Stay Safe from Common Insurance Scams

January 6, 2015

Nearly all insurance agents and companies are honest and ethical, and they have to be in order to stay in business. However, there are scam artists posing as agents who are able to take advantage of unsuspecting consumers. Experts in the field of insurance encourage consumers to educate themselves about scams and to know how to identify the signs to better protect themselves and their finances. The following are some common scams.

Premium Stealing
With this type of scam, a phony agent takes the money sent in for a premium instead of giving it to the insurance company. These types of agents do this to support their own bad habits or businesses.

Fake Insurance
Phony agents may make up fake coverage from a company that does not even exist. In some cases, they may use a legitimate company name but not provide a real insurance product. They are sometimes able to create believable documents and correspondence that looks like it is from a reputable company or a company with a similar name. Consumers usually do not realize they have fake coverage until they go to file a claim and experience the ensuing nightmare of finding out their coverage does not exist.

Sliding
When this happens, a legitimate policy is purchased. However, there are extra charges or services added in that the policyholder did not want. Some agents may claim this is part of the package or do not mention the coverage.

Churning
Agents who are dishonest may be able to convince buyers to use their whole life policy's value to purchase a better plan. However, their current coverage would be perfectly fine in this instance. The agent would receive a commission, and the person would have to start up a new plan again to rebuild cash value and likely pay more.

Worthless Investments
An agent might tell a person to invest in products called investment-like instruments. Viaticals, which are policies taken out on terminally ill people, are legitimate products. However, they are common choices for phony agents who like to create fake products. Promissory notes detailing commitments to make high returns quickly are also common schemes. The phony agent claims the notes are backed by insurance but they are not.

Twisting
Agents may encourage people to switch policies early by twisting the truth about any disadvantages. For policyholders with medical conditions, they usually claim that the change will be part of an affordable new health plan that does not discriminate against preexisting conditions.

Consumers who fall victim to these phony agents and scams may think they are saving money at first. In the end, these scams can wind up costing them their savings and even their health. Insurance experts recommend ensuring any agent chosen is licensed in the state he or she operates in. They also recommend contacting the Better Business Bureau to see if there are any complaints. If an agent offers a price between 30 percent an 50 percent less than top reputable competitors, experts warn that this is a scam. Premiums should always be paid by money order or check, and they should be paid to the insurance company directly. Do not sign any forms with blank spaces where values should be added, and always ask for copies of any documents requiring a signature. To learn more about staying safe, discuss concerns with an agent.


Click here to return to Amity Insurance E-Newsletter January 5, 2015.