‘The Day They Seized the Agency’

I got an interesting call yesterday. When someone says they have a story to tell, but they’re not sure if they want to tell it—you know it’s going to be a good story.

This caller just happened to be a victim of insurance fraud; but no, she wasn’t a consumer paying too much for an auto policy. She was a former producer with a Northern California agency that was raided by the CDI and the DA’s office last year.

“Susan” shared her story in a voice still tinged with fear and anger of that day. “They came in, asked everyone to step away from their computers, isolated the owners and put the rest of us in a waiting room. Those of us who stayed were interviewed.”

Investigators confiscated files and computer systems, and also served search warrants at the principals’ homes and storage facilities. Apparently, the raid was the culmination of more than two years of investigation.

It was a small agency, mainly commercial lines, $5- to $6-million premium volume, two principals who were father and son, a couple of CSRs, a personal lines producer and a bookkeeper. The description is identical to many mom-and-pop setups across the country.

So what went wrong?

“They didn’t return returned premiums, they charged broker fees on everything and didn’t disclose it, there was inappropriate use of premium financing—for example, I was going over accounts and there was a bill that would normally have been a direct bill, but it was an agency bill, and it was premium-financed. The actual policy premium was something like $3,800, and they were billing for $5,000.”

When an agency goes bad, the negative fallout is not only on the producers and principals. Everyone who had contact with the agency is potentially involved.

“I was always proud to be an insurance agent, to sell the product and service it—I felt like I was doing something for my client. This experience has left me feeling like the last two years have been worthless. We all saw it happening and we questioned it, we questioned them, but we were afraid to do something.”

Unfortunately, this fear allows such dishonest business to continue. The only way to stop it is to ask questions—because chances are, if it doesn’t seem right, it probably isn’t. If asking leads nowhere, then it’s time to take the questions to a higher authority. Following some advice she got from a local association’s general counsel, Susan called the CDI after the raid and went back to share what she had seen.

“The fraud problem has to stop, or we’re going to destroy our own industry,” Susan said. “We always talk about professionalism; we want to be known as more than just a used car salesman, but we are all too willing to work that gray area.”