Do you may more for
insurance than you'd like? I
know I do. It's not that we're all bad risks, it's that we're paying for
other peoples' losses. We're
also paying for billions of dollars in fraud.
The very nature of insurance is a con artist's dream.
We pay money today to financially protect us from some future
event, which may not even happen. Salesmanship convinces customers that the promised coverage
will be there when needed.
In
the United States, about $67 billion is lost every year to
fraudulent claims. Diversion
of premiums is the most common form of insurance fraud investigated
by the FBI. This occurs
when an insurance agent, broker or managing general agent fails to
send the customer's premiums to the policy underwriter.
They just take the money and run.
Another
scam involves unlicensed insurance sales.
These illegal salesmen collect as much premium income as
possible in a short period with no intention of paying customer
claims. Their
businesses are short-lived and involve high-risk lines of insurance
that have significant demand and few legitimate providers.
In
Operation Short Tail, the FBI's Newark office uncovered 70 shell
companies claiming to offer insurance. These bogus companies were eventually closed down and
liquidated. Over $50
million was recovered. Operation
Soft Assets focused on Alan Teale and his wife, who orchestrated a
network of bogus property and casualty insurance companies across
the country. Assisted
by over 90 accomplices, Teale and his associates established a Ponzi-type
scheme, collecting customer premiums on high-risk insurance
products, backed by nonexistent offshore assets.
Insurance
fraud is clearly a nationwide problem.
The fraud committed by executives, agents and others results
in increased premiums and reduced coverages for all of us.