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What Asian Americans Should Know About Insurance Fraud

What Asian Americans Should Know About Insurance Fraud

What is insurance fraud?

Insurance fraud is any deliberate deception against or by an insurance company or agent for the purpose of illegal or unwarranted financial gain. It can occur during the buying, using, selling and/or underwriting of insurance. Insurance fraud includes the sale of insurance by unlicensed agents and companies; people who pretend to slip and fall so that they can sue a property owner; organized criminal gangs who stage fake car accidents; homeowners who exaggerate damage claims, drivers who lie about their driving records or residence to get better auto insurance rates, and doctors who inflate their bills or charge insurance companies for treatments they never performed.

I'm honest—why should I care about insurance fraud?

Insurance companies pass most of their losses from fraud along to their customers in the form of increased rates. Therefore, all policyholders pay more because of losses to fraud. Insurance industry surveys have found that even some "honest" policyholders do not understand that lying about your driving history or where you live in order to get a better insurance rate is insurance fraud.

Who commits insurance fraud?

Insurance fraud can take place during many insurance transactions. It may involve unlicensed agents and brokers, applicants for insurance, policyholders, third-party claimants, doctors, lawyers and other professionals, and even organized crime rings. Overall, the cost of insurance fraud totaled more than $85 billion in 1995.

Are any populations disproportionately victimized by fraud?

According to state insurance commissioners around the country, immigrants are increasingly the victims of insurance fraud. Newcomers often have limited English skills and have little or no understanding of insurance—a complex subject that many English speakers do not fully understand. Scam artists prefer to prey on unsophisticated consumers.

Con artists take advantage of the fact that newcomers often feel more comfortable around people of the same background, and trust people who speak the same language. But no matter who referred you to an insurance agent or company, it is important to check them out with regulatory agencies before you purchase a policy.

Why do Asian Americans become victims of insurance fraud?

  • Insurance contracts are complicated legal documents and they are usually written in English. While many newcomers may speak some English, they may be unable to understand the specialized terms contained in insurance contracts.

  • Many Asian Americans prefer to pay their bills with cash, because they are not used to banks, or may even have come from countries where banks are not particularly trustworthy. These immigrants may feel safer keeping their money at home and paying their bills with cash instead of checks or credit cards. Unfortunately, cash payments are not as easy to trace as these other forms of payment and may encourage premium fraud—which happens when agents or brokers keep the money paid by policyholders, instead of sending it to the insurance company.

  • In immigrant communities, there may be con artists who prey deliberately on people who speak the same language. Newcomers have become victims of fraud at the hands of con artists who speak the same language or belong to the same ethnic group. In an unfamiliar environment, these victims may place unwarranted trust in what they are told by such scam artists. For instance, newcomers have been coerced to take part in staging auto accidents because they were told that such activities were legal in the U.S.

What are some of the scams Asian Americans fall victim to?

  • Purchasing bogus policies. This scam can be as simple as printing up some official looking documents and selling an "insurance policy" that is not worth more than the paper it's printed on.

  • Buying from unlicensed insurers. This insurer may have an office, a business sign and business cards and may even advertise, especially in the in-language and minority media. But one important piece is missing—a state license to do business.

  • Diverting of premiums by agents. When a customer goes to an agent to buy insurance, the agent may accept a down payment on the premium due. But if the agent never forwards this payment to the insurance company, the policy never goes into effect or is soon canceled.

  • Being forced to purchase other services besides an insurance policy. You may go to purchase auto insurance, but the agent tells you must also purchase a motor club membership or pay an application fee.

  • Having policies upgraded unnecessarily. You may be told that you should "upgrade" your policy because it is out-of-date or does not provide enough coverage. While this may sometimes be advisable, it can also be an excuse to charge you additional fees and commissions. (If you own a whole life insurance policy, you should be very cautious if you are asked to upgrade your policy. You could lose all of the accumulated cash value of the policy if you upgrade it.)

  • Being sold more coverage than you need. This is not only a problem of additional cost to you, but it can also be illegal. Never overestimate the value of an insured home, car or other object—your policy may be subject to cancellation if you do.

  • Buying duplicate policies. You may be told that you have to purchase additional coverage for items that are already covered by your homeowners, life or auto policies. Read all paperwork carefully to make sure you are not purchasing unnecessary coverage. (It is usually necessary for homeowners to purchase "riders," or additional coverage, for certain items such as furs, jewelry or artwork.)

What are other scams that Asian Americans should watch for?

