Insurance Agent Fraud

 Posted on April 10, 2018 in Uncategorized

Insurance is very important to have, especially for home, auto, and life. Anything can happen to you, such as a car accident, a house fire, or sudden death. Even though most insurance agents can be trusted, the insurance industry can still be grounds for potential fraud schemes.

Types of Insurance Fraud on the Agent’s End

Over one trillion dollars in premiums are collected by thousands of insurance agencies every year. Because of how big the insurance industry is, there is much opportunity for fraud to occur. The cost of insurance fraud on the agent’s end amounts to over $40 billion every year, and the average American family ends up spending between $400 and $700 in the form of increased premiums.

The most common fraud schemes that insurance agents may commit include but are not limited to:

• Premium diversion;
• Fee churning;
• Asset diversion; and
• Workers’ compensation fraud.

If a premium diversion occurs, then the insurance agent is embezzling insurance premiums. The most common type of insurance fraud, the insurance agent does not send the premiums to the underwriter and pockets the money for his or her own use. Other forms of premium diversion involve an agent selling insurance without ever holding an insurance license, and the collection of premiums without ever paying claims.

Fee churning consists of commissions taken through the agreements of reinsurance. The first premium is reduced by the repeat in commissions until there is no money left to pay the claim. The company that has to pay the claims is frequently a business that has been set up for failure.

Asset diversion is like premium diversion, only with the theft of insurance company assets as opposed to insurance premiums. This type of fraud scheme often involves the acquisition of control of an insurance company with funds that have been borrowed. Once a purchase has been made, then the offender uses the company’s assets to pay off debt, with the rest of the assets often used for personal use.

In workers’ compensation fraud, some insurance agents will provide this type of insurance at a reduced cost to entice the prospective policyholder, and then misappropriate the funds without ever providing insurance in the event of a workers’ compensation claim.

Call a Chicago Federal Crime Defense Attorney

Insurance agents who commit the act of fraud are sure to see undesirable consequences. If you are an insurance agent and have been convicted of fraud, then effective legal representation is in your best interest. At the Law Offices of Hal M. Garfinkel LLC, Chicago Criminal Defense Attorney, our seasoned Chicago federal crimes defense lawyers have represented Cook County area clients in various matters for over 28 years. To schedule a free initial consultation, please call 312-629-0669 to discuss your case.

Source:

https://www.fbi.gov/stats-services/publications/insurance-fraud