Today we’ll be discussing how to check if insurance company is legitimate or not? This is something we can’t afford to ignore while entering into insurance contract. If we dare to do so, we’d end up with insurance fraud.
We buy a policy (car insurance, homeowners insurance, life insurance or health insurance) to tackle with unforeseen events. After paying premiums from our hard earned money, of course we wouldn’t like to end up with a bogus policy and pay the reimbursement cost.
Small precautionary measures such as checking legitimacy of your insurance company can save you from future hassles.
We will be going over following topics:
- How to check if insurance company is legitimate?
- What is insurance fraud?
- Types of insurance frauds
- Warning signs of insurance fraud
- Precautionary measures to prevent such frauds
How to check if insurance company is legitimate?
Check if insurer is legitimate
Insurance industry around the globe is thriving at a very rapid pace under the supervision of regulatory authorities such as Insurance Regulatory and Development Authority of India (IRDA), Insurance Bureau of Canada (IBC), National Association of Insurance Commissioners (NAIC) and the like.
These watchdog authorities, setup by the concerned governments, supervise and develop insurance sector in such a way that both insurer and insured stay protected from insurance frauds. These issue licenses to insurers and monitor all licensed insurance companies to ensure that insurance services are being delivered smoothly to the policyholders.
All companies who would like to carry out insurance services need to acquire license from these authorities. These authorities keep their licensed insurers, agents and brokers lists up-to-date all the time and publish the same on their official websites and through print media.
For your information, apart from above, concerned departments (IRDAI, IBC, NAIC and other depending on your geographical location) also revoke an insurance company’s license if insurer willfully violates insurance selling guidelines or defrauds a policyholder.
So to check if insurance company is legitimate, all you need to do is just approach your state insurance department by calling to their toll free helpline, visiting help centre or landing to their official website.
In this age of internet, all nations’ insurance regulatory authorities have websites. One can visit concerned state insurance department’s website to see list of registered insurance companies.
Visit official NAIC official website (for USA) or IRDAI official website (for Indians) to find out your state’s regulatory body. If you belong to some other country then find your state’s insurance regulator and visit his website to see list of legitimate insurance companies.
If you couldn’t find your insurance company’s name in the list then raise your eye-brow and further investigate. In this scenario, a prompt action would be needed. If fortunately you’ve not signed the contract yet then pat your back and say to yourself, “Good work, I deserve a pat!” Why? Because you’ve prevented an insurance fraud.
What more you can do in this case is inform your state’s insurance regulator to take action against the fake insurance company.
On the flip side, if your insurer is registered and has a valid license then you can think of it. I suggest you don’t repeat horrible mistakes while buying insurance; that most people make.
Check if insurance company’s name is correct
Once you know your insurance company is legitimate and has a valid license, next step is verify insurance company name. What actually happens is fake insurance agents approach potential victims on the behalf of a reputed insurance company, but on documents they slightly alter the name of the insurer.
Therefore, while reading policy brochure, verify whether name of the company is correct or not.
Check if you’re dealing with registered agent or broker
Next step, which is slightly difficult for some to follow because most of the insurance agents are our friends or acquaintance, is check if you’re dealing with a registered agent or broker.
How would you know?
Answer is by checking your insurance agent license. Every insurance agent goes through agent training and passes pre-licensing exam before he actually becomes an agent and gets a license. Same for brokers and web aggregators.
If your agent fails to provide you a valid license issued by insurer then it means you’re dealing with a fake agent. Otherwise, you’re good to go.
Above were very easy but effective ways to check if insurance company is legitimate. Let’s recap:
- Check list of registered insurance companies by approaching insurance regulatory authority
- Check if name of the company is correct
- See your insurance agent license
There is also another type of insurance fraud which is policy misselling. To prevent that read, “Questions you should ask your agent before you actually sign your contract.”
What is insurance fraud?
When someone (e.g.- agent, broker) or insurer deliberately defrauds policyholder by selling an unworthy policy, making false promises, or taking higher premiums with intention of not paying claims is termed as insurance fraud. Also, when policyholder willingly fabricates false claims, it’s also an insurance fraud.
Insurance fraud not only affects innocents but also insurance marketplace. Therefore, monitoring authorities make very stringent rules for insurers to curb such incidents. However, criminals still manage to fraud policyholders. The major reason behind insurance fraud is lack of awareness.
Types of insurance frauds
Insurance fraud has a long history, infect it existed ever since the beginning of insurance marketplace. Auto insurance fraud alone costs billions of dollars (around $40 billion each year) to the industry every year.
Insurance fraud can be categorized into ‘Hard fraud’ and ‘Soft fraud’.
Hard fraud is when someone intentionally plans or fabricates a loss such as setting fire to property, damaging own vehicle or theft of the same, to get compensation from insurance company.
Soft fraud AKA opportunistic fraud occurs when someone purposely provides false/incorrect information to insurance company to get compensated for a cause that actually didn’t happen.
Here are some most common insurance fraud examples
Since this post is written to check if insurance company is legitimate, therefore, we’ll be discussing frauds pertaining to policyholders from insurer’s side.
