Insurance Commissioner John Garamendi Warns Consurmes of Dangers of "Fake Insurance"

Joining national awareness effort, the Commissioner John Garamendi reminds Consumers: "Stop. Call. Confirm." before buying insurance products.

SACRAMENTO - Each year far too many insurance consumers are duped into buying bogus insurance policies, putting them and their families or business at great risk of financial catastrophe. Seeking to prevent these harmful crimes, Insurance Commissioner John Garamendi on Wednesday warned consumers to be aware of the dangers of fake insurance.

From auto insurance, to life insurance, to health care policies, millions of dollars are stolen each year in California because insurance policies sold to consumers and businesses "aren't worth the paper they are written on," said Commissioner Garamendi. Appearing with Department investigators and insurance industry representatives, the Commissioner added that consumers should arm themselves with knowledge, or they too could become victims.

"My Department, in Northern California alone, has cracked a number of cases of fake insurance over the past months that could have cost consumers some $20 million," said Commissioner Garamendi. "No one can stop these criminals before they attempt to sell you a fake policy. But I can give you tips and information that can help you avoid becoming a victim."

The announcement Wednesday is the beginning of a statewide campaign. The National Association of Insurance Commissioners has launched a national awareness campaign to help consumers fight fake insurance. Commissioner Garamendi will promote this campaign in California during the coming months.

In recent months the California Department of Insurance enforcement arms have made significant progress in fighting fake insurance. In July, a former Antioch insurance broker pleaded guilty to multiple counts of grand theft, was sentenced to three years in state prison, and ordered to pay $1.3 million in restitution after selling fake construction performance bonds to numerous construction companies.

In another case, investigators worked with the Federal Bureau of Investigation to bust suspects allegedly operating an illegal insurance company that operated in the US and Canada. The suspects allegedly sold as many as 3,000 fake auto liability policies to consumers.

In a third case, Department investigators worked with US Postal Inspectors to nab a San Francisco man who pleaded guilty to selling $4 million worth of fake commercial liability policies to restaurants and other businesses.

"My advice is simple - read your policies, don't sign anything you don't understand, never pay cash, and, most importantly, check out your agent and his company with the Department of Insurance," said Commissioner Garamendi. "There are other steps to protect yourself that you can find on our Department web site or by calling our Help Line, but the key is to be an informed consumer."

FIGHT FAKE INSURANCE Stop. Call. Confirm.

Fake Insurance Consumer Awareness Tips

Take the following steps to avoid becoming a victim of a fake insurance scam:

When you are offered a policy, call the Department of Insurance and check to see if your agent is licensed, and if the insurance company is legitimate. Call our consumer services hotline at 1-800-927-HELP, or go online to www.insurance.ca.gov for assistance.

Never pay cash!

Don't be pressured into signing anything you do not understand.

Look for "red flags," such as high-pressure marketing tactics or an extreme sense of urgency. Be skeptical of sales pitches contending that you "must act now," or those that say, "this is a one-time offer."

Be wary of policies pushed by high-pressure newspaper ads, fax flyer solicitations, hotel sales meetings, and via internet marketing.

Ask questions! If the sales agent or representative is evasive, that's a warning signal. Make sure you get all of the important information about the policy.

Be aware of premiums that are at least 25% below the average price for comparable insurance products.

After you purchase your policy, call the Insurance Company to verify the company and your insurance policy number. Call the Insurance Company if you have not received your policy within 30 days.

Bottom line: If it seems too good to be true, it probably is!

Discount Health Plans and Discount Health Cards are another form of fake "insurance."

In 2004, CDI referred 4,723 calls to the Department of Managed Health Care (DMHC) involving various health related issues, including fake health plans.

Calls related to "fake healthcare plans" are referred to the DMHC, which has primary responsibility for complaint tracking and enforcement action.

"Fake health insurance" is difficult to manage and more often than not, the advertising clearly states that "this is not insurance." Consumers and small business owners must read the fine print to avoid scams.

With rising healthcare costs a big concern, fraudulent health insurance plans thrive by victimizing small businesses and consumers.

Illegal discount health cards and plans are also widely offered to the public through newspaper ads, flyer solicitations, hotel sales meetings, and via the internet.

The premise is that the buyer usually pays a one-time or monthly fee and, in return, will receive a discount off the medical practitioner's normal fee by simply presenting the card. Generally, a list of practitioners is part of the process.

For More Information

Please visit the Department of Insurance Web site at www.insurance.ca.gov. Consumer Hotline at 800.927.HELP. Callers from out of state, please dial 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833