Organized Life Insurance Scams Call for Fraud Prevention and Litigation Plans

David T. McDowell (Attorney at Law, Bracewell & Giuliani LLP) has recently published his article entitled Recognizing and Combating Organized Fraud in the Sale of Life Insurance, 36 Brief 22 (2007).

Here is the introduction to his article:

Fraud is a costly problem for the life insurance industry, borne by insurance companies in the short run and by consumers in the long run. Traditionally, life insurance fraud is perpetrated on an individualized basis. Someone provides false health information to a company in an attempt to obtain life insurance coverage to which he or she would otherwise not be entitled. In recent years, however, many companies are discovering that they have issued a sizable amount of life insurance coverage to organized fraud rings. These rings rely on a fairly sophisticated scam designed to procure and fund life insurance policies insuring the lives of either fictitious or unhealthy persons.

The amounts of fraudulently obtained coverage often at issue justify the creation and implementation of an aggressive fraud prevention and litigation plan by life insurance companies to reduce their exposure to organized fraud. The primary goal of any such plan is to eliminate fraudulently obtained life insurance policies from a company’s in-force ledger and to keep theses risks off the books in the future. Once the scam itself is understood, a litigation plan typically will seek to achieve these goals through a process of identification, investigation, and elimination.