Insurance Fraud

Seller Fraud

Insurance fraud from the seller side (which can involve one representative or entire companies) includes:

Issuing coverage from non-existent companies: policy premiums are obtained from consumers, but the policy is written against a non-existent company. The fraud is discovered when a claim is filed. This type of fraud is a planned criminal operation, often working out of “boiler room” operations (ad hoc, temporary offices). The sales are generated through the promise of exceptionally low premiums, which usually produces word-of-mouth referrals. If an accident claim is filed early in the operation, sometimes a phony claim process is begun, making partial payments so as not to reveal the fraud.

Failure to submit premiums: in these cases, a representative of an insurance company collects premiums from a policyholder but doesn't remit payments to the company. The customer believes that coverage is in force until a claim is refused for non-payment of premiums. This type of fraud is often caused by economic pressures upon the agent, in which she may have originally planned to use the premiums for a short-term loan, but was unable to pay the premium before a claim occurred.

Churning: a procedure by which an insurance company salesperson convinces customers to cancel and renew policies, not for the benefit of the customer but to generate additional commissions for the salesperson. The customer often pays more in commissions than is necessary, and receives no increase in policy value. This is a fraud type often perpetrated against older policyholders.

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Suicide disguised as accidental death is one form of insurance fraud.

Seller fraud involves pushing buyers to acquire inappropriate coverage.

Viatical fraud involves brokering policies to obtain immediate cash.

Inappropriate coverage: in these cases, sales representatives convince policyholders to obtain policies for which they may already have coverage or for coverage that they do not need.

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