States Campaign Against Bogus Sales

March 16, 2004

State insurance commissioners are vowing to crack down on unauthorized insurance plans with a campaign to educate consumers about illegal sales.

In its meeting in New York City, the National Association of Insurance Commissioners (NAIC) today finalized plans for an awareness campaign to help consumers identify unauthorized insurance activity. During the course of the next several months, NAIC said it will roll out a campaign to combat unauthorized insurance plans, which often are not approved by state insurance regulators and do not offer the benefit requirements of legitimately licensed policies.

Fraudulent insurance plans are becoming more prevalent in every line of insurance, and have cost consumers billions in unpaid claims, according to governmenr and industry reports.

The NAIC said that one of the reasons consumers purchase unauthorized policies is because they offer lower prices. However, in most cases, the reason for this is that these policies do not provide sufficient benefits, if any, when compared with licensed policies.

The General Accounting Office (GAO) estimated in a recent report that there had been upwards of 144 unauthorized entities which covered at least 15,000 employers and more than 200,000 policyholders in the U.S. Between 2000 and 2002 alone, it is estimated that these entities failed to pay at least $252 million in medical claims.

“A centralized message that encourages consumers to contact their state insurance departments is extremely important. Ultimately, it also will aid regulators in locating and taking action against these elusive, bogus insurance entities, with consumer input,” said Alice A. Molasky-Arman, Insurance Commissioner of Nevada.

The NAIC’s campaign will focus on public education about the sale of unauthorized insurance policies in all lines of insurance, and will encourage consumers to call their state insurance department if they suspect illegal activity or if they have questions before purchasing an insurance policy.

For more information, visit NAIC on the Web at:

Was this article valuable?

Here are more articles you may enjoy.