comes to collect on that policy.
Fraudmeisters prey on individuals who have trouble
getting insured or who can't afford the high premiums charged by
some companies. Insurance investigators began running across more
incidents of health insurance fraud when rates went up a few years
ago. For example, an insurance company would turn down an applicant
because of a pre-existing condition, but a disreputable salesman
would approve the application to sell a worthless policy.
So what happens if you've been sold a bogus policy?
That depends on your situation. The 1992 Los Angeles riots were
a prime example of a worst-case scenario. Many Asian-American business
owners tried to collect on policies after their shops were burned
during the riots. They soon discovered that they'd been had by a
group of crooked offshore insurance companies.
The victims eventually won a class action suit, but
they've been unable to collect on their losses, says Mike Diegel,
communications director for the Coalition Against Insurance Fraud
in Washington. "Attorneys have been going after those companies
by attacking their assets. The problem is that you can't find their
assets. It's difficult to trace the assets because those companies
keep moving the money around and changing their name."
Things are often easier if you've been victimized
by a fraudulent agent or broker who's employed by a legitimate insurance
seller, says Jim Spiller, an administrative assistant with the National
Insurance Crime Bureau in Palos Hills, Ill. "Usually, the insurance
companies are sympathetic when a client has been defrauded. Most
insurance companies will honor that policy. The consumer himself
will get some kind of recourse -- unless it's some type of offshore
company that is not regulated by any state."
I've been cheated, been mistreated
Agent fraud occurs when a consumer gives money to
an insurance agent and receives nothing in return or receives a
product that they never requested. Unauthorized insurance fraud
takes place when unlicensed companies sell insurance policies. Diegel
says agent/broker fraud makes up a significant part of the $120
billion in insurance fraud that takes place every year.
|Make sure you receive a written policy
within 60 days of paying the first premium.
|Be sure that "free" services are not hidden
somewhere in the bill.
|Protect your insurance identification numbers
as you would a credit card number.
|Ask for detailed bills for all services.
Check them carefully for accuracy.
| Be suspicious if the price is substantially
below that at other companies.
|Suspicious? Call the National Insurance
Crime Bureau's hotline, (800) 835-6422.
|Source: Coalition Against Insurance Fraud
"Agent fraud is definitely a problem. That is not
to imply that all agents are crooked, but there have been cases
where agents pocketed premiums instead of sending them to their
company. There have been other times when agents forged policy applications
and collected money that way. Agents have borrowed money from a
client's account or filed a phony claim with a company while using
their customer's information. All those scams are intended to drain
the customer's account in one way or another."
Prospective policy buyers can protect themselves from
fraud by checking with their state insurance department to see whether
an agent/broker is licensed and what their claims-payment record
But a broker or agent is not legit simply because
he is licensed. In one case, a father and son team and two licensed
insurance brokers pleaded guilty to fraud charges after selling
phony commercial policies to at least 50 companies in New York City.
Authorities accused Dean Sanders and his son, Scott, of taking an
estimated $30 million over a period of six years. The pair even
worked their scams from behind bars, authorities said, as one or
the other was imprisoned on unrelated charges during those six years.
Diegel warns clients never to pay cash or write payment
checks made out to an agent rather than a company. And never sign
blank insurance forms.
If you're buying insurance products online, Spiller
recommends that you check to see whether the company is registered
with the Better Business Bureau. You can also find out how an insurer's
creditworthiness is rated by agencies such as Standard & Poor's,
A.M. Best Co. or Moody's Investors Service.
Fraud victims can fight back by contacting their state
insurance department's fraud unit or consumer affairs office. But
in the end, common sense may still be your best defense against
being tricked. "If the deal looks too good to be true, then watch
out," Diegel says.
-- Posted: Oct. 1, 1999