NEW YORK, NY (04/05/2013)(readMedia)-- The arrest of an insurance agent here this week should serve as a warning to consumers looking for cheap insurance that they should be weary of shady deals, warns the New York Alliance Against Insurance Fraud (NYAAIF).
Agent Norman Michaels was charged with selling bogus health insurance to more than 400 New Yorkers.
"If you've got a serious medical condition and discover the policy you've been paying into is fake, you could be thousands of dollars in debt if you get treatment without realizing you had no coverage," says Jack Houston, chairman of the NYAAIF.
Cases involving the sale of bogus insurance policies appear to be increasing across the country and in New York. "In this tough economy, everyone is looking for a deal, and consumers are a lot more vulnerable to the traps of schemers," says Houston.
While the vast majority of insurance agents are honest and ethical, agents can take advantage of consumers in several ways, including:
- Theft of premiums. An agent pockets insurance premiums instead of sending it to the insurer. Crooked agents may steal premiums to support their business, feed a gambling or drug habit, or buy luxury goods such as cars or jewelry.
- Sale of phony insurance. An agent or company rep sells fake coverage from a phony or non-existent insurance company. Or the agent sells bogus coverage using a legitimate company's name, or a name that's similar to a legitimate insurer. Consumers might receive an official-looking policy or proof of insurance that's worthless.
- Sale of coverage you don't want or need. The coverage maybe real, but it's expensive, unnecessary or both. This is especially true of life insurance and longterm care coverage.
Protect yourself from shady insurance agents by taking these five steps:
- Make sure the agent and company are licensed in your state. Be especially careful if you don't recognize the company's name. Before you buy, contact the New York Department of Financial Services to verify. 1-800-342-3736
- Go slow if the agent or company rep seems evasive or can't answer your questions, or tries to sell you coverage without "bothering" your family with the details.
- Get a copy of every form you sign. If you finance your premiums, make sure your agent gives you paperwork that describes exactly how much you pay for each installment, and what that payment covers.
- Contact the company if you haven't received a policy within 60 days after sending in your application.
- Know what your current policy does and doesn't cover. Ask your agent or insurer for a detailed explanation in plain language. Ask pointed questions if you have any doubts about what's in your policy.
If you suspect fraud, contact the Frauds Bureau at the New York Department of Financial Services.
"Fraud is no gain, just pain," says Houston. "Especially for the victims."
Follow the fraud fight on Facebook and Twitter. Visit www.fraudny.com for more info.
The New York Alliance Against Insurance Fraud is a non-profit organization that seeks to increase public awareness about insurance fraud and its consequences. Membership includes more than 100 insurance companies writing policies in New York State.