Finding Fraud: How to Spot Insurance Scams

Deciding when or where you’re going to invest in insurance is a very important decision in life.
It is a tremendous financial turning point where you’re making decisions in entrusting your hard-earned savings through insurance providers that can accommodate your needs. This type of decision is especially difficult to make when struggles such as old age, sickness, or injuries are more likely to occur. Financially investing in life insurance providers is important as you can only do so much in preparing for the future since diseases or accidents can never really be forecasted.

Unfortunately, life insurance as a business entails opportunities for some delinquents who commit insurance fraud. According to Investopedia.com,

Insurance fraud from the issuer (seller) includes selling policies from non-existent companies, failing to submit premiums and churning policies to create more commissions. Buyer fraud includes exaggerated claims, falsified medical history, post-dated policies, viatical fraud, faked death or kidnapping, murder and much more.”

The specifics of life insurance investments are also complex. With many providers such as State Farm Group, facilitating for different plans for definite needs ranges from handling insurance on cancers, obesity, mental health and even issues on divorce. Such complexities can come by, especially when scammers begin to set their sights on a big fish.

Types of Fraud

Insurance fraud comes in two main categories: seller fraud and buyer fraud. Seller fraud occurs when the seller of a policy hijacks the usual process in a way that maximizes his or her profit. Buyer Fraud occurs when the buyer bends the process to obtain more coverage, or claim more cash, than he or she is rightly entitled to.

Investopedia added, “Insurance fraud is basically an attempt to exploit an insurance contract. Insurance is meant to protect against risks. It isn’t meant to be a tool to enrich the insured. Although insurance fraud by the policy issuer still occurs, the majority of cases have to do with the policyholder attempting to receive more money by exaggerating a claim. More sensational instances such as faking one’s own death or killing someone for the insurance money are comparatively rare.

With a lot of factors and guidelines to consider, you may never be completely safe from different insurance fraud (and any financial investment fraud for that matter!). Here are some early warning signs to help you spot a potential fraud:

Types of Seller Fraud

Seller Fraud involves those deals that providers make which exploits policy contracts, benefiting the seller while mainly harming the buyer. There are many variations of seller fraud, but they all center on these four basic types:

Ghost Companies

Ghost companies or ghost brokers are fraudsters who sell apparently cheap insurance deals but issue policies that aren’t worth the paper they’re written on. In this scenario, policies are issued and premiums accepted from policyholders, but the company underwriting the policy isn’t legitimate and often doesn’t exist.

Put simply, ghost companies operate in two ways:

1.) Policies are bought from legitimate insurance companies using false information and then doctored before being sold to the unsuspecting client.

2.) Fake policy documents designed to look like they have been issued by legitimate insurance companies are created and sold to customers.

These downright illegal scams can easily be considered a type of boiler room operation, where a team of high-pressure scam artists dial likely victims to sell them false policies. The problem with this is (and unfortunate as it could get) that the fraud isn’t usually discovered until someone tries to file a claim on the policy that their family member thought was in effect.

Premium Theft

Premium theft is when the insurance representative takes the premium for a policy, but doesn’t use for its intended use, rendering the expected policy to be invalid. In essence, the agent simply takes the money for himself or herself.

Fortunately for most people, premium theft has become less of an issue as more companies have moved towards direct deposit models. Then again, premium theft is still possible in some cases especially when a deal provides for suspicious and highly-broken down payment policies.

Churning

Churning basically refers to a situation where the insurance representative strongly advises the customer to either cancel, renew and/or open new policies in a way that is beneficial to him or her, instead of beneficial to the client.

This type of insurance fraud often targets customers who are easily driven by the agent’s passion. As such, the agent gets a client to sign up for more policies, thus more premium. In turn, the fraudster gets larger commissions.

According to Money & Career Cheatsheet.com, “For conservative, long-term investors, it is considered general wisdom that buy and hold strategies are the best way to go. So, if you are receiving confirmations once or twice a week, or 10 or more times per month, this may be a warning sign that your broker is excessively trading your account.”

Over or Under Coverage

Similar to churning, over- or under-coverage scams happen when an insurance representative tries to convince customers to buy coverage they don’t need, or sells a lesser policy and represents it as a complete policy.

