travel agent red flags

9 Ways to Tell if Your Travel Agent is Crooked

By Christopher Elliott

Tribune Media Services

As a rule, most travel agents are well-trained, competent professionals who work hard for you.

But there are exceptions to every rule. Take Kathleen Rossano of East Brunswick, N.J., who was recently sentenced to a 10-year prison term for stealing more than $75,000 from her travel agency. Prosecutors had charged her with offering luxury vacations to her friends, taking cash payments, billing the expenses to her agency's credit card and then pocketing the money.

It was the fourth time she'd been convicted of taking money from former employers.

A month later, her former agency, Cruise Value Center, collapsed without paying the cruise lines what they were owed and leaving customers in the lurch. One of the clients recently contacted me in a panic after her cruise line demanded an additional payment of $2,544 for her vacation because the cruise line had been stiffed by the agency.

While the odds of running across another Rossano are remote, they still exist. The Federal Trade Commission recorded 14,903 complaints in the travel and timeshare category in 2007 -- nearly twice as many as a year before.

How can you tell if your agent is trouble? Here are a nine signs:

1. Demands You Pay in Cash

Reputable agencies accept credit cards, and you'd be well advised to use plastic when you make a travel purchase. Why? Because the card protects you if something goes wrong -- say, your airline goes bankrupt or your hotel burns to the ground. Or even if your agent runs off with the money without paying for your trip. "I've never heard of a legitimate travel agent only accepting cash," says Stacy Small, president of Brentwood, Calif.-based Elite Travel International. "This would immediately set off a red flag." (That isn't to say you should never consider a wire transfer, she adds. Some overseas travel companies offer a 3 percent to 4 percent discount for cash purchases, but even then, Small recommends using a credit card.)

2. Acts Funny When You Bring up Commissions

Travel agents make money in two ways: by charging a booking fee or by taking a commission from a travel company. If you ask about an agent's compensation, a travel adviser who is on the up-and-up should be willing to openly discuss bonuses, so-called "overrides" and other forms of commission. Responses such as "What I'm making is none of your business" are a sign of trouble. In fact, it may mean the agent is trying to sell you a vacation that isn't in your best interests. "My pet peeve is to see an agent push a client into a cruise or tour that may not suit the client, but doing it anyhow because one, it's easy, and two, they get a better commission," says Patricia Dwight, owner of Adventure Travel, an agency in Summerville, S.C. Travel agents want to be considered "professionals" in the same way we do real estate agents or financial advisers. Yet the commissions and compensations of those professionals are clearly disclosed. Why not those of agents?

3. Has No Certifications

Although there's no accrediting agency for American agents that's comparable to, say, a bar association, there are groups that suggest your travel professional means business. Having an International Airlines Travel Agent Network (IATAN) card is a sign your agent is for real. Other organizations that may signal a seriousness of purpose include membership in the American Society of Travel Agents (ASTA) or a certificate from The Travel Institute, which accredits agents based on their expertise. Although no one requires these certifications, my rule is: the more paperwork, the merrier. For example, the top 1 percent of travel agents in the country belongs to an invitation-only network called Virtuoso. "It reduces complexities, uses network members for exclusive relationships, and opens up access to many luxury experiences," says Pamela Hurley Moser, whose agency is a Virtuoso member.

4. Adds a Booking Fee to Your Bill After You've Decided to Buy a Vacation

An agent on the up-and-up will disclose all fees, surcharges and extras before you make a booking decision -- not afterward. Agents who tell you, "Oh, by the way -- there's a $50 booking fee" are being less than upfront with you. And who knows what else they're not telling you? "It's important to have everything in writing, so there is a paper trail to follow, and being upfront always," says Cindy Harris, an agent with Travel 'N Dive Adventures, which specializes in diving, snorkeling and fishing destinations. Harris says a good agent treats clients like friends -- "with courtesy, honesty and respect."

5. Doesn't Know a Thing About Where You're Going

If your travel adviser has never heard of the destination you'd like to visit, that may not be a good sign. If it's a well-known place ("Orlando? Where's that?), you might want to slowly back away toward the exit. "The most important quality in a good agent is destination knowledge, and the ability to match the perfect vacation with each and every client," says Chet McDoniel, owner of Off to Neverland Travel, which specializes in Disney destinations. "The ability to listen and custom tailor each and every itinerary is crucial to being of service to my clients."

6. Has a Better Business Bureau Rap Sheet

Check out the Better Business Bureau site to see if your travel agency is listed. If it is, the BBB will give it a letter grade. "When we evaluate a company we look at their complaint record -- including the number of complaints, severity of complaints and whether or not the company tried to respond to the complaint -- as well as licensing and government action," says Alison Preszler-Southwick, a spokeswoman for Council of Better Business Bureaus. What if it isn't on the site? It might be listed under another name (try a search by address) or you might be looking in the wrong region. The BBB has 4 million reliability reports on North American businesses in its database, so if your agency has been in business for a while, there's probably a record.

7. Is Impossible to Reach

If your travel agent disappears after making a sale, that's not a good sign. "A travel agent should be able to be contacted," says Marcy Lannon, a manager for Meridian Travel in Dania Beach, Fla. "That does not mean that they have to be on call 24/7, but I think that it does mean you should be able to contact them during their business hours and you should expect replies in a timely manner." The worst agents never call back after booking a trip, never follow up to make sure you had a good vacation, and are never reachable when something goes wrong. You're better off buying a trip online, directly through an airline, hotel or tour operator.

8. Doesn't Listen

A competent agent takes the time to listen to what you want, and then makes recommendations based on your needs. In fact, good travel agents don't consider themselves agents at all, but "specialists in a destination or travel type," says John Peters, the chief executive of Tripology.com, a network of 9,000 travel agents. "They can get you information that can't be found on the Web. They listen more than they speak and then wow you with the perfect trip."

9. Other Warning Signs

Here are a few other things you don't want to hear your travel agent say: "I became a part-time travel agent because I love taking free trips." ("Many people wake up in the morning and say 'I love to travel ... think I'll be a travel agent'," says veteran cruise agent and blogger Sharon Emerson.) Another potential sign of trouble: "I bought my agency certification online for only a few hundred bucks -- and you can too!" Those so-called "card mills" are problematic. But that's a topic for another column. And finally, "No need to read the insurance policy, it'll cover you." The commissions on travel insurance policies are exceptionally generous, and a bad agent will try to push a policy that may not fully cover your trip.

