NAIC: Buyers Unaware Of Fake Insurance Danger

By Steve Tuckey

NU Online News Service, Dec. 15, 12:42 p.m.EST?Seventy-four percent of the public is unaware of therise in fake insurance sales and the need for increased vigilancewhen purchasing insurance, according to a regulators'survey.[@@]

The survey conducted by the National Association of InsuranceCommissioners also revealed that 83 percent of Americans feel theinformation available from their state insurance department couldbe helpful in avoiding fake insurance.

However, only 8 percent of adults surveyed said they havecontacted their state insurance department to confirm the validityof an insurance provider before making a purchase.

As part of the U.S. fight against the rise in fake insurance,the NAIC launched a nationwide awareness campaign that encouragesconsumers to "Stop. Call. Confirm," before buying insurance.

"In the area of fake health insurance alone, the U.S. GeneralAccounting Office reported 144 fake health insurers nationwide soldbogus products to more than 200,000 policyholders between 2000 and2002," said Diane Koken, NAIC president and commissioner ofPennsylvania. "This is simply unacceptable."

Under most state laws, with very few exceptions, no insurancecan be sold by individual agents, brokers or companies without theapproval of the state insurance department, NAIC noted.

A key problem in catching operators of health insurance scams,according to Texas Commissioner Jose Montemayor, is that many plansmanage to avoid state officials by claiming to be exempt under theFederal Retirement Security Act.

The GAO report stated that at least 15,000 employers, includingmany small companies, purchased coverage from unauthorizedentities. The states reported that more than half of theorganizations they identified frequently targeted their healthbenefits to small employers.

Ms. Koken noted that fake insurance is attractive because it istypically less expensive than legal policies.

"But that is because a fake policy does not providesufficient?if any?coverage," she said.

At a U.S. Senate Finance Committee hearing earlier this year,U.S. Senator Charles Grassley (R-Iowa) said "there is noconsistent, national comprehensive strategy for systemic nationwideproblems."

Also at the hearing, Florida resident Joan Piantadosi said thather husband nearly did not get a liver transplant when it becameclear their insurance was fake.