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Over $400 Billion A Year Lost To Life Insurance Fraud, Forgery, Spikes Policy Costs

Published: October 26, 2022 on our newsletter Security Fraud News & Alerts Newsletter.

The price tag for life insurance continues to rise due to fraud and forgery, leading to billions of dollars of losses for providers, and larger premiums for those seeking coverage. Those looking to deceive these providers also contribute significantly to the financial losses. Fraud and forgery in this industry result in over $400 billion in losses per year, which is recouped through more costly premiums for individuals.

The Coalition Against Insurance Fraud reports that insurance fraud costs providers $308.6 billion per year. The National Association of Insurance Commissioners finds those who lie on their policy application also jack-up policy prices. They report individual policy fraud adds up to $74.7 billion per year, nothing to sneeze at.

Insurance Forgery = Insurance Fraud

Don’t be mistaken, insurance forgery is a type of fraud that can end in criminal charges for the forger. There are three main types of life insurance forgery, and all have consequences for getting caught.

The legal name for lying on a life insurance application is called “material misrepresentation.” Applicants want to appear healthier than they really are to lower their premium costs, so they misrepresent their health as being better than it is. Know that life insurance companies get an applicant’s previous health records, including those from doctor’s, pharmacies, and even run credit reports, says the Medical Information Bureau.

Filing a false health insurance claim is another type of forgery. It happens when a policy holder fakes their own death, the death of a loved one, or commits murder to get a policy payout, according to the National Insurance Crime Bureau.

According to LIMRA, changing another’s life insurance policy to benefit themself is called “account takeover fraud.” According to LIMRA life insurance trade group, relatives, caregivers, friends, and others who know the policyholder are the biggest perpetrators.

Steering Clear from Forgery

LIMRA advises the following tips can help keep life insurance policies forgery-free.

Always be honest on the application, work with licensed brokers or agents, and never let someone else create an account for you on your insurance provider’s portal. Keeping your portal data private may be vital to keeping forgery-free.

The following tips help keep your data and your policy secure when using your account portal.

  • Do your homework on brokers and agents to make sure they are legitimate. If available, read reviews about experience with these individuals and the life insurance company

  • Always choose strong, unique passwords to protect your portal login and keep it to yourself. Should you write down the password, keep it a location away from prying eyes

  • Always choose multi-factor authentication (MFA) when available. It adds a layer of identity security when logging into your portal and can help keep you safe from data theft.

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