Types of Insurance Fraud Committed by Agents and Agencies

Based in Aurora, Illinois, SDC CPAs is a women-owned business that provides fraud investigation and forensic accounting services to claims adjusters. Fraudulent insurance claims are costly to insurance companies. SDC CPAs prevents such losses through extensive claim investigations to weed out false claims.

There are many types of insurance fraud. Some of them are perpetrated not by insured persons, but by agents and underwriters. Here are a few of them:

-Premium diversion. This happens when agents, instead of forwarding premiums to insurance companies, pocket them. It is actually very common in the insurance industry and occurs mostly with workers compensation, due of the high dollar amount insured persons pay.

-Fee churning. This happens when insurance agents move policies from insurer to insurer, specifically life insurance policies, to receive the larger initial commissions offered by companies. When this happens, policyholders’ premiums typically rise and their coverage is often reduced.

Other types of insurance fraud involving agents are settlement check diversion and false death claims. In the former, agents pocket settlement checks meant for policyholders and in the latter, they collude with others to fake a life insurance policyholder’s death and claim the insurance payout.