Survey Shows Consumers are Unaware of Increase in Fake Insurance

At this time of year, there is no room in the budget for purchases that do not deliver value. Yet, the General Accounting Office reports the number of fake insurance policies sold to consumers is on the rise, resulting in $252 million in unpaid health insurance claims alone.

According to a survey released today, conducted by the National Association of Insurance Commissioners (NAIC), most of the public (74 percent) is unaware of the rise in fake insurance sales and the need for increased vigilance when purchasing insurance.

The survey also revealed that most Americans feel the information available from their state insurance department could be helpful in avoiding fake insurance (83 percent), but only 8 percent of adults surveyed said they have contacted their state insurance department to confirm the validity of an insurance provider before making a purchase.

As part of the United States' fight against the rise in fake insurance, the NAIC has launched a nationwide awareness campaign that encourages consumers to "Stop. Call. Confirm." before buying insurance.

"In the area of fake health insurance alone, the General Accounting Office reported 144 fake health insurers nationwide sold bogus policies to more than 200,000 policyholders between 2000 and 2002," said Diane Koken, NAIC president and commissioner of the Pennsylvania Department of Insurance. "This is simply unacceptable."

According to most states' laws, with very few exceptions, no insurance product can be sold by individual agents, brokers, or companies without the approval of the state insurance department. Fake insurance is any insurance plan intended to defraud consumers or businesses.

Everyone is at risk

"Fake insurance can touch anyone at any time with potentially disastrous results," said Koken. "Frequent targets of unauthorized health insurance plans are older adults and small businesses or associations looking to reduce health insurance costs."

Fake insurance is attractive because it is typically less expensive than legal policies. But that is because a fake policy does not provide sufficient - if any - coverage.

As a result of fake insurance policies, honest people and businesses are swindled, health is endangered, premiums stay high, and goods and services cost more.

Protecting yourself is easy

The NAIC recommends, if not absolutely sure you are dealing with a reputable, licensed insurance provider, look for three warning signs of fake insurance:

  • Aggressive marketing and a high-pressure, "you must sign today" sales approach with lots of fine print and disclaimers
  • Premiums that are 15 percent or more under the average price for comparable insurance products on the market
  • Few coverage limitations

How can you protect yourself against fake insurance? The NAIC urges you to STOP ... CALL ... and CONFIRM before buying insurance:

  • STOP before signing anything or writing a check
  • CALL your state insurance department; contact information is available at www.naic.org
  • CONFIRM the company is legitimate and licensed to do business in your state

"If consumers will stop, call, and confirm before they buy insurance, they may save themselves the pain of unpaid claims," said Koken. "They also can help us track down and take action against the con artists who sell fake insurance."

You may like these other stories...

Camp Hopes Estate Tax Will Be on Its Way OutAn article in Bloomberg said that Republicans are considering voting this year to repeal the U.S. estate tax, according to House Ways and Means Chairman Dave Camp (R.-Mich.). He...
Senate Takes Different Approach from House for Highway and Bridge FundEarlier this week, according to a New York Times article, the Senate agreed to fill the coffers of the fund that pays for highway and bridge repairs with...
There it stands, your client's 100-year-old, rickety, vermin-infested barn or former hotel or whatever the darn thing once was. And she's considering what to do with it. There are two words that can help her decide...

Upcoming CPE Webinars

Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.
Aug 20
In this session we'll review best practices for how to generate interest in your firm’s services.
Aug 21
Meet budgets and client expectations using project management skills geared toward the unique challenges faced by CPAs. Kristen Rampe will share how knowing the keys to structuring and executing a successful project can make the difference between success and repeated failures.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.