Beth Ossino, claims manager at Golden Bear Insurance Co. in Stockton, Calif., puts dealing with agency fraud high on her radar.
She talked with Insurance Journal about agency fraud, and how agency owners should go about avoiding being involved with fraud.
This has been edited for brevity and clarity.
Insurance Journal: Tell us a little bit about agency fraud. What’s going on with this?
Ossino: Agency fraud runs the entire gambit. It could be something as simple as where an agent might be trying to sneak in a few extra coverages to boost a premium, to boost a commission trying to help the insured by misrepresenting some of the items on the application to help them get a lower premium. It could be that the agent takes the premium dollars that the insured is paying and keeps the money and never purchases the policy for them.
IJ: How should agencies avoid this?
Ossino: It’s never the wrong time to do the right things. They should always put the interest of their insured – they have a fiduciary duty to do so – to put the interest of their insured first, which means doing what they say they’re going to do to help protect the insured.
I would suggest, if they’re going to hire people to come in and work as agents, that they should check their licensing background to see if these licenses have had any other disciplinary action against them, because they want to hire the best people to work for their agency.
IJ: To what extent does agency fraud impact the end-user?
Ossino: It could be something very simple, where maybe an insured is being charged for a few extra coverages that they don’t need, so they’re paying a little additional premium.
It could be toward the very other end of the spectrum, where they thought they had a policy of insurance and they have no coverage whatsoever, where the agent never placed the policy. If their house should burn down, they could lose everything that they have.
If they have placed coverage for a life insurance policy, and the policy was never placed, that could put the family, the survivors, in a very bad position. If they don’t place a work coverage policy and a worker’s injured, that could also be very devastating, so it could have a devastating impact on the end-user.
If there’s some type of intentional misrepresentation on the application, then the insurance company could void the policy or rescind the policy leaving an insured with no coverage whatsoever. It could really impact somebody’s life and take away all that they’ve worked for.
IJ: What are insurers doing to deal with agency fraud?
Ossino: We work very closely with the Department of Insurance, and insurance fraud is a crime in 48 states. We are required to report any type of fraud that we suspect to our local department of insurance.
If we see something where we feel that a consumer has been taken advantage of or is not being protected in the way they should, we do report that to the local Department of Insurance so that they could follow up on this agency to make sure that they are working within the boundaries of the law and not breaching their fiduciary duty to any insured.
IJ: To recap, I think one of the bottomlines for our listeners is that if you’re an agency owner, you should basically look out for red flags, and make sure that you do your homework on agents that you hire. Anything else?
Ossino: No, that’s a very good point, because sometimes, even in the applications that we see for agencies through Golden Bear, there’re misrepresentations where there could have been disciplinary action against the applicant’s license that they’ve tried to conceal, so it is very important.
Any consumer can go on to the Department of Insurance website and check their agents’ licensing history to make sure that there are no disciplinary action against the license, and they’d want to go to an agent that they trust, that has a good reputation, and has a clean license record with the Department of Insurance.