Every business needs a variety of insurance policies to cover potential risks and losses. You may have a great relationship with your insurance agent, but for all too many people the trust they put in their agents was misplaced. If you think about insurance fraud, you may think about bogus car accident claims or employees faking injuries to collect workers compensation, but you should think about insurance agents too.
There are more than 7,000 insurance companies in the United States collecting over $1 trillion in premiums annually, according to the FBI. Any industry that big will be a magnet for criminals and some of them sell insurance policies to businesses and their owners.
The total cost of non-health insurance fraud is estimated to be in excess of $40 billion per year, according to the FBI, costing the average family between $400 and $700 per year due to increased premiums to cover the losses.
Premium diversion, as defined by the FBI, is the embezzlement of insurance premiums and it’s the most common type of insurance fraud. There are generally two types of fraud by agents,
- An agent takes premiums from clients but fails to forward them to insurance companies. Instead the money is used personal reasons.
- A person claiming to sell insurance, but doesn’t actually have a state license legally allowing him or her to do so, takes payments for premiums and keeps them for personal use. Customers wanting to file a claim due to a loss find out there’s no valid policy.
One example of premium diversion by an agent hit the news when Mario Ferreri of Florida was arrested in December for defrauding clients of his financial services company, Financial Management Resources, out of more than $1 million in life insurance premium payments, reported the Orlando Business Journal.
- Between July 2009 and March 2014 Ferreri stole more than $750,000 from one client’s life insurance premium payments and an additional $427,000 from another client, according to investigators.
- Ferreri told both clients to make their insurance premium checks payable to his company, not their respective insurance companies. He claimed this would allow him to better manage their investments.
- He changed the mailing addresses for both clients’ policies to his own address, so the clients wouldn’t get any correspondence from the companies warning them premiums hadn’t been received.
Ferreri got away with this, according to the Orlando Business Journal, until these two clients contacted their insurance carriers to ask about their policies, which lapsed due to a lack of payment. Investigators obtained bank records showing Ferreri deposited clients’ checks into his own account.
Ferreri, who is 60 years old, faces up to 60 years in prison if convicted on all charges.
If you feel you’ve been the victim of some type of insurance fraud, including fraud by your agent, contact our office. We can talk about what’s going on and how the situation can be addressed. If you’re losing money because of fraud, the sooner you act the faster the fraud can be detected and put to a halt.