Preventing insurance fraud is an agent’s duty in protecting their customers as well as their insurance carriers. What steps will you take to prevent fraud?
As an insurance agent, it’s important to do everything you can for preventing insurance fraud. Not only do you need to prevent your customers from being defrauded, but you also want to protect your agency and underwriters from being defrauded. It’s a lot of responsibility, but with guidelines and resources at your fingertips, you can successfully protect your customers and your agency.
The insurance industry is made up of more than 7,000 companies that collect over $1 trillion in premiums annually. According to the Federal Bureau of Investigation (FBI), this large dollar amount provides ample opportunity for fraudsters to act. With fraud occurring in about 10% of property-casualty insurance losses (Coalition Against Insurance Fraud), this fraud accounts for approximately $30 billion in theft each year, according to the Insurance Information Institute.
Types of insurance fraud
- Premium avoidance/ premium leakage – carriers aren’t charging enough of a premium to cover the risk, usually, because they’ve been given incorrect information by the applicant, who is hoping for a better rate.
- Premium diversions – in this case, an agent embezzles premium payments instead of passing them on to the underwriter. At the risk of sounding obvious, don’t do that.
- Cyber scams/identity theft -The Federal Trade Commission received a 113% increase in identity theft complaints in 2020. Cyber scams are a leading method for using a fake identity to secure insurance policies
- Lack of documentation or false documentation/receipts – In this method of fraud, the claimant or service provider is inflating the cost of repairs in order to skim a larger insurance payout.
- Padding – Service providers like autobody techs and home repair contractors can sometimes take advantage of insurance policies by overcharging for their work (sometimes called “padding”), or lying to adjusters about the level of damage done to the property. Other times, service providers will install counterfeit, used or substandard replacement parts in order to save them money. Many times this comes at the risk of overall customer safety.
An agent’s role in preventing insurance fraud
Once you know what to look out for, an insurance agent can take action for preventing insurance fraud from taking place and reporting it to appropriate authorities. Here are some action steps for preventing and reporting insurance fraud.
Analyze claims averages and claims histories
Be familiar with the average number of claims and dollar amounts for your given products and policies. When a claim comes in for a number well beyond the average, it’s worth paying closer attention. Likewise, pay attention to a customer’s claim history. Are there patterns of use or abuse?
Notice inequity and discrimination
Agents are in a unique position to see many different insurance claims and payouts. They can see which clients receive a full claim and which clients may be fighting to get an insurance payout. Sometimes, discrimination or inequity is uncovered. In this case, agents are preventing insurance fraud by making sure their customers receive the full value of their insurance policy. It’s an agent’s job to question insurance carriers asking why some clients receive different levels of payouts.
Pay attention to ultra-specific red flags
If a customer comes to you requesting ultra-specific information or even uses specific hypotheticals like, “If this jewelry was stolen from my car… ” consider that a red flag and document the exchange.
Cross-check against public databases
When a new client is purchasing home or auto insurance, it’s important to cross-check public databases to make sure the customer does, in fact, own the property.
Listen for inconsistencies from your client
If a long-time customer with a steady history of insurance coverage is all of a sudden asking for a very different level of coverage, pay attention. Ask questions and document responses.
Attend anti-fraud trainings and workshops
With technology ever-evolving, types of insurance frauds are also changing. It’s important to stay up-to-date on the latest trends in insurance fraud in order to work to prevent it. Take advantage of webinars, trainings, and workshops geared toward preventing insurance fraud.
Follow your anti-fraud plan
What is your agency’s anti-fraud plan? When in doubt, report it. Follow any in-house fraud reporting process with your insurance agency and carriers. Report instances of fraud to your local FBI office.
Work with HBW Leads to take a solid first step in preventing insurance fraud. Their team of insurance and technology experts will deliver you double-verified, exclusive leads. HBW Leads spends time qualifying each lead on your behalf.