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The year was 1974. A large midwestern MGA, operating under retro authority as a full insurance company, ran into financial problems due to a skyrocketing loss ratio. The founder and CEO of the MGA had died suddenly a year earlier, leaving stock and control to his wife and two children. Recognizing the need for a continued strong leadership presence, the family hired a new company president. By mid 1974, the company’s future looked grim. The new president, attempting to save the widow from financial ruin, purchased the company for a pittance and assumed the liabilities. With the ink hardly dry on the legal agreement, miraculous things began to happen to the flailing company. The loss ratios began to plummet and the little company that almost wasn’t … again was. One of the children was driven to find out why. How. What. An in depth audit of claims files revealed the answers. The losses had been artificially inflated by setting up reserves that did not fairly represent the risk. A simple parked car PD claim had been reserved for the PD AND for BI on four “possible” occupants. As soon as the company sale papers were signed, the four BI reserves were closed out. Multiplying this same scenario many hundred times revealed the clever fraud that had robbed a family of its financial heritage. Schemes, scams and clever frauds are not new. They have been around as long as insurance has and as long as the concept of money has. They are like a mutating virus, one which marches one step ahead of the latest in wonder drugs. Fraud-fighting efforts save fortunes and lives. But our war has casualties as well—every one a grim reminder that each case we investigate and prosecute is the win of a single battle, not the entire war. If the MGA’s President suddenly reappeared after a sojourn of 27 long years, I would have to tell him two things: that the disease of fraud has not been cured—it is still rampant and a pox upon our society and all of humankind. The other thing I would tell him is …….. Dad, I miss you. LK
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