This type of fraud can easily happen in other business, and the best thing about it (for the scammers) is that it doesn’t look like a scam. However, you should understand that the insurance rep is essentially trying to maximize his commissions, as well as to ensure the sale rather than focusing on meeting the client’s needs.

Types of Buyer Fraud

Much like Seller Fraud, Buyer Fraud also comes in a number of ways, but the overall theme is buyer dishonesty, “allowing” the fraudster to prematurely the supposed benefits from the policy:

 

Post-Dated Life Insurance

Post-dated life insurance is a type of insurance fraud wherein a policy was created after supposedly insured’s death. The fraudster makes it as if the policy has been in effect well before the passing of the documented insured, thus, resulting to claim from the company.

This kind of scam is often carried out by delinquents with the help of a charismatic insurance agent. Since record-keeping nowadays have been more rigorous than before, post-dated life insurance fraud is fortunately easier to detect.

False Medical History

This one is by the textbook. Falsifying medical history is one of the most common types and essentially the easiest type of insurance fraud. By omitting tiny details, such as a medical condition or a smoking habit, the buyer hopes to get the insurance policy at a cheaper deal than he or she would have gotten otherwise.

Lack of Insurable Interest

Some people are willing to do passively but chaotically dark deeds just to make a better deal. It is true that there are buyers who insure people they shouldn’t be insuring, in hopes that they will die. This constitutes fraud.

Faking Death or Disability

Many life insurance policies have riders for disability, and this is a good opportunity for scammers to prematurely get the payout. However, some people take it a step further and fake their own deaths! In both cases, the fraudster has to deal with the possibility of being discovered through an investigation.

As the old saying goes, insurance is a business that is built on risk analysis and probabilities. This makes every instance of insurance fraud very detrimental to the enterprise, whether it is from the seller or the buyer. For this reason, companies are forced to build contingency funds to protect them against fraud and any other unforeseen events.

While security is good from the client investor’s perspective, personal life insurance premiums tend to be higher. At the end of the day, it all boils down to both parties being honest as well as both parties being vigilant in spotting dishonest activities.

 

3 Financial Tips for Business Starters

Starting up a new business presents a variety of challenges that not only extends to the physical and mental side of things but also to the financial facet of the professional endeavor. Business planning and market studies involve intricate methods that need a lot of mental fortitude. The truth is that establishing a start-up business requires ample amount of time and actual physical presence for any involved business owner in order to check if everything is going as planned.

business-plan

The bottom line is that one of the most important factors to check is whether the business’ finances actually balance out. Simply put, money and financial management eventually become the deciding factor if starting a business is feasible in the first place.

Start-up business owners and aspirants alike are having a hard time finding out solutions to the challenges of these hard economic times. This is the main reason why anyone who’s aspiring to be a success in the field of business should look to inform themselves about some important financial tips that can actually make a difference in their work. In this regard, these financial tips and tricks that for startup business owners can help guide the any entrepreneur find their footing in the business world:

Financial Management Starts Personally

One thing that stands out as a part of the basics for any successful business is that a business should minimize expenditures and maximize profits. Business owners do the best that they can to cut luxurious services or even redundant equipment in their establishments, while still producing at the optimum level.

Then again, being money-smart is not a one-time thing if a person really wants to be a significant player in the market. It should be part of a consistent attitude that roots from culturing one’s self to be financially wise. Thus, financial management starts personally.

Financial advisers would always tell their clients that there are a variety of ways on how to handle their finances. It should take into account both the present and future of one’s money management.

financial-management

This is where saving comes in. Saving is an important facet in everyone’s financial status. This is highly critical especially when financial problems arise or the business may not be going too well. In fact, these unfortunate circumstances serve as the perfect moment when saved money presents its best benefit.

An alternative method of saving is investing. Investing is an integral for any individual, especially for those who wants to make it big in the long run. As such, investing early is much more preferred since money does require time to grow.

But where does one invest?

Banking is the most common used approach for saving money, and is in fact a form of investing in itself. Over time, money saved in a bank account can accumulate interest. Similarly, investing money in the stocks market can also be an option for those who want to involve themselves in trading.

While everything mentioned above tackled gains, financial management also puts a highlight on considering future events like retirement. Being able to get an individual insured is one of the better things when it comes to finances. Getting an insurance policy which entitles a person financial protection or reimbursement against losses is imperative for a money-smart individual.

