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HSFPP Update # 198— Insurance Fraud Costs All Policyholders Money

Message from Flashman: This week’s lesson covers insurance fraud—homeowner’s insurance, health, and life insurance—perpetrated by individual consumers as well as by insurance agents. Update # 190 dealt specifically with auto insurance fraud, and only by insurance agents. The current lesson addresses one of the reasons we are paying higher premiums for all types of insurance coverage.

 

Academic Expectations: 

Academic Expectation 2.18
Students understand economic principles and are able to make economic decisions that have consequences in daily living.

Academic Expectation 2.33
Students demonstrate the skills to evaluate and use services and Expectation resources available in their community.

Academic Expectation 1.2
Students make sense of the variety of materials they read.

Academic Expectation 2.30
Students evaluate consumer products and services and make effective consumer decisions.

 

Note to Educators:

Following are the correct answers to the Property Insurance Quiz below:

1.  A                             6.  A                             11. E
2.  D                             7.  C                             12. C
3.  B                             8.  C                             13. D
4.  B                             9.  B
5.  D                            10. B

 

Web Site Pick of the Week:

www.InsuranceFraud.org

The Coalition Against Insurance Fraud Web site provides examples of the various types of insurance fraud, and links to other sites.

 

In the New$... Insurance Fraud Costs All Policyholders Money 

by De’ja Hall, a UK student majoring in Family & Consumer Sciences

Insurance is something that no one should be without. 

During my senior year of high school, a friend of mine was hit by a drunk driver while walking to her car on crutches. The driver had no insurance. Although my friend had auto insurance from a well-known insurance company, they wrongfully denied her claim for treatment and medical bills totaling more than $8,000. Her doctor recommended surgery to fix the herniated disc injury. But the insurance company repeatedly delayed and denied approval for the mounting medical bills and surgery that she continued to incur; and, because of this, she became physically and financially devastated.

She did not have health insurance, so her unpaid doctors began denying her further care because of her delinquent accounts. She was also denied a college loan because banks told her it appeared she had potential insurance fraud on her credit record.

She finally contacted an attorney at the Office of the Insurance Commissioner. The insurance company settled her claim more than three years later, but by then it was too late. She had already endured the agony and stress of not knowing if she would win or if she would even have enough money to pay her bills. The settlement did not compensate her for these things (pain and suffering).

This is not an isolated situation, as Anderson Cooper showed on “CNN 360” in a two part segment on the problems many policyholder of Auto Insurance have had.

When incidents like this occur, it is no wonder that some people feel it okay to commit insurance fraud. Because of insurance fraud, however, all policyholders end up paying higher bills. Here are some examples of cases in which insurance fraud has been discovered and highlighted by the Coalition Against Insurance Fraud for 2007:

Mr. TN: Desperately in debt to a motorcycle gang that had sold him methamphetamines, the Colorado Springs, CO man burned down his home for the insurance money. Three children died from smoke inhalation in the fire. Mr. TN received life in prison.

Mr. CMR: The Lakeland, FL man burned his mobile home for insurance money, disguising the arson as a hate crime. He spray-painted threatening words on the front steps, then filed a bogus claim for property that he had placed in storage. Many people in the community rallied to his support, believing it was a case of sexual bigotry. He received 18 months in state prison.

Ms. CL: A special education teacher in suburban Albany, NY, she faked terminal cancer in order to receive disability money from her school system. She then moved to New Hampshire to do it again. She was found out when a local newspaper did a story on her apparent struggle. She was sentenced in a New York court to one to three years in prison.

Mr. RDW: He ran three Missouri nursing homes that abused patients and defrauded insurance companies. The homes denied residents food, water, and sanitation, but still billed Medicare and Medicaid for many of the services not provided. Some patients died from neglect. Mr. RDW was sentenced to 18 months in federal prison and fines of $750,000.

Mr. RJ: A Guyanese-American, this life insurance agent had close ties with the Guyanese community in the New York City area. He used his friendly relations to buy fraudulent life insurance policies on Guyanese street people and had four of them killed for proceeds netting more than $1 million. He and an associate will receive life in prison.