This is by no means an exhaustive list. But if you're curious about your agent, it's a good start.

Christopher Elliott is the ombudsman for National Geographic Traveler magazine and the host of "What You Get For The Money: Vacations" on the Fine Living Network. E-mail him at [email protected] .

(c) 2008 Christopher Elliott Distributed by Tribune Media Services, Inc.

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Guest Column: Fraud Prevention For Travel Agents, Part 1: Red Flags

In the past six months, I’ve spent innumerable hours trying to track down a fraudster who scammed a independent travel professional out of thousands of dollars.  

The client seemed innocent enough: a doting son who had purchased a pair of first-class tickets to Europe as a gift for his parents. He approved the charge in writing, even sent in a photocopy of his driver’s license. Sounds legitimate, right?

Though our story resulted in a chargeback that should have been indefensible, there were a few boxes left unchecked by the agent. With credit card fraud on the rise , it’s more important than ever for travel entrepreneurs to know how to protect their business.  

What is f rau d?   Fraud is malicious or criminal deception intended to result in personal or monetary gain. In legal speak, it can also be understood as “false enrichment,” meaning someone getting money/not paying for something they should have by pulling a fast one on you, the agent.  

In the travel industry, fraud is commonly perpetrated by “clients” purchasing travel products using stolen credit cards or issuing chargebacks (denying charges on their credit card) for products that they did actually use. Sometimes, fraud can even mean someone breaking into your GDS to book travel products without your knowledge or steal sensitive personal information.

Smells p hishy : Red flags to watch for in initial contact With the advent of the Internet, traditional “walk-in” travel customers are few these days. Fraud, therefore, naturally increases simply due to your inability to meet every client in person. With this in mind, proceed with caution whenever you receive new travel requests from an unfamiliar source. Any combination of the following scenarios should raise immediate suspicion: 

• First point of contact is via e-mail, a form through your website, or a TTY service (for the hearing impaired) 
• Client or passenger name is new to your agency  
• The cardholder’s credit card, driver’s license, or passport can only be faxed/e-mailed because cardholder can never be present at the agency location (tricky for home-based agents, but always ask!) 
• E-mail requests contain obvious spelling errors 
• Caller ID shows the client as non-local, or no Caller ID information is displayed at all 
• Caller claims to be a representative from a GDS or ARC and starts asking for your personal information/credentials  
• Client can only be contacted via phone with a non-local area code 
• Client uses fictitious U.S. address or phone number (Google everything!) 
• Client can’t call you back OR you can only ever leave a message

In the travel industry, fraud is commonly perpetrated by 'clients' purchasing travel products using stolen credit cards or issuing chargebacks (denying charges on their credit card) for products that they did actually use.

Red f lag s : Fraudulent c lients   Even if the initial contact seems innocent enough, keep on your guard. Other red flags that may reveal themselves during your qualification process. Here are a few of the most common: 

• Client uses a religious/medical title (“Pastor Robert” or “Doctor Smith”) or religious premise (missionary work) to establish credibility or empathy
• Last-minute bookings 
• Highly flexible travel schedule or budget 
• Client doesn’t quibble over the price 
• Client can’t or won’t fill out a credit-card authorization form 
• Client has no local address 
• Flights originate outside the United States 
• Flights are international-to-international   
• Client references airport codes instead of city names (e.g. asking for LAX to LOS instead of Los Angeles to Lagos, Nigeria) 
• Passenger is not the cardholder 
• Client can’t or won’t verify the billing address of the credit card being used 
• Client uses a single credit card to book several routings, travel dates, and passenger last names 
• Client uses multiple credit cards to pay for the trip 
• Client offers multiple credit cards for payment if first card is rejected 
• Client purchases high-priced tickets for a third party (bingo—this was the case with the culprit mentioned above) 

Red f lags : Fraudulent access to your GDS   Not all fraud comes in the form of a sneaky client; some comes from skilled fraudsters gaining access to your GDS or client information. If you are a GDS user and/or have sensitive client information on your computer, beware the following: 

• “Phishing” e-mails containing attachments or links that entice you to click for additional information or to update your GDS credentials/profile (NEVER open attachments or click on links from unknown sources!) 
• Calls from someone pretending to represent your GDS or ARC, requesting your login information or agency credentials like your IATA number 
• Calls from anyone claiming to be in the travel industry requesting access to your client list (for marketing purposes, etc.) 

We believe that when it comes to protecting your agency and your pocket book, paranoia is your friend. Committing the above red flags to memory will drastically reduce your risk of fraud.  

Come back for the next part of our three-part fraud prevention series, where we’ll explore the latest fraud schemes and best practices for fraud prevention.

Emily Peters is the  business development manager of Montrose Travel

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Watch CBS News

Travel advisor reveals red flags to look for to not get scammed when planning trips

By Lauren Victory

Updated on: April 3, 2024 / 12:34 PM CDT / CBS Chicago

CHICAGO (CBS) – Spring break may be over for students, but summer vacation is right around the corner.

It's time to start planning.

CBS 2 has reported on stories about travel deal rip-offs in recent months. So here is how to make sure your next trip goes right.

Pinky Jackson earned major grandma points with a surprise trip from Chicago to Broadway in New York City.

"She was so elated," Jackson said of her granddaughter. "She's the biggest fan of Hamilton."

The city that never sleeps showed them a fantastic time, except for the part where the hotel room Jackson's family paid for never materialized.

"I just knew it was, it was a loss," she said. "I had to take it as a loss."

She and other travelers got burned and it wasn't from too much sun. They blamed their vacation fails on a Glenwood man hawking travel packages that left them out of a place to sleep, stuck in airports and more.

Months earlier, CBS 2 met another group duped by Discounted Travel. They were all in court for a theft case against a so-called travel agent from Oak Lawn .

CBS 2 tapped travel advisor Cheryl Richardson from Travel 100 Group in Northfield for help recognizing red flags in the world of trip planning. She said watching CBS 2's previous stories of people losing their money just looking for a deal to go on vacation left her "heartbroken, because people do save for a long time to get on a vacation."

