Life insurance serves as a safeguarding financial tool for individuals and their beneficiaries, ensuring protection in the event of the insured’s passing. Unfortunately, it is also a target for fraudulent activities due to the significant payouts involved.
One of the types of life insurance fraud that occurs is agent fraud, wherein an insurance agent acts in bad faith to deceive policyholders. Signs that an insurance agent is engaging in fraud include the following.
Unusual beneficiary designation
Unscrupulous insurance agents may add unfamiliar or questionable beneficiaries to the policy without the policyholder’s knowledge or consent. These beneficiaries could be fictitious individuals, distant relatives or even the agent themselves or their associates. This is indicative of potential fraud, especially if the policyholder did not authorize such changes or if they were unaware of the beneficiaries listed on their policy.
Unusual changes in policy details
Another sign of potential life insurance fraud is sudden unsanctioned changes to the policy form data such as premium payments, beneficiary names and coverage amount. Policyholders should be wary if they notice unauthorized alterations to their policy details without their consent or knowledge. Any unexpected changes should prompt the policyholder to investigate further and verify with their insurance provider.
Policy replacement
Fraudulent agents may also replace a policyholder’s existing policy with a new one from another company. This type of fraud is called churning, and it typically involves convincing the policyholder to surrender their current policy and purchase a new one often with promises of better returns or benefits. However, the new policy may not actually be in the policyholder’s best interest and may result in financial loss or reduced coverage.
Life insurance fraud can lead to denied claims and financial loss for policyholders and beneficiaries. Getting legal guidance can help policyholders and beneficiaries understand the complexities of insurance law and seek recourse against fraudulent agents or companies.
