Types of Insurance Agent Fraud
When a person intentionally lies to get something he has not earned or deserves, that is fraud. It is a crime in every state. Usually, fraud involves money or services. Unethical insurance agents defraud people by charging an amount to a client, but not delivering adequate services, or sometimes no service at all. These frauds can be run by real insurance agents scheming to make extra money or by professional scammers looking to prey on the vulnerable.
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Promissory Note
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A promissory note is similar to a loan. An investor loans a company money which is to be paid back over an agreed amount of time with interest. Agents then sell these so-called notes, promising a high rate of return for very little risk as these notes are supposedly insured. The agent then keeps the money. According to the Securities & Exchange Commission, this type of fraud normally targets the elderly.
Viatical Fraud
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A viatical settlement takes place when a terminally ill patient cashes in his insurance policy for the face value. An agent bids the policy to settlement companies. In this scheme, the agent recruits an ill patient to apply for multiple policies, misrepresents the truth by falsely answering medical questions and then has healthy impostors do the physical testing. The policy is bought by a settlement company then sold to a third party investor who is clueless about the scam.
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Fake Policy
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Perhaps most common is the selling of nonexistent policies or charging more in premiums than is actually being delivered. For example, the fraudster will charge $1 million in premiums to cover worker's compensation and liability insurance. The company buys the insurance believing it is covered only to learn when making a claim that there was never coverage, or that it was much lower coverage than originally thought.
Cheaper Health Insurance
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This type of scam is increasing in frequency as a result of the new health care laws. A supposed insurance agent telephones a person, offering a policy in which the company covers 80 percent of health expenses and the client pays 20 percent. The agent applies pressure on the person to agree now or lose the offer forever. The pressured individual enrolls, providing credit card information to pay for the premiums. When, or even if, the supposed policy arrives in the mail, it's not what was described or is a health discount plan.
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References
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