When a New Business Request Raises Red Flags

A KAIA member recently shared a suspicious new-business encounter that is a good reminder for all our members: sometimes the best thing an agency can do is slow down.

The agency received unsolicited homeowners’ requests involving two individuals purchasing separate homes. The prospective customers quickly provided extensive personally identifiable information (“PII”) but then supplied conflicting details (year built, roof type, etc.) about the properties. After receiving proposals, one person wanted to use a single checking account to pay both policies and repeatedly pushed the agency to process the payment immediately.

The agency stopped the transaction and did additional verification.

We don’t know that this particular request was fraudulent, but the pattern is worth noting. In July, the National Insurance Crime Bureau warned of an emerging homeowners “reverse payment” scheme involving policies purchased using alleged synthetic identities, followed shortly by cancellation and requests for premium refunds—sometimes before the original payment had fully cleared. If you’d like to read that report, visit here.

Red Flags to Watch For

Be cautious when several unusual circumstances appear together, such as:

• Information that changes or doesn’t match;
• One person or bank account paying for multiple unrelated risks;
• Pressure to bind coverage or process payment immediately;
• Resistance to normal verification questions; or
• Details about a property or applicant that are difficult to independently confirm.

What Should Your Agency Do?

Slow down. Don’t let urgency override normal procedures.

Verify independently. Confirm applicant, property and payment information using reliable sources.

Ask questions. If the payer, named insured and account holder don’t line up as expected, understand why before proceeding.

Be cautious with refunds. Follow carrier and agency procedures and confirm the original payment has cleared before money is returned.

And most importantly, trust your instincts. When several details don’t add up, it’s okay to pause the transaction and verify before moving forward. The adage used to be “trust, then verify” but increasingly, it has now become “verify, then trust.”