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Remedies for Victims of Insurance Claim Frauds Outlined by Policyholder Attorney Bill Voss

Remedies for Victims of Insurance Claim Frauds

If you ever experienced making an insurance claim, you must know that it is not an easy process. Some insurance companies resort to different strategies in order to evade their responsibility of paying your proceeds. Some would even commit fraudulent acts just to renege on their obligations.

Common Fraudulent Acts

You need to be vigilant if you feel that your insurance company is committing a fraud. Here are some common fraudulent practices you need to watch out for:

Fee Churning. Under this scheme, a series of intermediaries take commissions through the execution of several reinsurance agreements. The premium you paid will be reduced due to these repeated commissions until nothing is left to pay claims. In the end, a company that the conspirators have set-up to fail and does not have funds will be left to pay the claims.
Premium Diversion. This is the most common type of insurance fraud which involves the embezzlement of insurance premiums. The embezzlement may be done by an insurance agent who does not send the premiums you paid to the underwriter and keeps the money for himself. It may also involve an alleged insurance company that operates without a license, collects premiums and fails to pay claims.

Workers’ Compensation Fraud. This concerns entities that purport to provide workers’ compensation insurance at a reduced cost. Subsequently, they will misappropriate the premiums paid without providing the promised insurance.

Asset Diversion. This scheme involves the theft of an insurance company’s assets. It may come in the form of a merger or an acquisition of an existing insurance company with the use of borrowed funds. The borrowed amount will be paid using the insurance company’s assets, leaving the company with little or no assets to pay off its obligations to insured people.

Disaster Fraud. This may be committed by policyholders who make false or exaggerated claims, misclassify the damage suffered as something else or file claims even if they don’t live within the disaster zone. This may also be committed by contractors who rig the bids by falsely inflating the cost of repairs or those who require upfront payment for services yet fail to perform the repairs agreed upon. This can also include charity fraud scams where funds donated for disaster relief are misappropriated.


Fortunately, there are some entities you may run to in the event that you are defrauded, to wit:

Insurance Companies. If you feel that someone from the insurance company, such as an agent, is committing the fraud, report it to the insurance company’s fraud hotline or headquarters.
State Fraud Bureau. Check if your state has a fraud bureau tasked with investigating an insurance fraud.

Federal Bureau of Investigation (FBI). In the absence of a state fraud bureau, you may report the fraud to your local FBI office.

National Insurance Crime Bureau. This is a non-profit organization that works together with the government and insurance companies in detecting, identifying and prosecuting insurance criminals.

Coalition against Insurance Fraud. This is a national alliance of government agencies, insurers, consumer groups and public interest organizations dedicated to preventing insurance fraud.

National Association of Insurance Commissioners. This group assists state insurance regulators in achieving regulatory goals and serving the public interest.

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