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Types of insurance fraud

| Oct 6, 2020 | Insurance Defense

Countless insurance companies strive to maintain the highest customer service standards built upon a solid foundation of ethics and fairness. However, that will not stop policyholders from making serious allegations of fraudulent behavior. Accusations of adversarial actions can damage reputations, leaving successful insurers fighting to restore their reputations.

Fraud allegations can take many forms and include:

  • Terminating policies after the filing of claims
  • Modifying policy language without customer approval
  • Withholding of payments policyholders are entitled to
  • Undue influence in the settlement process

Premium diversion and fee churning

One of the more prominent types of insurance fraud, premium diversion occurs when agencies keep premiums instead of sending to the underwriters. Fee churning involves constant alterations to a life insurance policy to make them look different. From there, each insurance company will send the agent multiple commissions.

Unapproved policy changes

Unnecessary coverage is also a common form of fraud. Allegations are not always the result of buyers’ remorse. A customer may find that an insurance company’s agent added something that they didn’t need and bundled other coverage without their knowledge or consent.

Due diligence is important

Caution is necessary when consumers purchase a policy. They should conduct their due diligence and seek out any “red flags.” It is important that potential customers “do their homework,” starting with the company being licensed in the state. One phone call to the license issuer should provide clarification.

From deceptive product sales to fake policies, insurance fraud is a problem. False accusations against prominent insurance companies are also common. Scams do exist. People will get taken advantage of by unethical enterprises.

However, most insurers, particularly the larger enterprises, abide by rules and regulations that govern their industry. Serious allegations can result in devastating consequences that require an immediate and aggressive legal response.