Editorial
Front Page - Friday, July 30, 2010
Insurance Insights
Insurance fraud
Jay Bradford
A recent negotiated plea of “No Contest” to one count of Theft of Property in excess of $2,500 by James N. Pickard, an insurance agent, in Pulaski County Circuit Court reminds me of how much insurance fraud costs companies and consumers each year. It is tens of billions of dollars. In the Pickard case, the agent received premium payments from consumers and did not forward them to the insurance company.
Let’s be honest, it is a reality that insurance fraud exists here in Arkansas and across the country. Insurance fraud occurs when an insurance company, agent, adjuster, or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.
Individuals within the insurance industry have been known to deceive consumers for personal gain. An unscrupulous insurance agent may collect premiums from a customer without passing them along to the company just as Mr. Pickard did. The consumer believes that his premiums are being properly handled while the insurance company thinks the policyholder is not paying his premiums and, therefore, cancels or does not renew the consumer’s policy.
This type of situation has
occurred infrequently in Arkan-sas and we have prosecuted agents for it. In Mr. Pickard’s case, he was sentenced to five years probation, payment of a $500 fine, and thirty hours of community service.
There are fake insurance companies who defraud consumers by collecting premiums for bogus policies with no intention of paying claims. These “companies” might offer policies by phone—if there is a listed phone number at all. One should always check in advance to make sure you are dealing with a legitimate, licensed insurer before signing an application for a policy.
Legitimate companies that are not licensed by Arkansas to sell insurance might lead consumers to think they are selling “insurance” while evading state insurance regulations. A company selling a health discount plan might call the plan insurance when it is really an unregulated, non-insurance product. If you question whether a product you are offered is insurance, you can contact our Consumer Division.
Consumers can also be
guilty of insurance fraud. Deli-berate attempts to stage an accident, injury, theft, arson, or other type of loss that would be covered under an insurance policy; exaggerating a legitimate claim; and/or knowingly omitting or providing false information on an application for a policy are all examples of consumer insurance fraud.
Any suspicion of insurance fraud should be reported to the Criminal Investigation Division of the Arkansas Insurance Department at 866-660-0888.
The Arkansas Insurance Department is located at 1200 West Third Street in downtown Little Rock. 1-800-852-5494. www.insurance.arkansas.gov
Jay Bradford was appointed Insurance Commissioner by Governor Mike Beebe on January 15, 2009.
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