Every year, thousands of people are hurt by buying policies from fake insurance companies--companies that look and sound like legitimate ones but, in reality, are unauthorized entities attempting to sell worthless policies and plans. Fake insurance companies defraud the public by collecting premiums, but not actually paying claims. In many cases, a fake insurance company will provide consumers with documents that look real. In some instances, these policies may even be represented by legitimate insurance agents who themselves have been misled by fraudulent companies.
The facts are alarming: in the area of health insurance alone, the General Accounting Office of the federal government identified 144 fake insurers nationwide that sold bogus health insurance to more than 200,000 policyholders between the years of 2000-2002, resulting in more than $252 million in unpaid claims. Similarly, there are many fake companies selling auto, homeowners, renters, life, disability, prescription drug and long-term care policies.
So, how can consumers protect themselves against scams?
Before signing an application for an insurance policy or writing a check to an insurance company, consumers should stop and take the time to confirm that the company they are about to do business with is legitimate. Their state insurance department--easily reached by phone--can quickly verify whether an insurance company exists and is authorized to sell insurance in their state. There are no expectations. Every legitimate insurance company must be licensed in the state for which they are doing business.
Consumers should be on the lookout for the following warning signs, as they may indicate that an insurance company is fake:
1. If an agent or broker is very aggressive and pressures a consumer by saying
they must sign up for a policy right away (sometimes adding..or premiums
will go up).
2. The premiums from one company are a lot lower (more than 15-20% less) than
other companies' comparable coverage.
3. When a consumer tries to call the insurer to get more details or ask a
question, they can't find a listed number, or it is very difficult to get
through on the phone.
While all consumers are at risk of being defrauded,fake insurers often target senior citizens, who may be more prone to take them at their word; small businesses that are looking for ways to save money on health and other insurance plans they offer their employees; or even young people, who often don't know a lot about insurance issues or companies.
So, fight fake insurance by remembering to Stop, Call, and Confirm before signing up for any new policies.