  • Medical insurance fraud. Review all records from your health insurance company to make sure that they have not been "padded" with treatments that you did not receive.

  • Medicare fraud. This happens most often when health care providers bill Medicare for treatment you did not receive. Review all your records and inform the Medicare Hotline (1-800-638-6833) if you find mention of any treatment you did not receive. You will be asked to leave a message and a hotline operator will return your call. Don't feel self-conscious--under federal law, Medicare beneficiaries are encouraged to report fraud.

  • Workers compensation fraud. Faking accidents at work, lying about whether an injury really happened on the job or after work and staying home after you are able to return to work are all considered worker compensation fraud.

  • Staged auto accidents. Three percent of all bodily injury claims for auto accidents result from outright scams such as "staged," or faked accidents in which criminals deliberately crash cars and/or pretend to be injured. The insurance industry states that fraudulent bodily injury claims for auto accidents amount to 17 to 20 cents on every premium dollar paid—or $6.3 billion per year in additional costs to policyholders.

How can I make sure an insurance agent or company is legitimate?

Call your state insurance department or other licensing agency and ask if the company or individual is licensed to do business. To find this number, look in the state government section in the front of your white pages phone directory.

How can I make sure a company is solvent?

Before signing up for coverage or making any payment, check to make sure the insurance company is licensed with your state department of insurance. Also check the company's financial stability with one of these free insurance rating services: Standard & Poor's at (212) 208-1529; Moody's at (212) 553-0377; or Duff & Phelps at (312) 368-3157. Ask about the highest ratings each service gives and for how long the insurer has had its current rating. Stick to companies that have had the highest ratings for five or ten years.

What are the signs of potential fraud?

There are numerous signs that you might be dealing with a fraud artist. Much of the danger that you will become a victim of fraud can be eliminated if you check out agents, brokers or insurance companies with your state insurance department or licensing agency. It is illegal to sell insurance without a license.

Be especially cautious if any of the following situations:

  • An agent asks you to use cash instead of a check, credit card or money order.

  • You make an insurance down payment to an agent but do not receive your policy in the mail within 60 days.

  • The agent pressures you to buy a policy, or suggests that you should not have anyone else go over the policy with you.

  • The premiums are much lower than on comparable insurance policies.

  • The agent suggests that you replace existing policies with new ones.

  • You are pressured to buy other kinds of insurance and/or financial services in addition to the insurance you were seeking.

How can I protect myself from insurance schemes?

Make sure you have a clear understanding of what types of insurance you need. There are many kinds of insurance, from homeowners to auto to life, and even these have subcategories, such as casualty, collision, liability, etc. It pays to shop around—not only will you get to hear several opinions on what coverage you need and be educated in the process, but there's a good chance you'll save money.

If you are more comfortable speaking a language besides English, look for companies with multilingual representatives. Always check out the company with your state insurance or consumer affairs department before buying a policy. These numbers can be found in the government services section of your white pages phone directory.

If you cannot find a company whose employees speak your language, take along a friend or family member who is fluent in English. Many community-based organizations and/or consumer groups are willing to help consumers who do not speak English.

Is it better to get a personal recommendation when I buy insurance?

Most people prefer to use a person or company referred by someone they know, however this could lead to trouble if you don't check them out yourself. It is understandable that you wish to work with someone who speaks your own language, but do not assume that all people in your own community are honest. Don't forget to check!

I prefer to pay in cash. Is there anything wrong with this?

There is nothing wrong with paying cash, but it does not provide a paper trail in case anything goes wrong with the service or product you are buying. Using your check, money order or a credit card will make it easier to prove that you made a payments if there is ever a question. If you do pay cash, make sure you get a signed receipt. The receipt should have the name, address and phone number of the agency or the insurance company printed on it.

Should I take my payments to my insurance agent's office?

Many agents collect payments as a service to their clients. But if you pay in cash, it could be a problem, because cash is not easily traced. If your agent does not send in your payment to the insurance company, your policy will be canceled.

Your insurance premium billing statements will be sent to your home and in most cases they contain a return envelope for sending back the payment. The safest way to pay your insurance premiums is to send a check or money order directly to the company that bills you, using the envelope it sent you.

What is the penalty for participating in insurance fraud?

If you are found to be a party to insurance fraud, your insurance policy could be canceled and you could possibly face fines and/or a jail sentence.

Many people believe that giving a different address to get a better rate on their car insurance or exaggerating the amount of damage in a homeowners claim is not really illegal. In fact, providing false information on an insurance or credit application of any kind is a serious violation of state and federal laws.

