Recently, insurance scams have become even more prevalent as consumers are desperate to find instant solutions to the problems caused by the recession. It is important to be aware of insurance scams, understand the risks involved, and know what to do in the unfortunate event that you are involved in an insurance scam.
What Sorts of Insurance Scams Can Occur?
There are many types of insurance scam. They are not confined to one area â you can encounter scams related to life insurance, homeowner's insurance, medical insurance, health insurance, renter's insurance, automobile insurance, emergency insurance, travel insurance, and many other types of insurance. Any time you purchase an insurance policy, no matter what it is for, you should be vigilant and take proper precautions to avoid being scammed.
Here are three of the most common insurance scams:
1. Fake Insurance Companies
Not all companies claiming to deal in insurance are legitimate. A fake company has no code of ethics â they are just out to defraud consumers. One of the most common ways that a fake insurance company might cheat customers is by selling fake policies. Then when a customer submits a claim, the fake company refuses to pay it, or simply cannot be reached. Often fake insurance companies like this sell hundreds of policies to unwitting consumers, and then disappear, never to be heard from again.
How to avoid this insurance scam: Always double-check that you are dealing with a licensed insurance company. Don't sign anything until you have asked your state insurance department to share the licensing information for the company you are dealing with. As a consumer, you have the legal right to check your insurance company's credentials.
2. Unscrupulous Insurance Agents
Sometimes the insurance company itself may be legitimate, but the specific agent you are working with is dishonest. Crooked insurance agents have been known to collect premiums and then hold onto them instead of documenting that the payments have been made. The policyholder, in all innocence, has made their payments on time, but because the company never received the money, the customer is logged as non-paying. Therefore, the policy may be cancelled without the customer knowing about it. When the customer needs to file a claim, only then do they learn that they have no insurance â and that they are responsible for paying their bills out of pocket.
How to avoid this insurance scam: After you've signed up for an insurance policy, you should always receive an insurance ID card and a copy of your policy. These should arrive in a timely manner. If you don't receive these documents soon after signing up for the insurance policy, this is a huge red flag! You need to contact your insurance company right away to make sure they've received your payments. Speak with someone other than your primary agent, as if he is the one deceiving you, he will simply lie to you and attempt to allay your concerns.
3. Dishonest Drivers
One very sneaky type of insurance scam involves planning a car accident deliberately, but making it look like it was an innocent party's fault. This way, the criminals can collect money from the other driver's insurance company. Not only can these insurance scams cause serious medical injuries or even death, but they can result in a good driver's premiums being raised through no fault of their own.
How to avoid this insurance scam: Obey all traffic signs and signals, follow all other vehicles on the road at a safe distance, and never admit to fault if you are involved in an automobile accident. Don't let bystanders convince you that an accident was your responsibility â they may be fake witnesses who are in on the scam. Report any suspected automobile accident scam to your insurance company immediately. Although most accidents are simply what they appear to be â accidents â it never hurts to be cautious and careful in these types of situations.
Some of the clues that you be may be dealing with an insurance scammer include:
- Attempting to sell you a policy that the salesperson claims is required by federal law. He or she may cite the 2010 federal healthcare reforms, saying that all uncovered Americans are now required by law to purchase health insurance. However, this requirement does not go into effect until 2014. Therefore, there is really never any need for consumers to be scared into purchasing health insurance because they think the government requires it.
- Pressuring you into buying right away because the price or premium offer will only be good for a short, limited enrollment period. Consumers should always be suspicious if they feel they are being pressured to buy a policy before having adequate time to make up their minds.
- Presenting you with a basic list of what's covered under the insurance policy and avoiding or sidestepping the question when you ask to see a comprehensive list of the insurance coverage. You have the right to read all the small print before signing anything. Don't let your insurance agent convince you that she will just "explain the complicated parts verbally" or that she doesn't have a copy of the information, but you can have it later. Insist on seeing the complete insurance policy before signing anything, and ask for written clarification on any points that are unclear to you.
What to Do If You Suspect an Insurance Scam
Do you suspect that you have been scammed by an insurance company or agent? Then you should immediately:
- If your insurance company or agent is scamming you, file a formal complaint against them by contacting your state insurance department
- Complete the Online Fraud Reporting System's form
- If you are being scammed by an individual, contact the police as well as your own insurance company.
- Document any actions you have taken.
- If you have telephone conversations with someone you suspect of scamming you, record those conversations. Save all emails and printed communication. You may need these things as evidence if you decide to press charges.