A woman from Sacramento, California scammed over 971 people in eight states out of $400,000 in life insurance premiums. She had sold fake policies which guaranteed her clients a death benefit of at least $3,000 to $30,000. She did all of this simply by sending out e-mails to her potential victims.
A claims handler working for a big insurance company suddenly noticed that a ‘pet owner’ filed a series of claims, the total of which amounted to almost $12,000. On investigating the next claim, it was discovered that the man picked up dead animals off the road and stored them in the freezer. He would then take out insurance policies on the animals and claim the death benefit after a short while.
An insurance scam or fraud can be defined as an instance when either party willingly and knowingly lies to deny or obtain financial benefits which he isn’t entitled to. Insurance scams and frauds cost the economy millions of dollars each year, financially damaging both the policy holders and the insurers.
How do you spot a scam?
A fraudulent sales pitch is not very hard to spot. All you need to do is keep your eyes and ears open and keep a few simple pointers in mind.
• Total coverage at unbelievably low prices – The premium rate is so low that you might as well pay with pocket change. The policy might also come with a Waiver of Premium rider
• Abnormally simple procedure – The signup procedure involves ticking a few boxes and signing at the bottom, there are no medical checkups, no exclusion for serious pre-existing conditions.
• Pushy sales pitch – The sales pitch is too pushy and the sales representative keeps shoving the pen in your hand, asking you to sign on the dotted line because “it’s a special offer, a one time deal which isn’t going to last long unless you take it up right now”.
• Invasive marketing – Your inbox is bombarded with e-mails every hour telling you about the great benefits you can get at the lowest of rates, the phone is ringing every hour and there is a telemarketer on the other end of the line telling you about the numerous benefits of signing up with them.
• Federally mandated – These conmen might even tell you that they are federally mandated and they are regulated by ERISA or some other federal law. They might even tell you that a certain insurance product is required by health-care reform regulation. The most common pitch along this line these days seem to be Obamacare. PPACA or Obamacare is not a product that is sold from door to door.
• Groups and unions – The agent asks you to join some sort of group or association so that you will be able to buy coverage. These are fake groups used to create the illusion of group health coverage.
How do you avoid scams?
You can go through a series of simple steps to protect yourself from getting scammed while ensuring that you understand the product as well as the company you are about to invest in.
• Check the company’s rating – Check up on the company’s rating with one of the leading insurance rating services like Standard & Poor’s, Moody’s, Fitch Ratings or A.M. Best before signing the contract. Companies which have had consistent AAA ratings over the last 5 to 9 years can be trusted.
• Don’t pay cash – Make the down payment with a check payable to the insurance company, not the agent. You can use a credit card if you like. This way you make it easy to cancel the payment if you sense something is wrong. It also makes it hard for the conman to steal from you. • Check license and ID – Ask the agent for his license number and if you think there is something wrong, call up your state insurance department or any other licensing agency and confirm the ID with them.
• Read the fine print – Extra perks and unnecessary financial services being offered along with the policy is simply designed to tempt and draw the victim in. Read the fine print very carefully and find out what you need and what you don’t. More importantly, find out if the new policy has sufficient coverage for your needs.
Insurance is a complicated subject and most of us tend to trust anybody and everybody who knows even a little about it. Con-men take advantage of this factor to scam people out of their hard earned money and leave them without the protection of insurance when they need it the most. Take some time to shop around for insurance and it will help you understand the product a little better. A few simple steps and a little smart thinking is all you need to protect yourself against frauds and con-artists.