A New Tool To Fight Crooked Insurance Agents
By Daniel Hays
NU Online News Service, April 20, 1:15 a.m. EDT?A private investigation firm unveiled a new product to check insurance agents' backgrounds this week, which a company representative said is needed to counter an "alarming growth" in agent financial misdeeds.
James Mulvaney, managing director for corporate intelligence at Great Neck, N.Y.-based Fortress Global, said the program employs techniques which the company developed to weed out undesirables in other industries.
He said Fortress Global realized insurers had a need for better agent screening in the course of doing investigations for carriers victimized by rogue agents whose background all included material that should have been a red flag to prevent their hiring.
"All these people had money troubles, liens, lawsuits, bankruptcies and businesses that went under," Mr. Mulvaney recounted.
After one investigation of an agent who stole premiums from four companies, Fortress Global checked back and found he had a past record of bankruptcy, frozen credit cards and telephone service cutoffs for non-payment.
Mr. Mulvaney said agents in a financial bind face an extraordinary temptation to misuse trust funds containing client premiums.
From his discussions with participants at this week's Risk and Insurance Management Society meeting, he said he believes the percentage of agents making inappropriate use of trust funds is well above government estimates of 60 percent–although not all the infractions involve theft.
Fortress Global calls its program to identify questionable agents, brokers and other representatives Agent Check Plus and says it's designed to root out agents who pocket premiums, divert claims payments and commit other crimes.
According to Mr. Mulvaney, standard background checks can miss crucial details because they are not integrated with the specific requirements of the insurance industry.
Agent Check Plus, he said, was designed in coordination with insurance industry specialists who identified the potential witnesses and crucial criteria in establishing the bona fides of an agent. Agent Check Plus investigations are paid for by the applicant agent, rather than the insurance company.
"This pricing model for Agent Check Plus is similar to the current insurance industry practice, where agents pay licensing and franchising fees to represent an insurance company," said Robert Seiden, President of Fortress Global Investigations. "We believe that most honest brokers will be glad to participate in a system that gets rid of shady competitors."
Mr. Mulvaney noted that only 28 states require fingerprinting of agents and ironically many insurers do more financial background checking on policy applicants than they do on agents.
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