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Fraud Prevention and Detection

Fraud is the most critical challenge facing premium finance companies today. You probably have some, or many, fraudulent receivables on your books today; you just haven't uncovered it yet. Hopefully it is not a large amount. The fraud can arise in a myriad of ways:

  • Agents 

    • Financing policies which the insured has paid in full

    • Creation of finance agreements financing phantom insurance policies

    • Failing to submit premiums to the insurance carrier

    • Financing the same insurance policy with multiple finance companies

    • Financing an actual insurance policy but with the incorrect premium

    • Improperly including agent fees in the financed premium

  • Brokers/ Wholesalers

    • Selling phantom insurance policies

    • ​Failure to remit premiums to the MGA/ Insurance Carrier

    • Improperly representing themselves to be appointed by the carrier

    • Selling coverage for which they have no carrier authorization

  • Employees

    • misappropriating customer payments

    • misappropriating insurance company refunds

    • creation of phantom vendors

    • working in conjunction with agents to change accounts and misappropriate funds

Even if you have the appropriate underwriting and approval procedures in place, it is critical that there is a comprehensive set of Audit Procedures and Exception Reporting in place to detect any areas of concern and red flags. If there is a "hole" in your system, be assured that agents / insureds will eventually find it.

  • Do you determine if multiple accounts are utilizing the same address?

  • Do the addresses of insureds referred from certain agencies contain a high percentage of PO Boxes

  • Are agents paying a high proportion of customer installments directly from the agent's bank account?

These procedures are just a small sample of the procedures that you need to have in place to ensure that any "unusual" situations are detected quickly, minimizing losses 

At PremiumFinance.Consulting we can review your current fraud prevention and detection procedures to determine if they are rigorous enough in today's world where financial related fraud is pervasive

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