Taking this into consideration, insurance serves as an individual’s protection from the risks of financial losses, damages or liability from damages caused by a third party. Insurance companies can vary in wide arrays, but the most significantly popular ones involve health and protection. The truth is that rigorous medical examinations are involved in getting the actual policy, but smarter people opt to take advantage of no exam life insurance which is much simpler.

Whatever form of investment one opts to go for, at the end of the day, using money to earn more money is a good set-up for any business.

Breakeven is not Necessarily Bad

The ultimate goal of any business is to gain profits consistently. However, before any real gain happens in a business, the inevitability of losses should also be considered since business may not be flourishing every time.

Losses are particularly hard to take especially for starting businesses, since it might bring about professional discouragement. While there are various possibilities in business, there comes a point when everything just ends up leveling to zero –no gains, no losses. Simply put, breakeven.

The bigger question now presents itself – is breakeven bad? The answer is not necessarily so. The actual decision whether it is good or bad comes from the circumstance it is in. If breakeven points come at a time when the business incurred losses from the months before, then it might be a good thing. If a business is consistently breaking even from the start, then it may be time to rethink about the business model of one’s establishment. Breakeven is studied deeper in economics. This is called break-even analysis.

break-even-analysis

Break-even analysis is used to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.

Break-even analysis is a supply-side analysis; it only analyzes the costs of the sales. It does not analyze how demand may be affected at different price levels. The break-even point is the point at which gains equal losses. Reaching the break-even point is a business’s first step toward profitability.

Good Profits with Better Business Partners

Establishing a new business is not always a one-man team. Often times, it comes as a result of collaboration from business partners with the same goal: to gain higher profit. Business partnering is not new. However, as today’s business world becomes more uncertain and more volatile, the imperative for business partnering is greater than ever.

The Chartered Institute of Management Accountants (CIMA) defines business partnering as a finance professional who works alongside other business areas, supporting and advising their strategic and operational decision-making through insights that drive better business. The speed and quality of decision-making is becoming increasingly essential to a business’ success, and may actually be that competitive edge they need. New research with senior executives from around the world identified a common need for faster, better decision-making processes.

good-deal

Real business value is created through knowledge, intellectual property, collaboration and partnerships throughout the company. Now, more than ever, financial leadership has an opportunity to contribute tangibly to the success and future of the business. However, they can only do this successfully if they are effective business partners, which require a special set of both technical and behavioral skills: an understanding of the business and what is actually driving the numbers, as well as good people and leadership skills.

Before anything else, getting a good business partner should be done carefully and with proper thinking. Because partners join forces for a variety of reasons and expectations, sometimes, the strengths of each individual may be overlooked. The most obvious strengths are evidently recognized; however, underlying strengths, when effectively brought out, can often make a big difference in long term motivation, commitment and success.

Each person in the partnership has his own reasons for being in the business endeavor. Sometimes, people seek a partner for capital, expertise, and even connections. These are not always expressed, yet they remain as an underlying expectation. If the expectation isn’t met, the relationship can become strained.

Because each person’s expertise, motivation and personality are different, it’s important to have this discussion before anything is committed contractually.

Penny Power – How to Save Money without Pain

Saving money shouldn’t be too painful a task for you. You don’t need to be hungry, nor be that stingy friend who wouldn’t come to concerts or basketball games because you’re trying too hard to save every penny. The following are painless ways for you to save money that can lead you to your much deserved financial freedom.

Track your money

It’s usually in doing the little things that you can start to save up bigger and bigger as the days go by. There could be parts of your expenses that you may have overspent on, and you still would’ve enjoyed your life without it. The best way to know this, though, is by keeping track of your money.

recording-finances

Tracking your spending also forces you to look at your financial reality, and that’s not a bad thing. If you ask anyone older than you if they regret not getting a handle on their finances sooner, most would say yes. Take advantage of your younger years – start tracking your spending now to have more security and freedom later. Your future self might thank you.

The truth is that you have a finite amount of money to allocate to certain categories, as they are usually based on what you earn. Laying out your expenses compels you to prioritize where you want your money to go. Mindlessly spending on things isn’t going to get you where you need to go. You need a plan, and tracking your spending is one way to create that plan. If you want to accelerate saving or paying down debt, having a clear picture of your finances can also help you determine how you can accomplish both all at the same time.

