Louisiana Joins National Fight Against Bogus Insurance

November 11, 2004

As part of his state’s fight against fake insurance, Louisiana Commissioner of Insurance Robert Wooley is joining the National Association of Insurance Commissioners (NAIC) in launching an awareness campaign that encourages consumers to “STOP. CALL. CONFIRM.” before buying insurance.

“One of our major current fraud concerns involve bogus insurance policies, which lead people to believe they are purchasing an insurance policy from a legitimate company, when in fact they are not,” Commissioner Wooley said in an announcement. “Fake insurance puts consumers’ health at risk and causes rates to skyrocket.”

As the cost of health insurance rises nationwide, so do the instances of consumers falling prey to insurance scams. Consumers are drawn to these scams by promises of cheaper rates regardless of pre-existing conditions. They cancel their legitimate coverage to go for the “good deal.”

Scam operators sell the phony insurance policies to the unsuspecting consumers, collect the premiums, but fail to pay medical providers. The consumer is then left with mounting medical bills and no real insurance coverage. However, fake insurance should not be confused with Discount Medical Plans. Many Discount Medical Plans are legitimate “savings” plans, but they are not health insurance and are not regulated by the Department of Insurance. Consumers should review plan materials carefully and be certain the benefits are worth the cost.

“We get a lot of our information about insurance fraud through complaints we receive from the public,” Commissioner Wooley said. “Often we will pick up on a pattern of complaints on an individual or company that suggests fraudulent activity is taking place. Unfortunately, we don’t often hear about the scam before the scam artists have moved on to other areas.”

Bogus insurance has boomed in large part because of insurance sales over the Internet and the capabilities of digital printing. Fraudulent policies are often sold through direct mail, fax machines, e-mail or over the Internet, so consumers are urged to be cautious when responding to these types of solicitations. Many such plans come complete with glossy brochures, stately letterheads and licensed insurance producers to back them up. None of these things should be considered “proof” that a policy is legitimate.

Red flags that can signal phony insurance:
*Health insurance marketers who offer rates far less than what other companies are charging and/or boast that they insure everyone, regardless of pre-existing conditions. Remember, if a policy sounds too good to be true, it usually is!
*Marketers who avoid the word “insurance” and call premiums “contributions.”
*Producers or companies that say this is a “one-time deal” or the “last chance for savings.”
*A company that is evasive when questioned about state insurance licenses.
*Marketers who demand cash for payment or do not issue a receipt.
*A producer or company who asks for detailed personal information that is not needed to write an insurance policy. It is always important to check the credentials of both the producer and the insurance company.

“If you suspect an insurance deal is bogus, STOP before signing anything, CALL the Department of Insurance at (800) 259-5300 or (225) 342-5900 and CONFIRM that the company is legitimate and licensed to do business in Louisiana,” says Commissioner Wooley. “Because of vigilant consumers we have made significant inroads into combating that type of scam in this state.”

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