Volume 1, Number 15, April 12, 2004
Unauthorized insurance entities have left more than 30,000 Floridians with millions of dollars in unpaid claims. It is a problem that has occurred in most other states as well, but Florida has been recognized as a leader in cracking down on these rogue entities and for its highly recognized “Verify Before You Buy” public education campaign.
The United States General Accounting Office earlier this year asked Florida regulators to provide testimony to Congress about the growing problem of illegitimate insurance. The GAO recently issued a report that in large part was based on information provided by Florida. The report can be found at http://www.gao.gov/new.items/d04312.pdf
I cannot state strongly enough how critical it is for consumers and agents to be diligent about investigating an insurance plan before buying. While the Department of Financial Services and the Office of Insurance Regulation have been aggressive about shutting down these bogus operations – issuing cease and desist orders against more than 200 entities, marketing representatives and insurance agents since February 2001 – consumers must provide their own first line of defense. Too often, it is only after employers and consumers have accumulated unpaid claims that the problem comes to our attention.
To verify licensure of an agent or insurance plan, go to www.MyFloridaCFO.com and click on the icon “Are you covered?” or call our Consumer Helpline at 1-800-342-2762.
In this issue of Consumer eViews, you will find a warning about to employers to be cautious if approached to set up a single-employer trust document that requires sending financial contributions to an out-of-state bank account. The single-employer trust concept can be a legitimate option, but regulators suspect that single-employer trusts may be the newest vehicle used in an attempt to scam employers struggling to find affordable coverage for their employees.
If an insurance entity is not licensed by the state, regulators will be limited in its ability to help with unpaid claims or recovery of premiums. Most important to remember, if it sounds too good to be true, it probably is.
Know what you’re getting. Verify Before you Buy.
-- Tom Gallagher
DATELINE NBC HIGHLIGHTS UNCLAIMED PROPERTY
The Bureau of Unclaimed Property is expecting heavy website traffic and increasing numbers of phone calls following last Friday’s broadcast of Dateline NBC. Friday’s Dateline featured a look at Unclaimed Property programs nationwide. Florida’s inquiries frequently double after similar stories, with thousands of Floridians going online or calling to search for unclaimed property.
“Searching for lost treasure isn’t just for
adventurers and explorers,” said Chief Financial Officer Tom Gallagher, who
administers Florida’s unclaimed property program. “Floridians could be a mouse
click or a phone call away from discovering lost or forgotten treasure.”
The department has returned nearly $75 million to Floridians since July 2003. Most of the property comes from dormant accounts in financial institutions, deposits paid to utility companies, insurance premium refunds, safe deposit boxes and trust holdings. In addition to cash and securities, the state’s holdings include property such as watches, jewelry, coins, stamps and historical items.
“We have Spanish doubloons, fine diamonds, rare autographed baseball cards and much more,” Gallagher said. “Florida is searching for the owners, but if they can’t be found, the state auctions these items to the highest bidder to benefit public education.”
Unclaimed property held by the state is deposited
into the State School Trust Fund until it is claimed by the rightful owner.
Items from abandoned safe deposit boxes are auctioned annually, but the proceeds
are always available for the owners to collect. Last year’s auction yielded
approximately $500,000 to benefit public education.
CFO ISSUES WARNING ABOUT SINGLE-EMPLOYER TRUSTS
Florida’s Chief Financial Officer Tom Gallagher is alerting employers to use caution when considering setting up a health benefit plan through a Single Employer Trust (SET) document that requires sending financial contributions to an out-of-state bank account. Florida consumers have been victimized by such plans, including the Meridian Benefit Plan that is now in federal bankruptcy in New Jersey.
Out-of-state plans and bank accounts can leave employers vulnerable to fraud, and can leave state regulators with very few options for helping with recovery. In the case of Meridian Benefit, marketers also claimed to have re-insurance or stop loss coverage when they did not.
single-employer trust may appear to offer substantial benefits and savings, but
they are complex arrangements that can be rife with financial risk,” said
Gallagher, who oversees the Department of Financial Services. “With any
insurance or financial transaction, it is imperative to verify before you buy.
Remember, if it sounds too good to be true, it probably is.”
An employer approached to buy this type of plan will be told it is an Employee Retirement Income Security Act (ERISA) qualified plan regulated by the U.S. Department of Labor. To implement the trust, the employer is asked to sign a standardized document, then is billed monthly for a financial contribution deposited in an out-of-state custodial bank account. The monthly premiums, or contributions, are paid into a custodial bank account that is supposed to pay medical claims and buy reinsurance or stop-loss insurance to cover costs in excess of the account balance.
Although there may be an accounting of each employer’s contributions, there is a
risk that funds that are supposed to be in separate custodial accounts are being
For more information or to find out if an insurance company or agent is authorized to transact in Florida, log on to www.MyFloridaCFO.com or call the Department of Financial Services Consumer Helpline at 1-800-342-2762.
BEWARE OF TRANSFER FUND SCAMS
Florida’s Chief Financial Officer Tom Gallagher has warned consumers to beware of unsolicited e-mails promising an opportunity to get rich quick, but which are nothing more than an attempt to drain unsuspecting consumers’ bank accounts.
Recipients of these e-mails
are told that the sender is either a high-ranking government official or the
close relative of a high-ranking government official from a developing country.
As a result of some financial miscalculation, the sender has millions of dollars
languishing in a bank account that cannot be accessed without the recipient's
assistance. In return for this assistance, the recipient is promised a portion
of the funds, usually 20 percent. All the recipient has to do is demonstrate
their good faith by either depositing a sum of money in a bank account (which
the sender can access) or by faxing company letterhead and information on the
recipient's bank account. The sender then drains the bank account.
Additional information can be found at the U.S. Secret Service’s website at http://www.secretservice.gov/alert419.shtml. Victims should contact the Secret Service’s Financial Crimes Division at 202-406-5850. Consumers may also call the department’s toll free helpline at 1-800-342-2762.
Florida Department of