Is there a way for victims of insurance fraud to recoup their losses?

It can be very difficult to recover any money lost to insurance fraud—the best way is to avoid becoming a victim in the first place by being cautious and checking out agents and companies.

Check with your local Small Claims Court for the limit allowed in small claims lawsuits. This amount varies from locality to locality, but may be as high as several thousand dollars. It is unlikely that the person or company that defrauded you will show up in court—you may win by default if they don't show. But even if you do win a judgment in Small Claims Court, collecting the money can be very difficult, if not impossible.

If your loss was substantial, you might want to consider hiring a lawyer. If you have a low income, you may be able to get help from a legal aid organization in your area.

Who can I complain to about insurance fraud?

If you are a victim of insurance fraud, report your case to the proper law enforcement agency. Try these agencies:

  • Your state insurance department. (See the end of this manual for state contacts for the ten states with the largest Asian American populations.)

  • Your local District Attorney's consumer fraud unit.

  • Your state Attorney General.

  • The local office ofthe Federal Bureau of Investigation (FBI).
    All of these numbers should be listed in the government services section of your white pages phone directory.

  • You might also consider contacting the media. Many communities have a TV or radio station that runs a special "action line" to help consumers. The media can be very responsive to stories about scams and rip-offs. Even if the station does not put your story on the air, action line staff members may offer some ideas to help resolve your complaint.

Appendix

These are the insurance regulators for the top ten states with the largest Asian American populations. Unless noted, the department does not have multilingual employees available.

  • California:
    California Dept. of Insurance, 300 Capitol Mall, Suite 1500, Sacramento, CA 95814.
    1-800-927-HELP (1-800-927-4357) or 1-213-897-8921. Web site: http://www.insurance.ca.gov/

  • New York:
    New York State Insurance Department, Empire State Plaza, Agency Building #1, Albany, NY 12257. Bureaus in New York City; Seaford, Long Island; and Buffalo. Property & casualty concerns: 1-800-522-4370. All other concerns: 1-800-342-3736
    To report suspected fraud: 1-888-FRAUD-NY (1-888-372-8369).

  • Hawaii:
    Insurance Commissioner's Office, 50 South King St., 5th Floor, Honolulu, HI 96813.
    1-808-586-2790

  • Texas:
    Texas Department of Insurance, Public Information Office, P.O. Box 149104, Austin, TX 78714.
    1-512-463-6464. Web site: http://www.tdi.state.tx.us/

  • Illinois:
    Illinois Department of Insurance, 320 W. Washington St., 4th Floor, Springfield, IL 62767.
    1-217-782-4515. Web site: http://www.state.il.us/ins/

  • New Jersey:
    New Jersey Department of Banking and Insurance, 20 West State St., CN325, Trenton, NJ 08625.
    1-609-292-5360. Web site:http://www.state.nj.us/dobi/

  • Washington:
    Insurance Commissioner's Office, P.O. Box 40255, Olympia, WA 98504. Hotline: 1-800-562-6900. Web site:
    http://www.insurance.wa.gov/ (Washington accepts insurance complaints on-line.)

  • Virginia:
    Virginia Bureau of Insurance, P.O. Box 1157, Richmond, VA 23218. 1-800-552-7945; in Richmond: 1-804-371-9741 . Web site:
    http://www.state.va.us/scc/division/boi/

  • Florida:
    Florida Department of Insurance, Regional service offices in Daytona Beach, Ft. Lauderdale, Ft. Meyers, Jacksonville, Largo, Miami, Pensacola, Tallahasee, Tampa, West Palm Beach. Insurance Consumer Helpline: 1-800-342-2762. Web site:
    http://www.doi.state.fl.us/

  • Massachusetts:
    Massachusetts Division of Insurance, 470 Atlantic Ave., 6th Floor, Boston, MA 02210.
    1-617-521-7794

 

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Comments

N  30th of Jul, 2007 by Ryan  [send email]
Playing towards the race card just a bit, don't you think? Surely this article applies to all non english speaking immigrants, instead of implying that all asian americans are immigrants when most have settled here at the same time as other countries (italians, germans, irish, polish etc.)
N  30th of Jul, 2007 by Ryan  [send email]
Forgot to add, the greatest irony being those who need the advice of the article can't read it - so really, what is the point of posting it other than stirring up stereotypical racial feelings?
N  27th of Mar, 2009 by   ejnn
Give me a break! Insurance salespeople are the lowest form of life to begin with and would cheat thei rown mother, let alone their own race!

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