The Fraud
Agents and underwriters have endless opportunities to defraud both insureds and insurers. Premium frauds, settlement check diversions, false death claims, false statements and misrepresentations, and the creation of fictitious policies are but a few. The most newsworthy might be going South with a huge premium instead of paying it over to the carrier, but there are other, more subtle ways to defraud as well.
- Sliding is a term used to describe the fraudulent practice of agents packing policies with extra coverages unknown and unneeded by the insured, thus reaping larger commissions.
- Churning is an agent convincing a customer he can get additional coverage for free using the "build up" value in their original policy. The truth is that the extra insurance can be very expensive.
- Twisting is an agent replacing policies with new ones, thus earning the higher commission for first-year premiums.
The Flaw
Insurance salesmen can be very persuasive, and their jargon very perplexing. Insurance frauds come about when buyers fail to understand what they're getting, or agree to buy something and sign a contract that has blank spaces, or tend to trust that the charming agent is looking out for their interests instead of his own.
The Fix
Caution and vigilance is needed on the part of the buyer. If you don't understand it, don't buy it. If it's not spelled out in writing, don't buy it. If it sounds too good to be true . . .(say it out loud)!