Sources: CNN 360 Anderson Cooper - Auto Insurance Part 1
http://www.youtube.com/watch?v=pSj3FLO3IXA

CNN 360 Anderson Cooper - Auto Insurance Part 2
http://www.youtube.com/watch?v=pkq-CX17aO8

“Teacher, Gypsy, Even an Insurance Agent Make Fraud Hall of Shame List,” Insurance Journal, 1/22/08. http://www.insurancejournal.com/news/national/2008/01/22/86616.htm

 

Discussion Questions:

1.) Do you think insurance companies are less likely to the pay insurance claims of minorities than of others? Yes ___  No ___. Why or why not?

 

2.) Do you think insurance companies are less likely to pay insurance claims of low-income policyholders than of other income groups? Yes ___  No ___. Why or why not?

 

3.) What can you do, if you have legitimate insurance claims, to make sure they will be paid? And how can you protect yourself from being labeled a criminal because of the claims you file?

 

4.) Do you think you would be able to spot the types of fraud mentioned in this news story? 

 

Property Insurance Quiz:

  1. You can own a home without insurance, although you generally cannot obtain a mortgage without showing proof of homeowners insurance.
    1. True
    2. False
  1. Your homeowner's insurance should cover which of the following?
    1. The structure of your home
    2. Your personal possessions kept in the home
    3. The cost of additional living expenses if your home is damaged and you have to live elsewhere during repairs
    4. All of the above
  1. How often should you update your homeowners' policy?
    1. Every day
    2. Once a year or whenever you remodel or add on something significant
    3. Anytime you buy something for your house
    4. Never
  1. A tree falls on your car in your yard; your homeowners' policy covers the damage.
    1. True
    2. False
  1. The following steps can provide discounts on your homeowner's insurance rates.
    1. Installing a burglar alarm
    2. Hiring a security guard for your house
    3. Installing an approved fire protection sprinkler system
    4. Both a and c
  1. What is renters' insurance?
    1. Liability coverage taken out by someone who rents an apartment or house
    2. Insurance on a rented automobile or watercraft
    3. There is no such thing. If you rent, you and your possessions are covered under the property owner’s insurance
    4. An insurance policy aimed at covering your landlord’s possessions
  1. During a storm, wind knocks a neighbor's tree down and damages your fence. Who is liable for the damage?
    1. The neighbor is liable for the damages
    2. The state insurance department will pay for the damages
    3. Your property insurance policy will pay for the damages
    4. Storm damage is never covered in property insurance policies
  1. When having a house built, you should insure the property:
    1. When the house is halfway complete
    2. When the house is finished
    3. The property should be insured before construction
    4. After your first night in the house
  1. In an actual cash value homeowners' policy, in the event of a loss or damage:
    1. The policy holder will receive the appraised value of the property plus 10 percent in hardship awards
    2. Policy owner is entitled to the depreciated value of the damaged property
    3. The policy owner is reimbursed an amount necessary to replace the article with one of similar type and quality at current prices.
    4. Actual cash is delivered to you via the mail
  1. Property that you take out of your home is not covered on your homeowners' policy.
    1. True
    2. False
  1. Which type of insurance policy is not available for purchase?
    1. Vacation
    2. Pets
    3. Wedding
    4. Travel
    5. All of the above are types of insurance available for purchase
  1. Which of the following items will increase your homeowner's insurance premiums?
    1. Couch
    2. Bathtub
    3. Pool
    4. Wine rack
  1. Taking inventory of your property can?
    1. Help you decide how much insurance you need
    2. Come in handy in case you have a garage sale
    3. Simplify the claim process
    4. Both a and c

 

Source: http://insurance.state.wy.us/getsmart/htmlQuiz/quiz_property.html

 

Kentucky High School Financial Planning Program

http://www.ca.uky.edu/fcs/hsfp

The purpose of the HSFPP financial updates, video lessons, and Web site is to assist county Extension agents, credit union educators, high school teachers, and parents who home school their teenagers so that they may improve the economic well-being of our teenagers; and also to show educators how the HSFPP, updates, and video lessons meet Kentucky core concepts. The Web site, updates, and video lessons are provided by the University of Kentucky Cooperative Extension Service, and are free to all educators. The list of core concepts and order form for free program materials including the student guide and instructors manual can be found on the Kentucky HSFPP home page.

If you are not already on our listserv:

The video lessons are available only to members of our listserv and will not be posted to the HSFPP Web site because of the timeliness of the information. If you would like to receive our video lessons, which are sent to our listserv biweekly, on alternate weeks from these updates, please sign up at the following page of our Web site: http://www.ca.uky.edu/fcs/HSFP/response.htm.

 

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