Calif. Commissioner Warns Residents of Dangers from ‘Fake Insurance’

Each year far too many insurance consumers are duped into buying bogus insurance policies, putting them and their families or business at great risk of financial catastrophe. Seeking to prevent these harmful crimes, California Insurance Commissioner John Garamendi on Wednesday warned consumers to be aware of the dangers of fake insurance.

From auto insurance, to life insurance, to health care policies, millions of dollars are stolen each year in California because insurance policies sold to consumers and businesses “aren’t worth the paper they are written on,” said Garamendi. Appearing with Department investigators and insurance industry representatives, the commissioner added that consumers should arm themselves with knowledge, or they too could become victims.

“My Department, in Northern California alone, has cracked a number of cases of fake insurance over the past months that could have cost consumers some $20 million,” said Garamendi. “No one can stop these criminals before they attempt to sell you a fake policy. But I can give you tips and information that can help you avoid becoming a victim.”

The announcement Wednesday is the beginning of a statewide campaign. The National Association of Insurance Commissioners has launched a national awareness campaign to help consumers fight fake insurance. Garamendi will promote this campaign in California during the coming months.

In recent months the California Department of Insurance enforcement arms have reportedly made significant progress in fighting fake insurance.

In July, a former Antioch insurance broker pleaded guilty to multiple counts of grand theft, was sentenced to three years in state prison, and ordered to pay $1.3 million in restitution after selling fake construction performance bonds to numerous construction companies.

In another case, investigators worked with the Federal Bureau of Investigation to bust suspects allegedly operating an illegal insurance company that operated in the U.S. and Canada. The suspects allegedly sold as many as 3,000 fake auto liability policies to consumers.

In a third case, Department investigators worked with U.S. Postal Inspectors to nab a San Francisco man who pleaded guilty to selling $4 million worth of fake commercial liability policies to restaurants and other businesses.

“My advice is simple – read your policies, don’t sign anything you don’t understand, never pay cash, and, most importantly, check out your agent and his company with the Department of Insurance,” said Garamendi.