The Director has discovered that some insurance producers are participating in insurance “sliding.” Sliding is described as an agent’s failure to fully disclose the elements of an insurance transaction and get informed permission to the purchase of all products and services involved.
What are examples of sliding in insurance?
When it comes to insurance sector unfair trading practices, we don’t need the law to figure out a handful of them. Unfair commercial practices include misrepresenting benefits, overcharging for coverage, and underpaying claims, which are also characterized as lying, cheating, and stealing. Yes, brokers and agents may attempt to rationalize the half-truth, and insurance companies may engage in promotional puffery, but the limits for all three sins are clearly drawn.
The unethical behavior of an insurance business does not end there. There are several less well-known acts that are prohibited by Florida law. Even if they don’t rate among the seven deadly sins, who’s to say the eighth or ninth aren’t just as dangerous?
The practice that has just come to our attention is “Slide.” An announcement was made by the Florida Office of Insurance Regulation “In February, the Department of Transportation released a “informational memorandum” on travel insurance policies and sliding premiums. The OIR apparently received complaints or concerns that consumers were being exploited. The OIR used the opportunity to remind insurers that under the state’s Unfair Insurance Trade Practices Act, sliding is expressly forbidden.
Sliding occurs when a consumer is misled by an insurance agent or firm regarding the breadth or cost of coverage. For example, the insurer may inform a customer that state law mandates that everyone buying a homeowners policy also buys auto insurance. Alternatively, the insurer may claim that auto insurance is included in the homeowners policy at no extra cost when, in fact, there is an additional cost that the consumer is unaware of.
The law also prohibits an insurer from charging a customer for coverage that he or she has not consented to buy. Without the consumer’s informed consent, an insurer cannot charge for coverage.
This was the issue that the OIR was made aware of, the lesser mortal sin that spurred the investigation “Last month, we received a “informational memorandum” (we used to call them bulletins).
The Florida Office of Insurance Regulation (OIR) is a state agency that regulates insurance “Automatically charging consumers for ancillary travel insurance without their informed agreement is illegal, according to OIR-15-01M, which was published on February 3, 2015.
What is twisting in the insurance industry?
Twisting is the act of persuading or attempting to persuade a policy owner to cancel an existing life insurance policy and replace it with a nearly similar policy by utilizing misrepresentations or incomplete comparisons of the two policies’ benefits and drawbacks.
What does churning mean in insurance?
You could come across a sales tactic every now and then that makes you think; something about it doesn’t feel right. You’re less likely to believe there’s a true conspiracy going on. Rebating and churning are two examples of sales activities that should be avoided.
Rebating is similar to a “kickback,” in that it involves offering or giving something of value as an incentive to buy insurance that isn’t explicitly stated in a life insurance policy. Although it is allowed in some jurisdictions, insurers may find it to be disadvantageous. The following are examples of rebates:
- Offering any special benefit, other than those offered by the policy’s terms, in terms of dividends, interest, or other policy benefits. For the advantage of a policy owner, offering to buy, sell, or give any sort of stock, bond, or property, as well as dividends or income from securities or property.
Rebating activity patterns can be evident in many early lapse scenarios, particularly when the agent commission is larger than 100% of the first year premium and commissions are not recaptured after the policy’s first anniversary or other predetermined commission period. Because first-year fees can be as high as 135 percent of the first-year premium, an agent who collects premiums on behalf of policyholders might potentially gain 35 percent on each policy purchased.
Numerous MIB activity codes and Insurance Activity Index (IAI) hits, with no indication of the application of considerable or any amount of current in-force coverage, could be an indicator of such behavior. A basic example is a situation in which the literary agent switches his or her own coverage with a new carrier each year. In the first year, the new agent commission offsets the first-year premium. In effect, insurance companies subsidize the agent’s insurance program on a continuous basis, with several carriers losing money in the process. Carriers with commission arrangements similar to those described above should have reporting in place to examine 13-month persistency, particularly for freshly engaged agents.
- Even though the producer receives annualized commission and shows regular replacement or lapsing of policies two years old or less, or directly after the commission recapture period, the mode on every application is monthly or quarterly. It’s possible that a pyramid scheme is in operation.
- Trusts that are set up to own policies are based in states other than the agent’s and potential insured’s home states.
- The client does not know the trustee, face amount, or premium to be paid during a personal history interview or tele-interview.
- The agent is new to your firm and is submitting a high quantity of premium in a short amount of time.
- A producer who hasn’t written any new business in years begins submitting enormous premium cases all of a sudden.
- Premiums are commonly paid through money orders, wire transfers, or cashiers’ checks.
- A considerable percentage of a producer’s policies have address modifications shortly after they are issued – all to the same address.