She's seen many parts of the world in her 35 years as a travel advisor. Richardson said to run if someone offers countless flights for a bulk price.

"There is no such thing as a pass for unlimited amounts of flights with any airline," she said.

Another big no-no: booking a trip with Venmo or similar apps.

"I don't even offer Zelle or Apple Pay, anything like that," Richardson said. "Not even Paypal."

She said most people use a credit card because "you have a trail then." Using a credit card also provides a way to dispute a charge if something goes wrong.

Of course, plenty of people schedule their own travel online with no issue, but Richardson said using an experienced agent is safer for their wallet.

"We have vetted all the tour operators, hotels, cruise lines, so, therefore, there's recourse should anything come about," she said.

Consumers can find further protection through the American Society of Travel Advisors. The nonprofit mediates complaints and offers a directory of agents who pledge they'll comply with a code of ethics.

Not on the list is the man Pinky Jackson used for her non-existent hotel room.

"At the end of the day, I had to take accountability for the part I played," Jackson said. "Because I, I should've known better."

Now, she does know better and looks forward to sunnier skies ahead.

An American Society of Travel Advisors spokesperson said the organization is "beefing up" its certification program to help consumers separate good agents from the bad.

Lauren Victory is a Morning Insider reporter for CBS2 Chicago. Lauren joined the station in May 2016 and is a graduate of the Medill School of Journalism at Northwestern University.

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• Feb 8, 2022

How to Know if your Travel Agent is Legit

Lately I heard that people worry about trusting a travel agent or travel advisor (the new buzz word, same meaning). I had never thought about it before. I always say I would make a horrible criminal because my mind just doesn't work like that. Perhaps my biggest fault is trusting another too much.

I listened to the concerns being expressed, and I heard that some travel agents are DISHONEST or at least poor money managers, and they have earned us all "a reputation". I heard that agents have been known to collect money from people that they never apply to a booking, or send off to the travel supplier. The client thinks they are booked and perhaps even paid in full, but no legitimate reservation exists.

OMG - right?

So I decided to write this post, because there is ONE easy way to tell if the Travel Agent you are dealing with is Ethical or not. All you have to do is:

Consider how they are asking you to pay them.

RED FLAGS of DISHONESTY

Your agent is asking you to "PayPal" "Venmo" or "CashApp" some money directly to them.

They might just be trying to avoid splitting the "planning fee" with their host agency.. but that too is fraudulent. They have a contractual agreement to share any and all profit earned with their "headquarters" "home office" "host agency" - whatever you want to call it. Don't help them cheat by sending money via any flavor of electronic transfer.

If you send money to a person's name - you have NO IDEA what they actually do with it!

Your Agent asks you to write a check to their personal name, or their travel agency company name. This is exactly how travel agencies have gotten in trouble. They collected money from a client, put it in their bank, and then spent the money on something else, thinking that they would apply the money to the client's booking LATER, and the never client noticed. And then something happened... money didn't come from another source as planned or whatever.

Lets face it - our society does not run on "checks" anymore. Anyone who is reasonably responsible with money has a way to pay with a card. Paying with a Credit or Debit card offers an amount of protection and assurance to the agent AND client. It is the way we do it today!

If you write a check to a person or company they have to put that check in a matching bank account. Sure, you can prove you paid them but if they never paid the travel supplier, you have a real mess..

Your Agent is asking you for CASH! They say that you booked at the last minute and cash is required. BULLSHIT! Even the shuttle bus companies take card payments now.

If you give cash to someone - you have NO IDEA what they will actually do with it!

Your Client offers you Cash! If your client doesn't have a card, they can find someone who does. They can give cash or a check to their Mom, but not to YOU!

If your client gives you cash, and you make a card payment on their behalf, and the cash turns out to be counterfit - you lose.

DO NOT PAY ANYONE BUT A TRAVEL SUPPLIER OR KNOWN AGGREGATE FOR YOUR TRAVEL BOOKINGS and NEVER PAY WITH CASH!

SOMETHING THAT SEEMS SHADY - BUT MAY NOT BE

Some agents charge a legitimate "Planning Fee". This is an amount of money to cover their time spent on your research, in the event that you don't book with them and therefore they don't earn a commission. Or it is a fee for service that is above and beyond the scope of normal services - for higher quality or more hand holding. They may ask for this money up front, before they do ANY work on your behalf. This is the ONE and ONLY time you should pay any money directly to your Agent, in their personal or company name. The burden is on you to thoroughly check their references first. People LOVE to share who they know! Ask them.

This type of fee may also be called a "booking fee" that is payable with your deposit, or even with your final payment. But this is the ONLY money that should be paid directly to your Agent or to their Agency/Company name.

Some people think you "Pay More" because SOME Agents have fees. This is simply not true. As in life "you get what you pay for". Watch our short YouTube Video specific to Cruise Travel (our Specialty). The best kept secret is that the cruise line pays us so you don't have to!

You should only ever see one transaction on your credit card statement transferring money to your Agent or their Agency/Company. (ABC Travel Agency)

ALL other money should be paid DIRECTLY to a travel supplier.

By travel supplier I mean an airline, cruise line, certain hotel or an online Travel Fare Aggregator like Expedia, Verbo or Hotels.com

Most Legitimate Travel Agents now have their own websites with trust worthy search engines that offer live inventory and flight or room selection. If a website is directly linked to the travel supplier, it is most likely legit. But check it out - do a quick google search for the terms " Is ___ abc travel agency ___ legit?" At your agent's site, you should be able to get all the way through your desired booking and pay a deposit by entering the card data yourself. If you can select a room at a certain hotel or on a certain cruise, the site you are at is directly linked to the travel supplier and the payment you apply will go directly to them. Hyatt Hotel, Princess Cruises, Viking Cruises, or whomever you book with will be what appears on your Credit Card Statement. NOT your travel agent's name or company.

