How to Protect Yourself from Insurance Fraud

Insurance is often bought and then set aside until a loss occurs and a claim made.It is then some people find that their policies do not contain all of the coverage their agents described, or they find they have no coverage at all.Sometimes this is caused by fraud or misrepresentation.Most insurance agents and companies are honest, but there have been abuses as in the following complaints received by city and state regulatory officials."There's no risk of losing your money," was the phrase used by an insurance agent we will call Bob. Bob targeted retired senior citizens that had set aside nest eggs of at least $20,000.He first approached them to buy nursing home or Medicare supplement policies.Once sold he persuaded them to place their nest eggs in an investment type contract.Checks for these policies were made out to Bob's agency, deposited into his business account, and then withdrawn for his personal use.As a result, insurance companies did not receive the premiums, and clients, instead of policies, received only assurances from Bob that everything was okay.When the fraud was discovered, only those with documentation were able to recoup their losses.The necessary documentation included a check, a receipt, application, or policy naming the company that Bob was representing, and also the coverage provided and premium paid.As long as an agent is appointed by an insurer and acts within the limits of their contract the insurer is responsible for the actions of its agent.As it turned out, many of Bob's clients found themselves lacking the necessary documentation to recover their losses from the insurer.Ultimately they were left to their own devices to recover their money.Many never did.One victim commented that she would have never loaned a friend $30,000; instead she trusted it to a stranger without investigation or receiving any proof of payment in return.A little prevention would have saved these people a great deal of money and worry.In one case, many of Don's clients accepted his personal checks to settle claims of losses.Only when the claim payment was delayed were suspicions raised.One client took his suspicions to the State Insurance Department.Through their investigation it was discovered that a policy had never been obtained by the agent for the client."Don" had acted as an insurance company, both accepting premiums and providing coverage on claims.This was illegal, and he did not have assets to cover the claims.