- Premiums for several unrelated insureds or multiple family members of the producer are paid from the same checking or savings account.
- For premium payments, a pattern of brand new checking accounts with starter checks or low check numbers is used.
Churning is a sales technique in which a current life insurance policy is replaced with a new one in order to earn more first-year commissions. This practice, commonly known as “twisting,” is prohibited in most jurisdictions and is also prohibited by most insurance policies. When the product being churned is a permanent plan of coverage with a total commission payout of more than 100% of the first-year premium, the activity is very prevalent.
Churning, by definition, has a direct impact on insurance lapse rates. Because of the labor cost of underwriting and new business employees, underwriting requirement costs, and agent commissions, new business acquisition costs are often higher than first-year premiums, especially in the first policy year. While some lapse behavior is unavoidable and priced for, intentionally planned scenarios, such as when the policy was never intended to last longer than 12 to 15 months, are not.
The use of analytics to assess agent activity is crucial in this case. To discover frequent replacements and persistency issues at the agent level, companies need to send information to Marketing, Compliance, and Legal associates on a regular basis.
What is insurance redlining?
Redlining is an underwriting practice in which a risk is rejected purely on the basis of its geographic location. Most states’ laws restrict this practice since it tends to discriminate against minorities.
Counterfeit airbags
According to the National Highway Traffic Safety Administration, frontal airbags saved an average of 2,782 lives each year between 2016 and 2017. (NHTSA). However, at least a small fraction of those deployed airbags will be replaced with counterfeits during the repair process, which can be fatal.
Despite the fact that phony airbags account for less than 0.1 percent of all airbags installed in American vehicles, their high risk of malfunction, explosion, and metal shrapnel release make them deadly to drivers.
The accessibility of internet shopping on sites like eBay has encouraged the distribution of counterfeit airbags. In addition, some repair companies, looking for methods to boost earnings, have been known to choose cheaper airbag replacements on purpose, despite the fact that their installation is prohibited in most jurisdictions. At least 21 car makes are known to have counterfeit airbags, including mid-range brands like Nissan and higher-end brands like Land Rover and BMW, according to the NHTSA.
“Crooked repair businesses frequently replace the bags with low-cost knockoffs, or simply fill the area with debris and garbage,” Quiggle said. “The insurer pays for fake maintenance, and the driver is left with an unsafe vehicle.”
If you’re buying a secondhand automobile, there are a few things you can take to avoid getting a fake airbag placed in your car.
- To learn more about your car’s accident and servicing history, get a vehicle report from Carfax or another similar provider.
- When your automobile starts to show that it is functioning properly, look for the airbag light on your dashboard to momentarily turn on.
- Get your automobile evaluated by the manufacturer, especially if your airbags were changed in the last three years by a company that isn’t affiliated with a new car dealership.
Staged accidents
Staged accidents, according to the National Insurance Crime Bureau (NICB), are a “huge business” that drivers should be aware of and avoid. Any incident in which a driver purposefully or strategically causes a collision with another vehicle in order to collect a false insurance settlement is included. The specifics of the occurrence are frequently exaggerated or twisted in order to place blame on the unwary driver.
Staged accident claims can range from $2,000 to $10,000, but certain fraud rings can pool their resources to get even more, totaling hundreds of thousands of dollars. For policyholders in South Carolina, which ranked seventh in the US for the number of staged incidents, these schemes resulted in premium increases of roughly 8.9% among the state’s ten main providers.
- When waiting to make a left turn, the victim is enticed to turn too soon by an oncoming fraudster who waits and then collides with the victim.
- Two automobiles collide with a victim who receives a wave indicating that it is safe to exit a parking lot or side roadway.
- Enhanced damages: In a legitimate accident, the not-at-fault motorist damages their car further to inflate the claim.
- A panic stop occurs when a vehicle waits for the car in front of them to become preoccupied before slamming on the brakes, leading the tailing vehicle to rear-end them.
- Sideswipe: When a driver places themself in the inner left-turn lane of a dual left-turn lane intersection, they are attempting to sideswipe another vehicle.
If you suspect you were engaged in a staged accident, the National Insurance Crime Bureau recommends documenting the degree of the damage and the number of passengers in case false claims are submitted. Additionally, anyone giving advise and services that were not sought, such as post-accident medical counseling and towing services, should be avoided.
Agent fraud
Most insurance agents are trustworthy, but if you purchase auto insurance from one who isn’t, it might cost you a lot of money.
One of the worst-case situations, according to CAIF, involves a dishonest insurance expert stealing your money. When an accident occurs, you discover that you have no insurance to pay your claim and must cover the loss on your own because the unscrupulous agent pocketed your money and failed to set up the coverage. As a result, when an accident occurs, you discover that you have no insurance to pay your claim and must cover the loss on your own.