Fake insurance company: It’s a very common insurance fraud and most people become victim of it. Many criminals use this trick to loot naive people. Usually, they target victims through emails, spurious calls or online advertisement by offering lucrative discounts on premiums.
They collect premiums from a policyholder but do not pay claims. After targeting a number of people, they disappear.
Legitimate insurer: Sometimes legitimate insurance company who is licensed to sell only general insurance products may mislead people and sell them life insurance products. Such insurers may show prospect their valid license, but they don’t reveal that it’s for non-life insurance.
Health insurance business by unregistered companies: It’s come to notice of many states’ authorities that some companies are doing health insurance business and collecting money without actually holding a valid license.
Fraud agents: In this type of insurance fraud, an unscrupulous insurance agent holding a valid license collects premiums from policyholders without delivering the same to insurance company for his/her personal gain.
Fake insurance agent: Sometimes scammers who impersonate to be agent of insurance companies approach customers and try to sell policy without holding a valid agent license issued by the concerned company.
Online advertisements: In this digital era, most of the insurance companies sell their products online and target potential buyers through online advertisement. Scammers also do the same in the name of renowned insurers but with slightly differ name.
Warning signs of insurance fraud
Spurious Calls: Usually victims receive spurious calls from unidentified persons claiming to be representatives of an insurance company or insurance regulatory body. Scammers offers lucrative offers to potential victims or they suggest policy transfer to get more benefits without paying extra premiums and sometimes they significantly lower premium rates if policyholder purchase a policy or surrender existing to buy new from them.
Email: Victims receive emails from scammers informing that ‘Survival Benefit or Maturity or Bonus’ is due under their policy, or offer high discount on premiums and huge, sometimes unbelievable, benefits, gift and returns on buying a new policy. A few victims who fall prey to frauds and end up buying a bogus policy.
Agent without license: Very rare but sometimes scammers directly or through appointing local agents (who think their insurance company is legitimate) approach customers. Such agents may produce agent license but not valid one.
Precautionary measures to prevent insurance frauds
Monitoring agencies run awareness campaigns for consumers for instance United states based the National Association of Insurance Commissioners has launched ‘Fight Fake Insurance’ program for the benefit of consumers. What I like the most is their ‘Stop. Call. Confirm.’ idea.
Similarly, Indian insurance regulatory body, IRDAI, has launched a separate website for consumer awareness.
All states have some kind of awareness programs to fight with fake insurance.
To my mind, it’s not a rocket science, all a consumer needs to do before buying an insurance policy is to check if insurance company is legitimate and understand his insurance needs. Apart from that, following precautionary measures should be taken into consideration to prevent insurance fraud:
- First apply NAIC’s stop, call, confirm rule. If you’re unsure about an insurer or person you’re dealing with, stop before entering into a legal contract or issuing payment for premium; call concerned insurance department; confirm the agent or insurance company is legitimate and has a valid license to do the business in your state.
- Ask your insurance agent to show his photo identity card issued by the insurer. Don’t worry it’s his/her duty and it won’t bother honest insurance agents. There are many fake agents out there who sell fake policies and provide false documents.
- Check if you’re dealing with registered insurance companies by visiting your state insurance department’s website. To protect policyholders’ interest, regulators refresh list of registered insurance companies, whenever they issue a new license or terminates registration of an insurer, time to time. Anyone can visit official website of his state’s insurance regulator to see the list of licensed insurers. As discussed above, such insurance departments keep a close watch on private sector insurance companies as well as public sector, therefore, they may cancel an insurer’s license at any time; if insurance company violates policy selling terms and conditions. Therefore, see updated list of companies. It is advised that check list of registered health insurers and life insurers before buying an insurance policy.
- When your agent suggests you an insurance policy, don’t take immediate action. Take your time to go through the policy details and cross check with insurance company by calling to their helpline. Read policy wordings such as Insured Declared Value (IDV), deductibles, exclusions, no claim bonus and the like, clearly, don’t rush while doing so.
- Do not pay your premiums through offline payments modes such as in cash. Always prefer to make your payment using digital payments modes such as credit card, net banking, check and the like. Why? First these are safe and secondly, unfortunately if you become victim of insurance fraud then you would have a valid proof that you actually have paid the premiums.
- Beware of fraud intermediaries.
- Remember legitimate insurance companies never charge any type of signing fee.
- Don’t respond to spam calls, emails and don’t get trapped through fake online advertisement. Note: A legit company may also approach you but verify its legitimacy by visiting company’s nearest office.
- Report a fraud to concerned agency ASAP to get reimbursement.
- If you’ve become victim of policy misselling then surrender your policy within cooling-off period to get full refund of premium.
- Once you get your insurance policy, visit your insurer’s website and check your policy status online.
- Collect payment receipts and keep them somewhere safe.
- Many insurers provide QR based mobile apps to check genuineness of the policy. If an insurance company is not providing you a way to check the same (online/offline) then I would suggest you refrain from such a company; because insurance frauds are more likely to happen in the name of such companies.
- Prefer to buy your policy directly from insurance company.
- Never let your agent fill your proposal form. Always fill it yourself and enter all the details correctly.