PROFESSIONAL RECOGNITION

Ask, and research. What Travel Organizations do they belong to. Major Organizations Include

CLIA - Cruise Lines International Association

ASTA - American Society of Travel Advisors

IATA - International Air Transport Authority

All three of these organizations require a minimal level of performance and affiliation with a reputable company, for membership. Both Businesses and Individuals memberships are avaiable. fyi: Between my husband and I, we belong to all three. You can ask the agent for a member number and look up the individual, or business, on the association website. CLIA (Our favorite, since we specialize in cruises) has a wonderful "Agent Finder" feature. < click here > and enter your zipcode.

ETHICAL PRACTICES

Your agent asks you to use a form to authorize a specific transaction in a specific amount to be paid directly to a travel supplier in your name with your credit card. Yes - it's okay to give them your card data! They are only authorized to use it as your agent, directed by you, in writing. If they use it in any other way you are not responsible for the charges. Each time your agent makes a payment, on your behalf, using your card data - you should be authorizing it using a new form with a new and specific amount signed by you.

Your agent asks you for a photo of one of your checks . Your banks routing number and account number appear on each of your checks. Viking Cruises gives a generous discount to clients who pay with an electronic check. Your agent can pay Viking using the numbers that appear across the bottom of your check as an e-check, on your behalf. This is legitimate and you will receive a 3% discount from Viking for doing so. In this scenario Viking saves the fee that the Credit Card company would charge them for processing the transaction, so they are willing to give it to YOU.

Your agent offers a "Traveler Portal". An online place that is only accessible to you using login credentials that you set, where you can enter and store your credit card payment info, and then authorize payments when due, in the amounts you choose, yourself. These are out there in various formats. REALLY NICE! You maintain control of your card data! No one else ever sees it. This is what I have and if you chose to use it, your card data is encrypted on my side. I can't even see it!

Your agent shows you a booking confirmation from the travel supplier that includes the amount due. Likely there will be a date and amount due as deposit, and also a final payment date and amount. Usually you can cancel without penalty prior to the final payment date, and even get a refund of your deposit. While agents, including us, can be a bit reluctant to provide supplier invoices, you can always ASK. These supplier invoices are most often VERY confusing. And cause more questions than they answer. But an honest agent will provide a copy when asked. This supplier invoice will show you EXACTLY where your money has gone. Alternatively with a Cruise Vacation, you will have an account at the Cruise Line and you will SEE in YOUR account, using YOUR log-in. You will see the monies that have been paid, and for what.

Your agent sends you an invoice from their Agency, that includes a booking number that you can use to verify your booking at the travel supplier. It also has itemized amounts that are to be paid to those travel suppliers on certain dates prior to your travel. The suppliers and amounts itemized SHOULD always MATCH your credit card statement EXACTLY!

WHAT TO KNOW

The burden is on you to verify that once you have made a payment through an agent - that the payment shows up on your booking. You should have online access to any and all reservations and the ability to see money applied to them…

By using a Credit Card to pay for your travel arrangements you will always have a second chance to approve the charges and amounts before you pay for them with money from your bank account. If you see a discrepency contact your agent, and the credit card bank IMMEDIATELY.

Some agencies, display the Ethical Travel Agent Badge on their website!

This badge certifies that my agency has agreed to the Ethical Travel Agent standards of practice. When you work with this agent, you may rest assured you are working with someone who will treat your vacation with the highest standards of care.

Planning to Cruise? Reach out with your question. We read all of our replies ourselves!

Disclaimer: at Travellikeanarchitect.com we wear many hats. If you happen upon a link within our blog here or at other linked sites, and you click it there is a possibility we could financially benefit from that. It is our greatest hope that the things we share are of great value to you! As always our opinions are our own and we always aspire to be an authentic voice.

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Travel scams: Everything you need to watch out for

Simon calder identifies the red flags to be aware of when booking a holiday – plus tricks used when scammers defraud the industry, article bookmarked.

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A ny travel purchase is an act of faith. Travellers pay a lot of money upfront and take delivery only when they turn up and (hopefully) get the holiday they booked. That makes travel a favourite target of scammers.

Abta, the travel association, says: “Each year, fraudsters target unsuspecting holidaymakers and travellers, conning them out of millions of pounds.

“Not only are people losing substantial sums of money but many holidays are being ruined, with people unable to afford a replacement.”

As household budgets shrink and the cost of travel soars, travellers are increasingly desperate to find bargains. Fraudsters know this. Conversely, more people are tempted to try to scam the system by defrauding travel agents, holiday companies and airlines.

What should you watch for? These are the key questions and answers.

Is there such a thing as a standard travel fraud?

Yes, when perpetrated against would-be travellers. A villain purports to be a legitimate travel business, finding customers – usually online – and persuading them to hand over cash or pay by bank transfer, which amounts to the same thing.

The criminal then vanishes. Often the victim does not realise until the day of travel that they have lost thousands of pounds.

An example?

A favourite hunting ground for fraudsters in search of unwitting victims is to offer ultra-cheap airline tickets. This is what happened to a reader whose identity we have protected: “I booked a flight with a travel agent who I had booked with before, so I trusted him.

“He called me out of the blue late last year, asking if I am looking for flights? I was tempted and booked a holiday to Singapore and Philippines in September this year.

“He gave us a huge discount for a premium economy seats with Singapore Airlines. It cost £2,200, and he said that he paid £100 out of his own pocket for us. I thought that was very kind of him, taking him as a friend.

“On 21 December 2022 I sent over the money by bank transfer to three different accounts as he had requested. He said he would send our e-tickets by 9pm that evening.”

All too predictably, the tickets did not arrive.

“I contacted Singapore Airlines directly. They had no records of any bookings with our names. I contacted my bank Santander, who managed to get back half of our money back. The rest was transferred to an overseas account, which would be difficult to retrieve.

“After I realised we had been scammed, I checked the address he had given. It was a nursing home in Birmingham, not a travel agency.”

How do I avoid that?

If it looks too good to be true, it probably is.

While many online agents will assert they have the best fare, prices for a particular flight are usually in a fairly narrow band. A check on a comparison website such as Skyscanner can give you a good idea of the ball-park figure for a destination on specific dates.

If an agent is selling well below the norm, you should be wary.

In contrast, if you go along to your local travel agent and buy a holiday, the overwhelming odds are that it will be a genuine and problem-free transaction.