To avoid premium theft, drivers should cooperate with reputable agents and double-check their coverage with the insurer on their own. You could look for a trustworthy agent in a variety of methods, including:
- Request references: You can ask for references to get a sense of the agent’s professional reputation and to ensure that they have a proven track record.
- Check the agent’s licensing: You can check an insurance agent’s license by searching it up in your state’s license database or through the NAIC Consumer Information Source.
- Compare advice: Similar to vehicle insurance quotes, getting coverage advice from multiple agents to see what they recommend could be beneficial. If an agent’s advise contradicts what you’ve heard from multiple others, you should question whether they’re giving you accurate information.
- Investigate complaints: An insurance agent with a lot of experience is likely to have a lot of information about their work history. Consider whether any complaints have been lodged against them while conducting your study.
Another prevalent practice is “slide,” in which an unethical agent sneaks extra coverage into your policy that you didn’t want. This particular type of auto insurance fraud can raise your premiums by a few hundred dollars per year while padding the agent’s profit.
Sliding scams are less likely to be perpetrated by vigilant drivers who examine their agents ahead of time and keep a close watch on what they’re buying.
Windshield replacement rip-offs
In most jurisdictions, a deductible is required for windshield replacement, but in Florida, Kentucky, and South Carolina, no deductible is required. Unscrupulous glass repair companies in these areas have taken advantage of the situation to dupe customers into having their windshields replaced even if there is only minor damage.
This con is very common in Florida. Drivers are approached at vehicle washes, petrol stations, and shopping centers at random and induced to sign an Assignment of Benefits (AOB) that allows the shady vendor to handle the repair and claim procedure with the insurance in exchange for gift cards.
These scam artists frequently collaborate with unscrupulous lawyers who file lawsuits against insurers in the name of policyholders without their knowledge or agreement. This can result in settlements of six figures for a basic windshield repair that should have cost only $200-$300. According to the Florida Justice Reform Institute, about 27,000 AOB windshield repair cases were filed against Florida vehicle insurers in 2020.
The windshield replacement offer, according to Farmers Insurance, is virtually always a ruse. And the dangers may be greater than most people realize. For starters, the replacement windshield and repair work are frequently of poor quality, putting your safety at danger while driving your vehicle. According to Quiggle, this scam can have a big impact on your insurance coverage, as it might result in higher rates or policy termination.
The best option, according to experts, is to decline the offer. If you need your windshield replaced, notify the loss to your insurance agent or carrier. They’ll check your coverage and schedule a visit from a reputable vendor, such as Safelite, to repair or replace your windshield at your home or business.
What’s the difference between churning and twisting in insurance?
When an insurance producer replaces a client’s coverage with one from the same carrier that offers similar or worse benefits, this is known as churning. Twisting is a different carrier’s substitute contract with comparable or worse benefits.
What does bending mean in insurance?
The conduct of “twisting” when selling life insurance is prohibited in most states. When an insurance agent uses deceptive tactics to replace an existing life policy with a new one, this is known as twisting. This does not imply that twisting occurs every time a life insurance policy is replaced by an agent. If an agent is trying to persuade you or someone you know to buy a new policy, be sure you understand the implications of replacing an existing policy with a new one.
What is the difference between twisting and misrepresentation?
Twisting is the act of changing one insurer’s insurance coverage with that of another based on false information (coverage with Carrier A is replaced with coverage from Carrier B). Churning is the process of an existing insurer “twisting” policies (coverage with Carrier A is replaced with coverage from Carrier A).
What is called churning?
Churning is the process of using a butter churn to agitate cream or whole milk to make butter. A churn was usually as simple as a barrel with a plunger in it, pushed by hand in Europe from the Middle Ages to the Industrial Revolution. Mechanical churns have largely supplanted these.
Butter is milk fat in its purest form. It’s typically made with sweet cream (that is, cream skimmed from milk rather than whey). Salt is commonly added to it in the United States, Ireland, the United Kingdom, and the Nordic countries. In the rest of Europe, unsalted (sweet) butters are the most frequent. However, acidulated or bacteriologically soured cream can also be used. Butter was still prepared from cream that had been allowed to sour naturally far into the nineteenth century. After that, the cream from the top of the milk was skimmed and placed into a wooden tub.
Butter was traditionally made by hand in butter churns. However, the natural sour process is extremely delicate, and contamination by foreign microbes has frequently damaged the outcome. Commercial buttermaking today is a result of decades of knowledge and experience in areas such as cleanliness, bacterial acidification, and heat treatment, as well as quick technological advancements that have resulted to the complex technology now in use. The continuous churn was commercialized by the middle of the twentieth century, while the commercial cream separator was launched at the end of the nineteenth century.