23/02/2010
The variety of different methods that are used to commit fraud against life insurace companies is seemingly limitless. Whether the fraudulent act is committed by the agent or the consumer, it seems like people are dreaming up new ways of doing it and it has been going on for a long time. It would be impossible to calculate just how much this costs the industry every year, as not all of the perpetrators are caught. One thing is true however, and that is that every person that owns a life insurance plan and every company that offers them pays for the damage that is done by people that are looking for easy money.
One reason that people have tried to commit life insurance fraud over the years is that the potential for gain is large; there are potentially hundreds of thousands of dollars to be gained, even millions in some cases.
In many cases, the fraudulent act is committed by the insurance agents themselves. Schemes of this type often involve situations where the agent has taken money from an individual for an insurance plan that was never even applied for. The agent will falsify the documents or simply throw them out after the application is made and pocket the money. Sometimes when policies are surrendered, the agent will keep the funds that should have been paid to the client as the cash value of the policy. The fraudulent acts committed by some agents are not limited to the individual clients; some agents have set up phony applicants and even phony bank accounts so that they can gather commissions from the insurance company. It costs the industry huge amounts of money every year to put systems in place to try and catch the agents, but even then some will get away with the crime.
At times the results can be devastating to the beneficiaries of the policies. When people believe that they have a policy in place to protect their family, there are times when the policy has been allowed to lapse because the agent has been pocketing the premium funds. Expensive legal battles often ensue.
Fraud can also be committed by individuals against the insurance companies. It seems like an extreme measure, but the faking of a person’s demise has been attempted many times. Often, the insured person travels to another country to fake their death as it may be easier in some countries to find ways to obtain fake death certificates. There are even organizations in some countries that offer ‘death kits’ that will make a comprehensive ruse for a fee. This can include the death certificate, fake funeral and even a fake gravesite.
People have also resorted to murder in order to collect the proceeds of an insurance policy. There have been many movies made and books written of schemes where someone either kills or has a family member killed in order to claim against an insurance company.
Life insurance fraud is certainly not a victimless crime, and indeed sometimes those on the wrong end of the deal end up paying the ultimate price.