Early in the Fall of 1992, a claim was submitted to our office for a house which had been vandalized with all the household and personal belongings removed by the vandals. The total value of items stolen was placed at $40,000. Most items did not have any identifying numbers so they could be traced, so the adjuster had to simply believe the claimant and reimburse him for his loss. Approximately five weeks later, the same claimant reported his house had caught fire, burning to the ground, and the only thing he could save were the clothes he was wearing. Again, a loss notice was filled out with itemization of household contents identified. This time the settlement would be based on brand new costs since they were so new. It seemed like just a run of bad luck for the insured. However, something was not right about claim.

When the adjuster and the agent went out to inspect the claim site, several things became apparent in their investigation. In the bedroom there were no springs left where a bed would have been; metal parts which would have been on appliances in the kitchen were missing; transistors which would have been in the television and musical instruments were nowhere to be found; rifle barrels of guns submitted to be paid for were missing; and there was dirt in the truck tracks which didn’t match the soil around the burned down structure. The adjuster followed those tracks which led him to the claimant’s girlfriend’s garage a few blocks down the street.

He decided at this point insurance fraud was definitely a possibility. He notified the sheriff’s office where a search warrant was obtained, and the deputy and adjuster went back to the girlfriend’s garage. Upon opening the door, they discovered the original household contents and the replacement contents as well. The insurance claimant was arrested and charged with submitting a false claim and lying to the adjuster. He was released on a bail bond awaiting trial. The case was turned over to the county prosecutor for him to pursue the charges. The claimant had requested a speedy trial, but the county prosecutor kept dragging his feet claiming due to his work load he could not bring this to court.

Long story short, the claimant walked due to not having a speedy trial. The insurance company had to pay for the house which had burned down and never recouped any monies paid for household contents. Insurance fraud? Absolutely.

More recently, as of December 20, 2018, a man running for governor of Georgia was indicted for filing a fraudulent claim of $300,000 for purported theft of computer equipment in May of 2018. He was charged with submitting a false claim and lying to investigators. He posted a $10,000 bond and is awaiting trial. It is not known yet what the cost will be to bring this insurance fraud case to a close.

Even more egregious, a Texas insurance agent who convinced an 87 year old woman to purchase a $400,000 life insurance policy for which over two years she paid $192,000 in premium. The agent collected that premium over 9 payments each at $21,333. This fraudulent activity came to light when the elderly woman contacted the insurance company to see if she had missed a premium payment. The agent was indicted for theft and misapplication of fiduciary property, both offenses upgraded to first degree felony charges due to victim’s age of 87. He faces 99 years in prison and a $10,000 fine. The Texas Department Insurance Fraud Chief Chris Davis calls this a sad story: “She thought she was taking care of her affairs while she was being robbed of a substantial amount of her retirement money.”

Insurance fraud occurs when an insurance company, agent, adjuster, or consumer commits a deliberate deception in order to obtain illegitimate gain. FBI reports due to the 7000 insurance companies dealing with trillions of dollars, fraud can easily slip under the radar and remains hidden until some dramatic event like one of those mentioned above comes to light. Consumers are encouraged to report fraudulent activities to the FBI, but they normally don’t due to apathy and indifference. It also in many cases is hard to prove fraud did occur.

FBI.com reporting on insurance fraud estimates “more than $40 billion paid (non health insurance related) for fraudulent claims. The average American family then has a cost of between $400 and $700 per year in the form of increased premiums.” This would appear to be one of the major factors in determining insurance premium to be charged.

Several areas seemed to be the main areas for insurance fraud: over inflated amounts for claims, false statements regarding alleged losses, insurance companies denying legitimate claims, and workers compensation abuses–all because the lure of getting something for nothing is so strong in some people.

These stories draw the deepest feelings of anger and frustration from agents who are trying their level best to fulfill the professional pledge agents who attain the distinction of CLU (Chartered Life Underwriter) prescribe to, “I shall, in light of all conditions surrounding those I serve, which I shall make every conscientious effort to ascertain and understand, render that service which, in the same circumstances, I would apply to myself.” (American College of Financial Services Code of Ethics)

A consumer who defrauds is one thing, but an insurance agent entrusted with the financial lives of his or her clients to sink to that level is unimaginable. How could one who deliberately stoops to that level ever look in a mirror and then have any quality of life.

It would seem the principle of caveat emptor has to apply to the purchase of insurance even though agents upon being licensed promise to hold themselves to a higher ethical standard. You would think the penalty of potential fines, jail time, community services, probation, parole, and/or restitution would curtail such acts, but apparently some just don’t have enough moral virtue to remain honorable in their business transactions. I honor those thousands of agents who do conduct themselves with professionalism, dignity, and an attitude of fair play–and at the same time wish something could be done to weed out the unsavory characters before they do harm to unsuspecting victims.