Any other airline frauds?

Yes. A relatively new one involves scammers intercepting passengers’ complaints on Twitter .

Some passengers frustrated by lost luggage and delayed refunds have been tweeting BA about their issues, using the official account @British_Airways. Fraudsters set up an unofficial scam account, “@CareBritish”, and responded to tweets from travellers.

They ask for contact details, and then concoct a preposterous story – claiming passengers whose luggage is missing must pay for it to be sent to them, even though no airline would ask for payment for delivering misrouted baggage.

The scammers specify that payment must be by bank transfer. Although they ask for the money to be transferred through a legitimate foreign exchange company, the transaction is equivalent to handing over cash to someone you have never met.

If the desperate passenger complies, then predictably the baggage does not appear. Instead the criminals step up their attack – explaining that further problems have arisen, and asking the victim to transfer more money.

As with most scams, there are tell-tale signs that not all is above board. In one case The Independent looked at, a British Airways passenger living in Mexico, whose bag had failed to appear at New York JFK, was told their bag had mysteriously been flown from a different NYC airport, La Guardia, to Dallas-Fort Worth.

Someone calling himself “Martin from BA” wrote on Twitter that the luggage could be recovered – but only if the passenger transferred 22,458 Kenyan shillings (£150) to a person living in Nakuru, Kenya.

That is not a normal request from a UK airline about baggage that is supposedly in the US and belongs to a Mexican passenger.

An airline will never ask a traveller to share personal information on social media. They may invite unhappy passengers to liaise with them by direct message (DM), but this should only be done to a Twitter account with a blue tick – certifying that it is a social media account belonging to a trusted organisation.

I was asked to pay by bank transfer because ‘the card machine was broken’

This should really set alarm bells ringing. It’s like giving cash to a stranger. To complicate things, plenty of genuine travel firms will ask for payment by bank transfer to keep handling costs down (and, ironically, to avoid fraud).

Be especially suspicious if the destination bank account is in an improbable location or name. Any payment to a bank in a country other than the UK or your intended destination country should be immediately suspect.

A request to pay a random individual – or into more than one account – may be further evidence of a fraud.

If you avoid flight fraud, what is next in line?

Villa fraud is the most common scam.

Every summer as the main holiday months approach, I fret about how many people will contact me with the same sad story: “We booked a villa online, sent the money by bank transfer, then turned up to be told that someone else was staying there and we’d been scammed.”

The typical case involves several thousand pounds which has been sent to the villain, plus the cost of air fares – and the often astronomical expense of finding somewhere different to stay at very short notice. It is a devastating and distressing experience, not least because children are often involved.

Due diligence is required to ensure you are dealing with a legitimate company/villa owner.

How does the typical scam work?

A website is created with lots of appealing properties combined with remarkably low prices and excellent availability. It looks professional, and often lists an address (usually in Spain) and a phone number. When you are tempted in, you are then told “Pay us today by bank transfer” – which is the same as sending cash – “and we’ll give you a special discount.”

How can you tell if a site is fake?

Check the photos by doing an online search of the picture of the villa. It may take you to a completely different but legitimate site, and possibly to a different location and a different villa name.

One bunch of fraudsters The Independent came across realised that smart customers were on to them, and so they pretended that this was all the owners’ doing – using multiple names. They also fibbed that the reason availability was showing on the scam site but not the real site was because the owners had decided to deal only with them.

Read the website carefully. Many scam websites are set up using extracts copied and pasted from genuine travel companies. If something strikes you as unusual, try a bit of copying and pasting yourself – an odd phrase may take you to a genuine holiday company. In one of the cases I investigated, CycladesRentals.com, a phrase about health looked distinctly out of place; it turned out to have been stolen from a legitimate operator specialising in well-being holidays.

Next, many scam sites have no telephone number, but may have an address. If you search this address online, you will often find the real company that is based at the address the fraudsters claim to use.

Find a number for that company, dial it and see what happens; in the case of the scam website called CycladesRentals.com, I went along to check and found it was actually the premises of a very good Polish restaurant.

Any other red flags?

Yes. Check the company (and the website) history. If a company such as “Calder’s Choice Canaries Cottages” is any good, or even if it’s mediocre, it will have an online footprint. So search online for the name of the company plus “reviews”. It may be that you’re warned immediately that it’s a scam. But if there are no reviews, and the company claims to have been in business for 10 years, that’s odd to say the least.

Use a website such as who.is to see when the site was registered. If it was in the past few months, be very afraid.

But I called them up and they seemed genuine…

To ensure you are not dealing with a criminal, demand a landline rather than a mobile, check that the dialling code is commensurate with the location, and phone up the owner.

You could ask, for example: “Just before I book can you give me a few more details about the area: how far is the beach, how good is the WiFi, what’s the mobile-phone reception like?” If you are not satisfied with the answer, probe more deeply: ask for the name of the nearest restaurant, then find the number for that place and dial it to cross-check.

They say unless I book now I will lose the deal. Is that true?

Fraudsters invariably want to pressure you into parting with your hard-earned cash quickly, by warning that the property will be let to someone else unless you commit immediately. They may also claim there is a 10 or 20 per cent discount for rapid payment.

You should be able to sense if they are getting agitated, and a good way to test their response is to suggest you communicate by post. A genuine owner will cut you some slack, and probably agree to receive your deposit as cash through the post.

While that concept might sound ridiculously 20th century, it can offers safeguards you don’t get online. I have phoned an accommodation owner in Greece and then posted the deposit in cash (by registered mail, of course) to a physical address in the village where the property was located. It is potentially a safer transaction than transferring money to a bank account in a distant land.

An owner on Airbnb said we should break the payment rules and both benefit. Is that fraud?

Almost certainly. On Airbnb , if any “owner” asks you to liaise direct and pay by bank transfer rather than going through the official Airbnb payment platform, you are probably dealing with a criminal.

They do this typically by purporting to be a host and using the chat facility to set up an outside email – they may say they are doing this to dodge the fees, or they have a special coupon, or other tosh. They will have some ingenious ways of doing it, including uploading photos of a room with an email address written on the wall. And some people respond.

Can the travel industry itself be defrauded?

