We have a story to tell you. One that you may find shocking, as it involves egregious insurance activity, impacting at least 26 of our member companies.

As part of MIB’s mission to detect and deter fraud, we periodically review our data including application activity from IAI as well as in force and terminated policy data from our In Force Data Vault. When we see red flags, we will take a closer look and share critical findings, where appropriate, for the betterment of our members and the industry.

Recently, we noticed several Alerts involving the same applicant which showed excessive application and terminated policy activity. The data raised so many red flags, we were compelled to dig deeper. We are continuing to work with members to uncover the full picture, and while some details are still emerging, here’s what we initially saw.

• 45-year-old male.
• Submitted at least 35 applications to 23 different member companies over the last 17 months.
• Face amounts ranged from $10,000 to $4,500,000 but most were less than $250,000.
• Mostly Whole Life and Universal Life products, a few Term.
• Several discrepancies with build, place of birth, and occupation were noted across member company data.
• This individual had at least 24 policies either lapsed or surrendered, many of which were only in force for a few months.
• At least 26 total member companies identified as involved across applied for, in force, and terminated policy activity.

After consulting with a few of our members, here is what we learned:

• One member noted 5 policies were purchased using 5 different agents. All lapsed.
• Another member noted 16 IAI hits during the underwriting process. When questioned, the broker was able to justify the activity and 2 policies were placed, both have since lapsed.
• A third member initially declined the applicant a few years back due to the inability to verify the total line. However, the individual later applied again, and the member then issued two policies, both of which lapsed.
• All members interviewed about this case have since flagged this applicant.

In every scenario we have discussed so far, the policies were issued, first premiums paid, commissions released. When future premiums were drafted, members received notice of insufficient funds and ultimately were forced to lapse the policies. In many instances premiums were returned.

This begs the question - Why would this person place policies, pay premiums, routinely lapse the coverage, and apply for more? Could this be a rebating situation? It was unknown if attempts to draw back commissions were successful. For some members, those attempts are still a work in progress.

While we want to trust our applicants and agents when questions arise, this case study highlights the need to verify accuracy and to have cross-industry awareness of an applicant’s activity. Here’s some important takeaways from this case:

• IAI is a critical tool to raise early red flags for excessive insurance application activity. It provided the first clues in this scenario.
• MIB’s in force policy Codes and Alert details provide critical data needed to verify that the information provided is accurate and complete. It can help identify when ‘shopping’ has resulted in policies placed, if stacking behavior is potentially present, or if over-insurance is a concern.
• MIB’s terminated policy Code and Alert data details provide tangible information about lapse activity across the industry, providing subscribers with insights into lapse or churning patterns.
• It is becoming increasingly apparent that there is significant anti-selective behavior occurring at smaller face amounts. Subscribers benefit most when they are receiving detailed Alert data on all their cases and will miss out if they only search the In Force Database on larger cases.
• To be protected, you must participate. In the absence of this data, how many more members would fall victim, waste resources, and lose revenue to this activity? In this particular case study, 26+ members are at risk.

We remain committed to working with our members as we progress with our investigation of this story and assist in addressing issues of fraud and misrepresentation.

Watch for updates as this story continues to unfold….