I thought I knew most scams apart from some new cyberfrauds.
I found this new scam in Zelma’s Insurance Fraud letter, which is a source of much information and entertainment. Barry Zelma does a lot to expose and combat insurance fraud, for which I applaud him. We need to see how frauds work, if we want to put arrangements in place to prevent them, as I will try to show in this example.
What’s grave about this new scam?
The fraudster, Joel McGuire of West Virginia USA, was an undertaker who arranged insurances to cover clients’ funeral expenses. He collected the premiums, paid them to the insurers and made the claims on behalf of his deceased clients. On the face of it, this was a commendable practice, which ensured clients’ families were not faced with large unexpected bills at a difficult time.
How did the scam work?
He put in excess claims and kept the proceeds, as the insurers paid him direct. He did not involve the clients’ families in the process. The claims included many for people who were still alive. Presumably, the clients would have then become uninsured, despite paying all their premiums. Otherwise, unless the insurers would have to be willing to pay out a second time for the same client. (What do you think?)
How can you avoid such a scam?
You should ensure that the arrangements with your insurers go through you. Above all, ensure that they make payments of claims to you, or your family/executors, and not to the undertaker or other intermediary. You could also ensure the insurers contact your family/executors, if they receive a claim.
You may wish to read about a corporate insurance fraud and what I have written about other kinds of scam.