Yes, and fraud has been a problem for decades. Mostly it centres around flights. Every day many people who would never regard themselves as criminals routinely defraud airlines by exploiting anomalies in pricing.

For example, a one-way British Airways flight from London to New York typically costs four times as much as a return. The saving runs into many hundreds of pounds, and passengers often buy a round-trip with no intention of using the inbound portion.

In theory BA could charge you for the difference, but I am not aware of this ever happening. In some cases, though, where travel agents have used tricks like this on an industrial scale, the agents themselves may be penalised.

In terms of very clear crimes: the standard scam involves paying for a ticket for a flight shortly before departure using a stolen or cloned credit card. By the time the crime is recognised, the passenger has made the journey.

But fraudulent transactions using someone else’s cards are not unknown through travel agents.

Ashley Quint, director of TravelTime World in Berkhamsted says: “If I were asked what the biggest challenge is at the moment for travel agents, I would say fraud.”

What sort of scams do people perpetrate against travel agents?

Fraudsters often seek to persuade an agent to make a booking on their behalf. The airline will accept the reservation without question if it is from a trusted travel agent.

Abta says: “A particularly common type of fraud is ‘card not present’ fraud, in which fraudsters make telephone or on-line bookings with a stolen card.

“These bookings are often for last-minute, high-value airline tickets, due to the fact that the criminal would have departed prior to a transaction being charged back.”

Mr Quint says: “If we take a fradulent transaction, if someone gives us a stolen or cloned card, and the owner of that card enacts a ‘chargeback,’ it becomes our responsibility.”

Shrewd travel agents look for a range of red flags. Someone trying to pay with a card that does not match the passenger’s name immediately raises concerns – especially if it is a very short-notice trip particularly in business or first class.

If someone from outside the company’s usual catchment area calls, and insists on dealing only by phone, an agent might ask for payment by bank transfer.

Even so, some frauds get through. One is to buy a flexible flight ticket for travel some months ahead. The scammer then calls the airline direct to shift the booking much earlier. saying that the agent was too busy to change the date. The fraudster is likely to fly before the crime is picked up.

Does fraud against agents go beyond buying flights?

Yes. A decade or two ago, the main form of fraud was on air tickets to Africa. But Mr Quint says fraud is becoming more common – and more mainstream in terms of destination and holiday type.

A couple even attempted to book a honeymoon fraudulently with his company.

“The credit card went through – it matched their passports. All went through fine. A week in, I got a phone call from the card owner saying, ‘I haven’t spent any money with you’.

“Then we had to go to the fraud squad. We think they found them in the end.

“Thankfully, the tour operator hadn’t ticketed the flight and had a good relationship with the hotel, so there was no cost. Otherwise it would be down to us.

“It’s OK for somebody like me who’s been in the industry for quite a time. You get an inner sense of when something isn’t quite right.

“But for somebody who’s relatively inexperienced, you could easily get caught out.”

Someone has used my credit card details to buy a flight. What should I do?

Britain’s biggest budget airline, easyJet , gives advice online to people whose cards have been fraudulently used.

The carrier says: “If you’ve been charged by easyJet and you (or someone you’ve allowed to use your card) haven’t made a booking with us, then you may be a fraud victim. If you think this you should contact your bank. Let them know all the details, and make sure they cancel your card. Check your account for other strange purchases. Inform the police.”

To reclaim the cash, the victim is told to contact the easyJet Customer Service Team.

“We will investigate the booking and give you as much information as we can, and whether we can refund or cancel the flight. If we haven’t, or can’t, refund the costs straight to your account, you can start a ‘chargeback’ claim.”

This is a voluntary arrangement on the part of your card firm – Visa, Mastercard or American Express – to reverse debit, credit or charge card purchase for customers who have not received the goods or services that they have been charged for.

Can’t the authorities track down the culprits and deal with them?

Most villains leave a cyber trail. Banks may have some details of their identity.

But because the sums involved are relatively small from a policing perspective, travel frauds are often neglected.

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How do I check if a travel agent is legitimate?

• March 14, 2023

When planning a trip, consider using the services of a travel agent to help you book flights, accommodation and tours. However, with the rise in the number of online travel agencies and an increasing number of scams, it’s crucial to ensure you know how to check if a travel agent is legitimate.

In this article, we’ll outline the steps you need to take to verify the authenticity of a travel agent, including checking their accreditation and certification, researching their reputation, assessing their professionalism and experience, verifying their contact information and looking out for red flags.

Check for accreditation and certification

Frommers, a trusted travel guide publisher, emphasises the importance of checking a travel agent’s accreditation and certification to ensure they meet industry standards and maintain a professional conduct. These credentials demonstrate that the agent has undergone training and is held accountable by a recognised governing body.

What are the different types of certifications and accreditations?

To check if a travel agent is legitimate, check if they are listed with any of the following travel associations:

ABTA membership 

Check if the travel agent is a member of the Association of British Travel Agents (ABTA). ABTA is a leading travel trade association in the UK, and its members adhere to a strict code of conduct and offer financial protection to customers. Verify their membership on the ABTA website and search for the travel agent using their ABTA number or company name.

ATOL protection 

ATOL stands for Air Travel Organiser’s Licence and is a UK financial protection scheme for package holidays that involve  flights operated by the Civil Aviation Authority (CAA). An ATOL license means the travel agent meets specific financial and operational standards to protect customers in case of company failure. You can verify ATOL protection on the CAA website . 

IATA accreditation

Verify if the travel agent is accredited by the International Air Transport Association (IATA). IATA accreditation is a globally recognised certification ensuring the travel agent meets industry standards and practices.  

Company registration

Check the travel agent’s company registration details on the UK Companies House website . Ensure they have a registered office address, contact information and active company status.

Research the travel agent’s reputation

In Frommer’s article, it is emphasised that researching the reputation of travel agents is crucial because it helps travellers avoid scams, fraudulent activities and other potential problems that can ruin their trips. Here are some reasons why:

Avoiding scams

Unfortunately, some travel agents operate scams, such as selling fake tickets, misrepresenting the quality of accommodation or promising services they cannot deliver. By researching a travel agent’s reputation, travellers can avoid these scams and ensure they are booking with a reputable and trustworthy company.

