Common Insurance Fraud Schemes to Watch Out For

Insurance fraud schemes - As a financial product, most insurance is offered to the public through marketing agents. The presence of these marketing agents can help prospective customers better understand an insurance product. Prospective customers can ask about various information regarding insurance products and get advice on which product suits their needs, the benefits offered, how to make a claim, and more.

Despite the positive role played by insurance agents, there are also irresponsible individuals who sometimes abuse their role as agents. So, if you plan to buy insurance, learn to recognize the fraud schemes these irresponsible agents may use. The goal is to help you avoid major losses and not be discouraged from buying insurance. So what are the BRI insurance fraud schemes? Read on in this article.

Schemes in Insurance Fraud

Insurance fraud schemes are deliberate actions taken by agents or insurance companies solely to gain financial profit. This fraud can happen at various points in transactions involving policyholders, third-party claimants, or professionals who provide services to claimants.

It should be known that people who commit insurance fraud include:

• Ordinary people who want to cover their deductibles, or who see filing a claim as an opportunity to earn a little money.
• Organized criminals whose aim is to steal large sums through fraudulent business activities.
• Professionals and technicians who inflate service fees or charge for services that will not be provided.

So how exactly do the insurance fraud schemes that are widely circulating in society work? Here is a full explanation.

1. Insurance Agents Concealing Product Information

This JNE insurance fraud scheme often targets customers of unit-linked insurance because agents frequently withhold product information. Agents do this to focus on earning commissions from premium sales. Typically, this scheme involves agents highlighting only the investment benefits without explaining the risks as clearly as possible. Yet, like any other investment instrument, unit-linked investments also carry the risk of loss.

2. Premium Transfers

Premium transfers are a way that irresponsible insurance agents reel in prospective customers. To avoid falling for this scheme, do not transfer premium payments into a personal account of an agent or insurance salesperson. Always transfer funds directly to the company account listed in the policy or on the company's website.

3. Replacing the Policy When the Customer Requests an Upgrade or Downgrade

This scheme is very common in insurance agent fraud cases. Under the pretext of upgrading your existing policy, an irresponsible agent will instead open a new policy with the benefits you want. The purpose is for the agent to earn a commission on the new policy.

At first glance, you may not notice, since the benefits listed in your policy match what you wanted. An easy way to tell whether your policy is an old policy that has been upgraded or a new one is to check the policy number. If it is an old policy, the policy number will not change. If it is a new policy, your policy number will change.

Moreover, if you look carefully, this can harm you because the premium for a new policy is higher as you get older. If your old policy has a cash value, you still need to stay alert, as the cash value of the old policy may be withdrawn to pay the premium on the new one.

You can prevent this from happening. Typically, when a customer requests an upgrade, the insurance company will send a notification that the underwriter is reviewing the upgrade request. When you receive this notification, first check the policy number listed, and see whether it is still the same as your old policy.

If it is not the same, immediately report this to customer service so they can handle the case as soon as possible. If your new policy has already been issued under a different number, report this as well and ask the insurance company to compensate you for your losses. Usually, insurance companies will sanction agents who engage in such misconduct.

You can also prevent this by reading carefully every form and document an agent gives you to sign. Avoid signing any document or form that is still blank, and never sign a document or form that you have not read or do not understand.

4. Fee Churning

With the same goal, fee churning is another insurance fraud scheme used to earn commissions by opening new policies. Typically, agents or insurance salespeople will persuade their customers to switch by making attractive promises such as excellent and top-quality service.

Worried customers, who fear they will run into claim problems without the help of an agent, are often swayed by these temptations. Yet, a trustworthy insurance company will help with any customer issue without needing an agent or salesperson at all.

Always keep in mind that switching insurance providers carries the risk of higher premiums as you age. Every insurance product also offers a wide variety of options. Switching insurance may cause you to lose certain benefits that the new insurer may not offer.

Tips for Avoiding Insurance Fraud Schemes

If you notice any suspicious schemes like those described above, it is better to report the insurance agent before it is too late. You can report to the Financial Services Authority (OJK). Insurance and investment products generally must be licensed by OJK. If a product is not under OJK supervision, it is almost certainly a scam.

The benefit of enrolling in insurance is that your future financial needs are better secured. For example, when your child starts junior high school, the insurance payout can be used to cover school fees. You should also be selective when looking for detailed information online.

To be more certain, read testimonials for the related product. Testimonials should be genuine, not written by company buzzers or fake accounts created solely to post reviews. Do not be easily tempted by the potential gains, but consider carefully how the mechanism actually works.