Defining Unauthorized Insurer

An unauthorized insurer is not licensed as a legitimate business and doesn’t have proper legal rights to run the business in a specific state.

As per the Unauthorized Insurer definition, it is an insurer who is not registered with the insurance regulator of the state where it is operating. Hence, the company is not legally permitted to sell any insurance products or services.

Therefore, purchasing an insurance policy from such a fraudulent insurer is dangerous and might be detrimental to your health, finances, etc. Because the unauthorized company may not have the capacity or intention to fulfill the said obligations or promises.

In short, an unauthorized insurer is an insurance company that operates without the oversight or permission of its state insurance regulator. This act is illegal and can lead to financial or legal penalties.

It also means that the customers who have purchased an insurance policy from these unauthorized insurers would be entitled to the necessary compensation by the business owners or professionals who made the sale.

Unauthorized insurers can affect the insurance sector significantly. For example, fraudulent Insurance companies can play dangerous tricks to make insurance agents sell their policies on their behalf. It might cause numerous customers to lose their valuable money.

How Unauthorized Insurers Work?

Individuals or entities operating unauthorized insurance companies are actually perpetrating fraudulent activities among the public. Consumers relying on these unauthorized insurers can find themselves unprotected, especially if the insurance company fails to meet its obligations and policy terms.

The customer may have little to no Recourse if he falls prey to the false promises made by unauthorized insurers, mostly because these companies may never have had the necessary assets to oblige to the claims of the policyholders.

On some occasions, these unauthorized insurance companies may fool policyholders as well as professional insurance agents or intermediaries to sell a policy. For instance, insurance agents might be fooled into promoting or reselling the products offered by these fraud insurance companies.

Here, if the policyholder experiences losses or unpaid claims, the insurance broker will be partially held responsible. In this regard, the insurance agent might also be held responsible for committing a crime, although done unwittingly.

Further, the agent may also be forced to pay heavy penalties, or worse still, have his/her insurance agent license canceled.

How to Save Yourself from these Scams?

Irrespective of whether you are a customer or an insurance professional, you must check (in fact, double-check) with their state insurance regulator. It will enable you to make your policy buying decisions better and save yourself from facing such high personal and financial risks.

Try avoiding those insurance companies whose name the state insurance regulator is not familiar with. One best practice that works in most cases is to pay attention to the potential warning signs, which indicate the legitimacy of a particular insurer.

For example, signs like -

• Extremely aggressive brokers or agents who force you or put pressure on the urgency of signing up for a service or product immediately
• Lack of any listed or registered phone number of the customer support service
• premium amounts might seem unrealistically low as opposed to that of genuine insurance companies.

So, all you can do is be a bit careful. Make sure to do proper research about various insurance companies in the Market, their licenses or registration details, prices and premiums offered, and so on!