Know how Insurance Agent can misuse your money without knowing you

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Insurance agent fraud is a quite a common story that happens to many people every day. It is most usually done by unauthorized removal of premium. The insurance agents deal with large percentage of the funds of their clients. Thus they can easily misuse the money that they have access to.

Here are the 5 ways by insurance agent can misuse your money:

  1. Lapping- the premiums of the clients are stolen by the agent. After that they conceal the fraud by creating a fake customer’s account and credit that account with thepremium of another customer.
  2. Skimming–the premium amount is stolen by the agent before the customer’s account that is maintained by the insurer gets credited with the payment.
  3. Fake policies –the insurance agents gets money from different incentive programs and bonus of the insurance company. This money is used to cover for the premium of the fake policies that they create by investing their own money. Then they let these fake policies to lapse after getting the money. Some questionable agents do not file the policy with the carriers after filing the same with the customers. Some clients try to avoid filing claims on policies because they think that they will have to pay a higher premium especially if they are early in their terms. Thus the agent’s do not gives the documents of the policies to the carriers and keep them for themselves. As the carriers are not aware of the existence of the policies, the agents are able to remove a part of the client’s payment.
  4. Forgery– the agents imitate the signature of the clients to steal the premiums and cash values of the insurance policies.
  5. Churning– the agents try to convince the clients to end their existing policies and buy new ones so that they can earn extra commission from them. The clients are not aware of the fact that they will lose money if they switch policies.
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Forensic data analysts can detect the abnormality in the data sets of insurance policies and significantly decrease the chance of fraud in insurance premium payments.

  1. Data is analysed from policy, agents and clients- the premium payments, trends and product types are analysed by the analysts. It may be considered unusual if a long term policy holder suddenly stops paying.
  2. Indistinct matches on names, telephone numbers and bank account details- it is considered risky to let the agent handle all the details of the insurance policy. The client may find many personally identifiable information matches.
  3. Analysis of identity card- personal information like gender, date, birth location that are present on identity card can sometimes prove to be very useful in detecting anomalies and matching them with the information that is stored in the company database.
  4. Detecting lapsed policies- if fake policies are created by the agents to get incentives and achieve sales target, he would let those policies lapse. Analysts can identify fraud agents by detecting the quantity and frequency of lapsed policies.
  5. Analysing date gap between policies- short gaps between termination of old policies and signing new policies can indicate that the agents persuaded the customers to buy new policies in order to earn extra commission.

Shailesh Kumar

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