Insurance Fraud

How to Avoid Instances of Insurance Fraud
With so many different types of insurance consumers can become confused as to which is a worthwhile investment and which insurance plans should be avoided. According to experts, there are quite a few insurance policies that consumers are better off not investing in. For example, private mortgage insurance, short-term, cash value life insurance, mortgage insurance, and cancer insurance.

According to federal law, a lender must notify a homebuyer that they can cancel the insurance once the outstanding balance on the mortgage drops below 80% of the original value of the home. Private mortgage insurance only covers a mortgage company when a homebuyer tries to take off without paying off the loan. The costs for the homebuyer end up being as much as a 13th mortgage payment. For homebuyers that are unable to put down at least 20% of the home’s value, obtaining private mortgage insurance could be inevitable.

The consumer Federation of America did a study on short-term, cash value life insurance and it showed that it would take five years before this type of insurance policy has any positive return, and then the return is not a substantial one. The insurance plan is intended to offer a death benefit and a return on investment, however the costly policy will fail to return much at all. Ten years after holding onto a short-term, cash value life insurance policy there is an average return of just 2%.

While mortgage insurance policies are for homebuyers wishing to avoid ever burdening their family members in the event that he/she dies or becomes disabled, in actuality the policy costs more than it will do good. The homebuyer can still ensure their heirs are never left with mortgage payments by getting coverage with another type of policy.

A General Accounting Office 1994 study found the largest insurance companies selling cancer insurance ended up paying out as little as 35% of the premium they took in. The cancer insurance is not beneficial because of the narrow coverage that it provides while it reaps high financial gain for the insurance company.

It is best to really understand what an insurance policy is providing you and your family with so that every consumer is able to properly assess if that insurance is worthwhile or if it simply a scam allowing insurance companies to make money off of unsuspecting consumers. For more information contact a consumer fraud attorney.

Force-Placed Insurance
Force-placed insurance policies can greatly benefit consumers that have experienced tremendous loss. Unfortunately, the insurance industry’s pursuit of financial reward has led to fraudulent practices that have monetarily devastated victimized consumers. Charges against force-placed insurance companies have alleged that the consumers were purchasing extraordinarily high priced policies that were determined strictly for the financial benefit of the company. If you would like more information on fraud lawsuits, contact us to confer with a consumer fraud attorney.

Collateral Protection Insurance (CPI)
Collateral protection insurance (CPI) is coverage for financial institutions that provides physical damage insurance on collateral held by the lender in support of the loan. In the mid-1990s lawsuits began to surface because CPI borrowers argued that their contracts breached loan agreement terms. Alleging banks were charging above-market premiums and commissions for the CPI insurance by assessing unnecessarily high coverage on the loans, the legal problems for the banking industry developed because borrowers claimed excessive insurance premiums on the collateral for their loans were being paid.

CPI lawsuits on behalf of borrowers alleged a range of different contractual, statutory, and negligence causes of action that included breach of fiduciary duties, breach of the implied covenants of good faith and fair dealing, fraudulent misrepresentation, negligent misrepresentation, unfair trade practices under the Federal Fair Debt Collection Practices Act, antitrust violations, conspiracy, negligence, and the failure to disclose under Regulation Z of the Truth in Lending Act.

For more information on CPI insurance fraud lawsuits, please contact us.

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Recent Insurance Fraud Scams

Credit Card Company Profiting Off Gamblers, June 15, 2002
Citibank, the nation’s largest credit card issuer was warned by the New York Attorney General that they could face criminal prosecution for aiding in the promotion of online gambling that is illegal in many states, including New York. Other banks have already blocked online gambling transactions due to the borderline legal issues as well as the high number of customer disputes regarding gambling charges. Internet gambling operations are reportedly suffering because of the credit card company’s warnings or penalties that have been issued according to The New York Times.

Paying For Non-Existent Insurance, June 4, 2002
Considered one of the biggest insurance fraud scams within the last ten years by James Quiggle of the Coalition Against Insurance Fraud, more and more Americans are finding they have been sold non-existent insurance plans. The insurance fraud plans are in operation in every state and leaves the victims with countless medical bills and debt. The insurance fraud is affecting more than individual patients, it also affects doctors and hospitals that are left in financial distress because state and federal authorities often do not discover that they are involved in a scam until it is too late.

Florida has been so badly affected by the insurance fraud the state has launched an ad campaign to warn people to check their insurance companies to make sure they are licensed. The fake insurance plans usually target the self-employed because they have the hardest time finding affordable health insurance, so the unlicensed companies can offer cheaper rates than the larger, well-known insurance companies. The insurance fraud victims do not find out they have been scammed until they need the insurance the most.

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