Insurance scams and fraud red flags
If you plan to work with an insurance agent or broker, there are red flags to watch for that can cost you a lot if you don't pay attention. I have used the mnemonic "LUCCCE" (pronounced "lucky") because I was lucky to notice these red flags myself. An insurance agent can easily claim that you committed the fraud they themselves created. Here are the red flags:
Lying:
- Beware of any encouragement to be deceptive. This could mean not stating that you smoke. If your agent or partner encourages you to lie about anything (yourself or the other person), do not sign anything.
Urgency:
- You had a child, and now, you need baby insurance. But do you really? And what for? You may be convinced by someone at a vulnerable time that you need something, even though it doesn't make much sense for you financially or personally. Perhaps, you're already a great saver and have emergency funds set aside. Why the extra?
Confusion:
- Overly vague forms may not state what kind of insurance you are applying for. If it is group benefits and your partner controls the application, they may tell you it is for medical benefits. Still, they may be including a life insurance plan you didn't know about.
- Small errors on forms that actually change the whole picture (identifiers that are misspelled, a previous address used instead of your current address, a phone number no longer in service) can all be signs of fraud. Fake online profiles and documents are becoming easier to create. Fraudsters are becoming very adept at this.
Coercion:
- If you don't sign, something bad could happen. If someone is trying to make you feel that something bad is imminent, please consider the pressure they are putting on you. Why? Do they know something? It's sad to think about, but coercive control in domestic violence situations has been showing up as a reason for suicide. Consider possible risks for the future. Is something being incentivized that ethically should not be? Make a list of some clear requirements. Take the time to consider if your needs really match the coverage. And yes, consider scenarios of marriage or family breakdown.
Collusion:
- There are many ways that people can collude to obtain benefits. Fake accidents and deceptive claims are happening more often than we would like to believe. Even family members taking from you behind your back could be worth exploring if you start noticing strange activity.
Empathy:
- Appealing to your empathy for their career path or life circumstances (i.e., they were recently sick or injured and cannot work as much themselves) can actually be coercion. This is pressure to overlook errors or support them in their financial endeavors. Be careful what you agree to.
I hope this offers you some assistance while navigating an industry that has been experiencing widespread fraud. Don't get caught in any traps. If you do, resolve it quickly. If you can't, document well the barriers you experienced in your attempt to resolve it. Otherwise, the fraud of others can become your problem as well.
If you notice these things happening while you own a policy, start documenting and keep records (both paper and digital). Your records are invaluable for providing evidence to regulatory bodies during investigations.
In Ontario, the Financial Services Regulatory Authority (FSRA) at https://www.fsrao.ca/ can help you with a report.
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