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Insurance Broker Fraud

Our Attorneys are Skilled at Insurance Broker Negligence and Fraud Claims

Insurance broker negligence occurs when an insurance broker acts in a negligent way that results in lack of insurance coverage. Insurance broker fraud can occur when an insurance broker makes misrepresentations or omits important information in the process of selling an insurance product. Insurance agents and underwriters may also commit similar insurance negligence and fraud.

Examples of Insurance Broker Fraud

An omission of details related to the insurance policy can constitute negligence and fraud. Examples of omissions could relate to information about replacement costs or failure to disclose terms of the policy. Errors on the part of the insurance broker could also constitute fraud or negligence, as could incompetence.

Other examples of insurance broker fraud include willful misrepresentation about certain insurance policies or their conditions; or the sale of inappropriate insurance policies – including some types of annuities – to elders.

Actions Related to Insurance Broker Negligence

A number of actions may be brought related to insurance broker negligence. Related actions include but are not limited to: breach of fiduciary duty or duty to advise according to the California Insurance Code; failure to provide, write, or secure adequate insurance, or failing to secure and provide the insurance after it has been purchased; omissions or disclosure failures about the terms of an insurance policy. Bad faith insurance can occur if an insurance broker, agent, or underwriter does not act in the best interest of their clients.

The Evans Law Firm represents senior victims of insurance broker fraud and stockbroker fraud in California.

Some of the following claims examples may constitute fraudulent investor practices:

  • misrepresentations and omissions about insurance policies and the details therein;
  • churning;
  • inappropriate advice or recommendations, especially to elders regarding annuities;
  • pension fund fraud;
  • failure to give appropriate warnings regarding unsuitable insurance policies;
  • financial abuse of elders by selling unsuitable insurance policies, including variable and other deferred annuities;
  • failure to diversify or over-concentration of insurance investments (especially with respect to annuities);
  • failure to procure and deliver insurance that was purchased.

Insurance Agent or Broker Fraud Can Be a Form of Financial Elder Abuse

Insurance agent or broker fraud can happen to anyone, so when the victim is a senior it is as a form of financial elder abuse the same way that other, more common forms of financial elder abuse are, such as senior seminar scams, caregiver fraud, Medicaid and Medicare fraud, and reverse mortgage fraud. Anytime an insurance agent or broker takes advantage of a senior to misappropriate the victim’s money for the perpetrator’s financial gain it is an act of financial elder abuse and can expose the perpetrator to liability and enhanced damages under California’s elder abuse statutes.

Insurance Premium Misappropriation

Insurance premium misappropriation (also known as premium diversion) is the most common form of insurance fraud. It occurs when an insurance broker keeps premium payments for himself or herself instead of applying them toward their policy. For example, assume that you have had the same insurance policy for 15 years and have diligently paid your premium every month since the policy began. You run into a bit of financial trouble and call your broker to withdraw some of your policy’s cash value. However, upon further investigation, you find out that, despite sending your premium payments to your broker, your policy lapsed two years ago due to non-payment and all of its cash value had been withdrawn. This form of insurance broker fraud can have a devastating effect on the elderly because not only does it leave them without insurance coverage (often without their knowledge), it results in serious financial loss. That loss can be compounded when the victim claims an insurable loss — such as for damage after a severe storm — only to discover that their coverage has lapsed.

There are several ways that insurance brokers can misappropriate premiums. While not all forms of insurance premium misappropriation are as extreme as that described above, they all have the potential to cause financial harm to their victims. Below are a few ways that unscrupulous insurance brokers misappropriate their clients’ funds:

  • Lapping: Occurs where the broker steals the premium funds and covers his or her tracks by crediting a fictitious customer account with the money
  • Skimming: Occurs where the broker steals the premium funds before they have been credited to the client’s account
  • Fee churning: Occurs where the broker continually purchases new insurance policies for a client he or she is authorized to buy coverage for in order to earn a commission. The new policies may have higher premiums and/or provide less coverage.
  • Forgery: Occurs where the broker forges the client’s signature to steal the cash value of the insurance policy
  • Fictitious policies: Occurs where the broker sells the client an insurance policy that does not actually exist and pocketing the client’s premiums

These forms of insurance broker fraud can be difficult to detect and often do not come to light until the victim files a claim, at which point the damage is done. Lapsed insurance policies — particularly life insurance policies — can have devastating and long-term financial consequences for the elderly. If you suspect that an insurance broker is perpetrating fraud on an elderly loved one, please contact a California insurance broker fraud lawyer as soon as possible to attempt to mitigate the potential damage.

Red Flags that Can Indicate You’re Dealing with an Unscrupulous Insurance Broker

Most insurance brokers are honest and trustworthy individuals who genuinely care about their clients’ wellbeing. But, as with any industry, there are always a few bad apples that tarnish the reputations of others. Insurance brokers must carefully thread the needle between meeting their sales goals and acting in the best interests of their clients, and it is very tempting for unscrupulous insurance brokers to veer too far into the former. Unfortunately, the elderly are a popular target for these kinds of brokers.

You may be dealing with an unscrupulous or unethical insurance broker if any of the following red flags are present:

  • The broker engages in high-pressure sales tactics: Ethical insurance brokers will not pressure their clients to purchase a policy immediately; instead, they will encourage the client to think it over so as to make an informed decision.
  • The broker asks you to pay your premium to them directly: It is not uncommon for elderly individuals to submit their premium payments directly to their broker. However, if you choose to do this, make sure that you make the check out to the insurance company rather than to the broker and always get a receipt.
  • The premium quoted is substantially lower than others: If you’re shopping around for policies and one premium is much lower than the others, the deal might be too good to be true.
  • The broker lacks a valid insurance license number: Insurance agents must be licensed to practice in their states; ask the agent for his or her license number and verify it with your state’s insurance regulator to make sure it’s valid.
  • The broker lacks a physical address or business phone number: If the agent lacks a physical address (e.g., they use only a P.O. box) or communicates via their personal cell phone, these could be indications of a fly-by-night operation.
  • You’ve never heard of the insurance company the broker works for: Only purchase insurance policies from insurance companies you are familiar with. If you’ve never heard of the company, it could be fictitious.
  • The broker encourages you to lie on your application: A broker who encourages you to lie on your application — for example, by telling you to indicate that you have no prior losses when, in reality, you do — is dishonest and should not be trusted. If they are willing to lie to their employer, they are willing to lie to you.

If you are unsure of whether an insurance broker you are dealing with is legitimate, you may want to consider contacting a California insurance broker negligence lawyer for guidance.

Contact the Evans Law Firm Today 

The Evans Law Firm handles insurance fraud and elder abuse cases throughout California. For a free and confidential consultation, contact the Evans Law Firm at or call 415-441-8669.

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