Improve your credit score

A good credit score can save you thousands of dollars in interest on everything – from a home loan to a car loan, and from school loans to credit cards. When you apply for a credit card, mortgage or even a phone hook up, your credit rating is checked. Credit reporting makes it possible for stores to accept checks, for banks to issue credit or debit cards, and for corporations to manage their operations. Depending on your credit score, lenders can determine what risk you pose to them.

credit-score

According to financial theories, increased credit risk means that a risk premium must be added to the price at which money is borrowed. Basically, if you have a poor credit score, lenders may not shun you (unless it is utterly awful); instead, they would lend you money at a higher rate than the one paid by someone with a better credit score.

If you’ve never focused on your credit score before, the place to start is to get your free FICO score online. Once you know where you stand, you can begin to improve your score and lower your interest payments.

Refinance your mortgage

The results of improving your credit score can also affect other aspects of your finances, like with your mortgage. Some people opt for refinancing to get a new mortgage to replace their original mortgage, which ultimately aids in the improvement of their credit score.

saving-money

Refinancing is done to allow a borrower to obtain a better interest term and rate. The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage. For borrowers with a perfect credit history, refinancing can be a good way to convert a variable loan rate to a fixed, and obtain a lower interest rate. Then again, for borrowers with less than perfect, or even bad credit, or too much debt, refinancing can be risky.

One of the main advantages of refinancing, regardless of equity, is reducing an interest rate. Often, as people work through their careers and continue to make more money they are able to pay all their bills on time thus increase their credit score. With this increase in credit comes the ability to procure loans at lower rates, and therefore, many people refinance their mortgage aiming to get better rate. A lower interest rate can have a profound effect on monthly payments, potentially saving you hundreds of dollars a year.

If you can reduce your interest rate by one percent or more, it is often beneficial to refinance. By doing so while making payments on a mortgage, people are able to take out substantial home equity lines of credit as the difference between the appraised value of their home increases, and the balance owed on a mortgage decreases. This is particularly true for those with high rates due to less than stellar credit scores. If your score has improved, you may qualify for a better rate.

Start Cooking!

Another big source of spending splurge usually comes off of eating out in fancy restaurants, or trying to get by lunch through fast food. The thing is, no matter the situation, eating out is always more expensive than cooking for yourself. Plus, cooking your own food allows you to keep track of the nutrition (or lack thereof) of the food that you take in.

cooking-money

They say that the key to saving money with meals is to look for healthy foods that are versatile and nutritious. The long list includes: peanut butter, oatmeal, canned beans, garbanzo beans, lentils, eggs, almonds, apples, bananas, grapes, fresh or frozen spinach, carrots, kale, canned tomatoes, chicken breasts, broccoli, onions, garlic, brown rice, potatoes, sweet potatoes, nuts, tofu, and milk (almond, soy, rice or cow’s). Thankfully for you and for the rest of the world, many online guides are showing this trend of making cheap and easy meals under $5.

By the end of the day, you would find out that you won’t need to spend so much money just to eat good food.

Take the cheaper or the more valuable options all the time

Look at your constant expenses and see if you can lower their costs. For example, try looking at your internet connection and how much you really need: if you won’t need so much data allowance or so much speed, you can lower your monthly costs to an internet connection that would cater to your needs.

You can also consider getting rid of your home telephone. This is a great way to save money. Many don’t do it because of the 911 service, and that’s understandable. Other than that, with today’s technology, more often than not, there’s no reason to keep a landline. If you do, consider reducing your service to the minimum, and only use the phone in an emergency.

stacking-pennies

Also, if you can choose appliances labelled as “energy-saver,” look long term and calculate if you can save more money if you replace your current appliances. Try to replace incandescent bulbs with compact fluorescent light (CFLs) bulbs. These bulbs use 75% less energy and last 10 times longer. They do take some getting used to, and they won’t work in every light fixture. However, using them where it makes sense can save energy and money.

Furthermore, do look at your variable expenses, especially your leisure ones. Even buying concert tickets or flight tickets can be lowered significantly if you know how to. For example, look for tips to save on tickets for the Clippers games online, and you would learn that you won’t actually need to spend hundreds of dollars if you just find the right timing to purchase one.

There’s so many ways that you can get the most value out of your money, you just need to know where to look for them.