(NC) When real customers unknowingly buy fake insurance policies from fraudulent actors, it’s called seller fraud. A fraudster will offer discounted insurance and take the victim’s money in return for home and auto insurance pink slips that are invalid or forged.
Unlike claims fraud, where fraudsters use fake accidents or reports to cash in on real insurance policies, seller fraud is easy to avoid. Three common mistakes that can lead to fraud are trusting the wrong individuals, seeking impossible rates, and overlooking important details.
Who to trust
Avoid falling prey to a fraudster by checking online for a licence.
A legitimate broker or agent is an individual or firm that sells insurance policies to clients and has a licence number from their provincial regulator. Direct-to-consumer insurance companies are federally regulated and licensed to sell insurance policies directly to the end customer.
TIP: A broker is paid in commission by the insurance company it sells a policy from. Legitimate brokers don’t charge a fee in most jurisdictions.
Shopping around for insurance is the easiest way to find your best rate. Different companies will offer different rates. But, if one individual offers a surprisingly better rate than all the others, you might want to think twice.
“Insurance rates are based on pooled risk — companies need to collect enough money to pay out claims in a given year,” says Roger Dunbar, the senior vice president of home and auto insurer Sonnet. “Generally, if a deal looks too good to be true, it probably is.”
TIP: Ads promoting cheap insurance for high-risk drivers are an example of a red flag. Insurers tend to charge high-risk drivers more because of their driving history.
Check the details
The devil is in the details. If an insurance policy includes misrepresented information, such as unlisted high-risk drivers or the wrong address, it can be cancelled and claims can be denied. Make sure you personally review the information on your policy to avoid losing money and failing to have proper insurance coverage in place when it counts.
Fraudsters may also use fake identities to set fake policies. If an insurer contacts you about a policy you never set up, don’t ignore it. You can report suspected insurance fraud to the Insurance Bureau of Canada. Find more information at IBC.ca.
TIP: A history of misrepresenting information makes it harder to get insurance coverage in the future – check the details.
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