The rise in fraud by insurance agents

At a time when many school districts are laying off teachers, cutting back on classes and increasing class size, six districts in Pennsylvania likely will have to come up with several hundreds of thousands of more dollars to pay for workers compensation and liability insurance. The districts in Berks County will have to bear the extra expense because they allegedly were defrauded by a couple of agents to the tune of more than $1 million. The money they dished out for insurance was used by the agents to buy luxury cars, expensive wine and other personal items — while the school districts went bare, coverage-wise.

The AG’s Insurance Fraud Section arrested cousins Kevin and Robert Pickell yesterday for defrauding the schools. They face up to 20 years in prison if convicted. In announcing the arrest AG Tom Corbett said “because the schools are all publicly funded, the true victims in this case are the taxpayers who live in those communities.” While true, it’s likely the kids will suffer as well because I doubt the school districts have an extra $1 million laying around to replace their insurance coverage. After-school programs, art classes, new books, teacher raises are usually the kinds of things cut when schools face budget crunches.

Fraud by insurance agents is on the rise across the country. A recent study by the Coalition found that a whopping 69% of state fraud bureaus say cases involving crooked agents increased in the last year. Nearly 40% reported the number of agent cases were “much higher.” Unless consumers become more sophisticated in dealing with agents — and regulators become more vigilant — we’re likely see many more stories like the one out of Pennsylvania this week.

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