A NY Fraud Lawyer Explains Insurance Churning
Insurance churning is a scam designed to defraud people who try to purchase insurance.
Churning occurs when agents sell policies not for the purpose of benefiting or protecting clients, but instead for the purpose of ear
ning a commission. Life insurance churning is especially common as a result of the high commissions paid for whole or universal life policies. Agents may be paid more than the total amount of yearly premiums for selling a policy.
Life insurance churning and other types of insurance churning are illegal. However, it can sometimes be hard for prosecutors to prove why someone repeatedly changed insurance providers. If you can cast doubt on whether you violated the law, you shouldn’t be convicted of a criminal offense.
Bukh Law Firm, PLLC has provided assistance to many clients accused of churning insurance. If you have been charged or are being investigated, give us a call so we can begin working on a strategy to respond to the accusations that could help you minimize or avoid the consequences of conviction for an insurance fraud offense .
What is Insurance Churning?
When an insurance policy is purchased for a client, the insurance company pays a commission to the agent. The agent is supposed to select the policy that provides the best coverage at the best price to the client who is buying the coverage. If an agent instead continually switches a client’s insurance coverage to earn a commission, rather than provide better coverage, this is considered insurance churning.
When life insurance churning or other types of churning occur, the agent is often enriched at the policyholder’s expense. The client may face higher premiums when a policy is replaced because life insurance becomes more expensive as a person ages. The new policy may also provide less coverage or otherwise have less benefits to the insured.
How Does Churning Insurance Work?
In a simple churning scam, an insurer simply re-buys a new insurance policy periodically for a client the agent is authorized to purchase coverage for.
Churning involves replacing an existing policy with a new policy from the same insurance company. A related offense, insurance twisting, involves purchasing a new policy for a client from a different insurance provider. In insurance twisting, dishonest high-pressure sales tactics or misleading information are used to convince the policyholder to surrender existing coverage and use the proceeds from the cash value of life insurance to buy a different policy with a new provider.
In both churning and twisting scams, the insurance agent receives a commission when the new policy is purchased.
Insurance churning scams can also be more complicated than simply buying new policies to generate more commissions. In some situations, those involved in insurance churning set up a company designed to fail. The agents sell policies and brokers and intermediaries take multiple commissions through a series of reinsurance agreements. Premiums end up being reduced by these repeated commission payments and there is no money left over for claims to be paid to policyholders.
Penalties for Insurance Churning
New York law prohibit churning of customer counts by insurance sales personnel for the purpose of generating commission. Insurance laws in New York also prohibit licensed agents and brokers from sharing commissions with non-licensees in order to discourage involvement in churning scams. Article 21 of the NY Insurance Code outlines the rules applicable to insurance agents, insurance brokers, agents, and reinsurance intermediaries that are designed to prevent churning or other practices that could harm consumers.
Penalties for churning can include imprisonment and required restitution. In some cases, insurance agents and those involved in churning scams face civil as well as criminal actions. Bank accounts may be frozen when accusations of churning are made or when criminal prosecution is ongoing, and assets may be seized if believed to have been obtained as part of a criminal scheme.
A NY Lawyer Can Help If You’r Accused of Churning Insurance
It is imperative that anyone accused of churning insurance seek prompt legal assistance from an attorney with experience in these complex cases. You could face multiple criminal charges for churning, violating insurance laws, falsifying business records, and engaging in mail or wire fraud. Bukh Law Firm, PLLC is prepared to help you to deal with all legal problems you may have as a result of accusations of insurance fraud.
Give our New York criminal defense lawyers a call today to learn more about what your options are when you are accused of insurance fraud and to get help defending yourself or negotiating a plea deal that will reduce penalties and consequences associated with a conviction for insurance churning.