Protecting financial interests

Booking a trip often requires a significant financial investment, and travellers want to ensure their money is safe. By researching the reputation of a travel agent, travellers know the company they are booking with is financially stable and has a good track record of handling customer funds.

Ensuring quality of service

A travel agent’s reputation can also provide insights into the quality of service they provide. Travellers want to make sure that they are working with a company that is responsive, helpful and provides high-quality travel experiences. By researching their reputation, travellers can get a sense of the company’s customer service standards and the experiences that other travellers have had.

What are the different sources for travel agent reviews?

There are several different sources for travel agent reviews, each with strengths and weaknesses. Here is a comparison of some of the most common sources:

TripAdvisor

TripAdvisor is one of the largest and most well-known travel review websites, and it includes reviews of travel agents. The site allows users to post reviews of their experiences with travel agents and rate them on a scale of one to five. TripAdvisor is an excellent source for a large volume of reviews, but the quality of the reviews can vary widely, and there is no way to verify that the reviewers are legitimate.

Trustpilot 

Trustpilot is a review platform that allows consumers to rate and review businesses, including travel agents. The site uses a transparent review system and users can see the reviewer’s name and the review date. Trustpilot also uses a verification system to ensure the reviews are from genuine customers. However, Trustpilot can be biased towards negative reviews, as people are more likely to leave a review after a bad experience.

Google Reviews

Google Reviews is a popular source for travel agent reviews. Users can rate travel agents and write reviews, with the ratings displayed on the agent’s Google business listing. Google Reviews can be helpful as it shows the average rating of the agent, but the reviews may not be as detailed as other sources.

Travel blogs and forums

There are many travel blogs and forums where travellers can share their experiences with travel agents. These reviews tend to be more detailed and personal than those on review websites, but they may be less reliable as they are not subject to verification.

How to evaluate travel agent reviews?

Very few travel agents are perfect; even quality travel agents often have a few negative reviews. The key is to look for an agent with a good overall reputation and a history of consistently providing great service.

When evaluating travel agent reviews, there are several factors to consider. 

Consistency of reviews

Agents with a lot of positive reviews that are spread out over several months or years are likely to be more reliable than those with a few positive reviews that were all posted within a short period.

Quality of reviews

Read through reviews carefully and pay attention to the language used. Reviews that provide detailed and specific feedback about a travel agent are generally more helpful than those that are brief and vague.

Response to reviews

Look for agents who respond to reviews, both positive and negative. A travel agent actively engaging with customers and addressing their concerns will likely be more reliable and committed to providing a good experience.

Reputation: 

Research the travel agent’s reputation outside of their reviews. Look for news articles or other information that may provide insights into the quality of their services.

How important is the travel agent’s professionalism and experience?

The professionalism and experience of a travel agent can be crucial in ensuring a positive travel experience for their clients. A professional travel agent with extensive experience will offer valuable insights and recommendations, personalised services and support that helps clients navigate the complexities of travel planning and execution. 

An experienced agent ensures clients save time and money and avoid common travel pitfalls, while being able to address unexpected challenges during their trip. The best travel agents help their clients make informed decisions about their travel arrangements, ensuring they get the most out of their trip while staying within their budget and preferences. 

What are the advantages of using a professional and experienced travel agent?

There are several advantages to using a professional and experienced travel agent.

A professional travel agent has in-depth knowledge about destinations, travel routes and the best times to visit different locations. They provide valuable advice on where to go, what to see, and how to make the most of your trip.

Time-saving 

Planning a trip can be time consuming and overwhelming, especially if you are unfamiliar with the destination. A travel agent can handle all the details, from flights and accommodation to tours and activities, saving you time and hassle.

Personalised service

An experienced agent will work with you to understand your travel preferences and tailor your itinerary accordingly. They can recommend hotels, restaurants and activities that suit your tastes and budget, making your trip more enjoyable.

In case of any unforeseen circumstances during your trip, a travel agent can provide support and assistance. They can help you with flight cancellations, lost luggage and other travel-related issues, ensuring your trip runs smoothly.

Exclusive deals and discounts

Travel agents often have access to exclusive deals and discounts that may not be available to the general public. They can help you save money on flights, accommodation and other travel expenses, making your trip more affordable.

How do you assess a travel agent’s level of professionalism and experience?

Other than checking their accreditations and membership of industry organisations, there are several things you can do to assess a travel agent’s professionalism and experience. 

Ask for references 

Ask the travel agent for references from previous clients. This allows you to speak directly with someone who has worked with the agent before and can provide you with an honest assessment of their services. Most good travel agents will have a list of clients you could contact.

Enquire about their experience

Ask them about their experience in the travel industry, including how long they have been in business and what types of trips they specialise in. This gives you a sense of their level of expertise and whether they are well-suited to meet your specific travel needs.

Evaluate their communication skills

Pay attention to how the travel agent communicates with you. Are they responsive, friendly and timely in their communication? Do they listen to your needs and provide personalised recommendations? A professional and experienced travel agent should be able to communicate effectively and provide excellent customer service.

How important is it to verify the travel agent’s contact information?

Frommers emphasise the importance of verifying the contact information of a travel agent before booking travel arrangements with them. This is crucial because it ensures that the traveller can communicate with the agent in case of any changes or issues that may arise during the travel process.

One of the main reasons why verifying contact information is essential is to avoid falling victim to travel scams or fraud. Some scammers impersonate legitimate travel agents and provide fake contact information, which could lead to travellers losing their money or having their personal information stolen.

Furthermore, in the event of unexpected circumstances such as flight cancellations, delays or natural disasters, travellers need to be able to get in touch with their travel agent quickly. Accurate contact information allows the traveller to communicate their needs and preferences with the agent, who can assist in finding alternative travel arrangements or accommodation.

What’s the best way to check that a travel agent’s contact information is legitimate?

Verifying travel agents’ contact information is crucial for ensuring that customers can reach them and receive the services they need. There are several methods for verifying travel agents’ contact information.

Direct Contact

This method involves contacting the travel agent directly by phone or email and verifying their contact information. Although this can be time consuming, it is often the most reliable method.

