Our team has updated this article using information from FSRA’s life and health insurance consumer guide, Assuris’ list of member companies, the Canadian Anti-Fraud Centre’s victim checklist and OLHI’s complaint process.
Scams can be difficult to spot. They may involve fraudulent policies, premium payments, identity theft, changes to insurance contracts, and a demand for a fee before a supposed benefit is released. Being pressured into buying insurance, or being sold a product that’s unsuitable for you, are different issues, but they’re important to scrutinize as well.
How Can You Identify a Life Insurance Scam?
Be on your guard if a seller won’t give you their licence number, pressures you to commit before seeing the contract, asks you to pay an individual, or demands money to release a death benefit.
Phone or online insurance isn’t necessarily a scam, but check the licence of the insurance company and the agent through your provincial or territorial regulator. Use a website or telephone number you’ve looked up yourself to contact insurers. Make sure you can view the contract and application. Use official payment channels and keep copies of policies and the terms you’ve agreed to.
Actual Life Insurance Scams
There are many legitimate reasons not to buy life insurance, but thinking it’s a scam isn’t one of them. Unfortunately, however, life insurance scams do exist.
Unscrupulous people may try to use insurance as an excuse to swindle you out of your money. These are the ones you should watch out for.
Common Life Insurance Scams
Life insurance scams take on many forms. Here are examples of commonly-encountered life insurance scams:
- Selling insurance policies to people who don’t need insurance: Some bad actors or unethical sales practices may involve high-pressure tactics to sell unnecessary policies, even if you don’t need one.
- Selling fake insurance policies: Some scammers may impersonate insurers or agents and sell fake or unauthorized policies. This means they take your money, but you don’t get anything from it.
- Selling insurance with fake benefits: A scammer might try to sell you a policy based on nonexistent benefits. For instance, they might claim that your policy will pay double if you die from a disease when the actual policy has no such benefit.
- Churning: This is a practice where an agent persuades or forces you to cancel your current policy and buy a new one from them. Agents do this to reap commissions from selling you the new policy.
- Lying about your beneficiary status: Scammers might contact you and say you’re a beneficiary to somebody’s insurance policy. They get money from you by claiming you must pay a fee for the death benefit.
- Taking premium payments instead of the company: This scam technique is often called a premium diversion. In this technique, scammers ask you to pay premiums directly to them, not the company. This means they can pocket the money and leave you without any coverage.
- Forging your signature: Scammers may forge your signature to make unauthorized changes to your policy, like increasing your death benefit or naming other beneficiaries.
- Claiming to be from a certain insurer: Fraudulent insurance agents can claim to represent a certain company and attempt to sell you a fake policy.
- Impersonation scams: Fraudsters may pretend to be from a legitimate insurer and request payments or personal information.
All the techniques mentioned above are just a sampling of what insurance scammers can do. Be vigilant and contact the authorities or the insurance company if you think you’re being scammed.
Checking Your Insurance Company and Agent’s Legitimacy
- Ask for the agent’s legal name, licence number and agency name, as well as your insurer’s legal name.
- Check both names in the regulator’s agent and company registries in the relevant province or territory. In Ontario, for example, FSRA also posts enforcement information.
- Check whether your insurer is listed among Assuris member companies, but don’t use this resource in place of checking company licences.
- Contact your insurer using contact information you found elsewhere to verify that your agent is authorized to sell policies from that company and confirm the correct place to send premium payments.
- Once you have your policy, review the needs analysis, application, illustration, and insurance contract. Make sure the policy owner, the person insured, beneficiary, death benefit, premium payment instructions and frequency, guaranteed benefits, non-guaranteed values, any riders and any exclusions are correct. Keep a copy of all completed forms.
- Use your policy review period if your new insurance doesn’t match what you thought you bought. FSRA notes that people who buy life insurance in Ontario usually have 10 days and sometimes 20 days to change their mind.
Read More: See How Insurance Brokers and Agents Differ
Can You Be Scammed When You Have a Policy?
Yes, scammers can take over existing policies, make forged or unauthorized changes, send bogus lapse notices, or switch a policy to one that may not be necessary.
Check statements at least annually, including beneficiaries, ownership, loans, withdrawals, payment status and contact information. Report any unauthorized changes to your insurer promptly.
A real premium increase or a policy notice isn’t necessarily a scam. Compare any notice to your policy’s guarantees and premium schedule. Then call your insurance company using a phone number you’ve independently confirmed.
Read More: See Why Life Insurance May Not Pay Out
What to Do After You’ve Been Scammed
- Call your financial institution where the transfer was made to see if the payment can be tracked or stopped. Ask to have your account flagged. Change any password that may have been compromised. If your personal information was used, call both credit bureaus so they can review your credit reports and accounts.
- Gather any supporting information such as fraudulent applications, insurance policies, receipts, messages, call logs, website addresses, and a detailed chronology of events with dates.
- Report the scam to the Canadian Anti-Fraud Centre and local police and keep the police file number.
- Notify the regulator for your province or territory and your legitimate insurer about the scam; ask the insurer to investigate and freeze unauthorized policy changes while it does so.
- Do not pay a recovery service that promises to get your money back.
- To resolve a dispute with a Canadian life or health insurer, you must first use the insurer’s complaint process. Once the insurer has made a final position on your complaint, or, in some cases, after 90 days if the insurer has not responded, OLHI may be able to review it. Learn more about filing a complaint with OLHI.