Online Verification

You can use online resources such as directories, business listings or social media platforms to verify the travel agent’s contact information. This approach is quick and easy, but may not always be reliable.

Third-Party Verification

This method involves using a third-party service or platform to verify the travel agent’s contact information. It can be a reliable method but may come with additional costs.

What are the red flags for evaluating a travel agent’s legitimacy?

According to Frommers, some red flags to look for when assessing the legitimacy of a UK travel agent are:

Lack of accreditation 

Reputable travel agents in the UK should be accredited by organisations such as ABTA (Association of British Travel Agents) or ATOL (Air Travel Organisers’ License). If an agent does not have such accreditation, it may be a warning sign that they are not legitimate.

Unsolicited calls or emails

If you receive an unsolicited call or email from a travel agent offering you a deal that seems too good to be true, it probably is. Legitimate travel agents do not usually contact customers in this way.

Lack of transparency

A reputable travel agent should be transparent about their fees, as well as any terms and conditions that apply to the booking. If an agent is not upfront about these details, it may indicate that they are not legitimate.

Pressure to pay upfront

Be wary of travel agents who pressure you to pay for your booking upfront, especially if they do not accept credit card payments, as this could indicate a scam.

Lack of a physical address

A legitimate travel agent should have a physical address you can verify. It could be a warning sign if the agent only has a P.O. Box or a virtual office.

Poor online reviews

Before booking with a travel agent, check their online reviews on websites such as TripAdvisor or Trustpilot. If the agent has consistently poor reviews or a lot of complaints, it may be best to look elsewhere.

Unprofessional conduct

If the travel agent behaves in an unprofessional manner, such as being rude or pushy, it may be a warning sign that they are not legitimate.

Overall, it is essential to do your research and take the time to evaluate the legitimacy of a travel agent before booking with them.

How to respond to red flags

If you encounter any red flags that indicate a potential lack of legitimacy of a travel agent, it’s important to take certain precautions before doing business with them. 

Be cautious if the travel agent requests payment in cash. Instead, use a credit card or other secure payment methods for travel bookings, making it easier to recover your money if something goes wrong. However, before making any payments or commitments, double-check the travel arrangements provided by the travel agent. Verify bookings with airlines, hotels and other service providers to ensure they are legitimate.

If you’ve done due diligence regarding the travel agent’s contact details, accreditations and reputation but are still concerned about their legitimacy, it’s best to trust your instincts and look for another professional. Don’t be pressured into making a decision if you’re not comfortable.

Final thoughts on identifying legitimate travel agents

In conclusion, it is crucial to ensure the legitimacy of a travel agent before entrusting them with your hard-earned money and travel plans. To verify the credibility of a travel agent, you can check their registration with relevant authorities, read reviews from previous customers and enquire about their affiliations and accreditations. For example, if you were to check and see whether Not Just Travel is a legitimate company you would see that they are part of ABTA, that they have great TrustPilot reviews and have been around for many years. They have numerous travel suppliers and key trade partners including big name brands such as NCL Cruises, Virgin Voyages, Gold Medal, Travelpack, Audley Travel and more. You can also Google the company and see that they are frequently featured in newspapers including leading industry travel publications such as TTG and Travel Weekly . The company is extremely interesting because many of its agents operate their own home-based business through investing in The Travel Franchise . It means that they are totally committed and passionate about what they do and offer incredible customer service because the growth of their business depends on referrals and repeat business. If you want to experience the level of customer service, book your next holiday with a Not Just Travel agent and check out the franchise opportunity at The Travel Franchise.

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The 3 Red Flags of Fraud

Unfortunately, the travel industry is no stranger to fraudulent activities. It’s possible that you, yourself, as a travel agent, will run into suspicious instances with clients throughout your career. But don’t worry, we’re here to help you spot the signs. Here are the 3 red flags of fraud that you should beware of:

Last-minute bookings (travel date is within 2 weeks)

If a client is trying to book a last minute trip, that can potentially be a cause for concern. It is common knowledge that it is best to book trips well in advance, so last minute bookings come off as suspicious. It’s not necessarily fraudulent or wrong, but it is a red flag to beware of.

Cardholder name and traveler name do not match

If the name of the traveler and the name on the credit card that they provide to you for payment are not the same name – that is definitely cause for suspicion. To avoid any possible issues, ask your client for a credit card that has their name on it and clearly belongs to them.

Client is eager to book & finalize reservation

It’s normal to be excited about travel, sure. But still, as exciting as travel is, it generally is the kind of purchase that clients don’t rush to make. They generally require some time to contemplate and consider before finalizing a booking. That’s why it can be suspicious whenever someone tries to rush the process.

Although these three red flags don’t guarantee fraudulent activity, they are signs that you should watch out for. If your client is someone you know and trust personally, or if it is a client that you have served for a while, then you may use your discretion in those cases. Nonetheless, stay vigilant.

If you are suspicious of fraud, please email us at [email protected] so we can manually review the CC authorization form before making a payment. You will be responsible for damages otherwise on fraudulent CC bookings.

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• December 2019

Don't Ignore Fraud's Red Flags: The Key to Fighting Fraud is Preventing It

• Colin M. DeForge
• Dani Storts

When Joe Gorman was found dead from a heart attack in a Houston-area motel room, it seemed to be a simple open-and-shut case. But things aren’t always what they seem.

The Oklahoma man’s address was for a UPS store, his prepaid cell phone was tied to a group of Irish Travelers (a secretive and nomadic group known for insurance fraud schemes), and his fingerprints led to a murder in Colleyville, TX. Investigators determined that Gorman was responsible for the murder of Anita Fox, a 68-year-old housekeeper. Gorman and his son, Patrick, stalked and brutally murdered Fox as part of a complex insurance fraud scheme involving Fox’s own daughter and son-in-law, Virginia and Mark Buckland. The Bucklands, who were English Travelers, had taken out several life insurance policies on Fox, naming themselves as beneficiaries, for a total of nearly $5 million. The Gormans were brought in as third-party investors. Ultimately, Patrick Gorman was convicted and sentenced to 14 years in prison, and in May 2018 the Bucklands were convicted in civil court of participating willfully with malice in a conspiracy that led to the murder of Anita Fox.

The Many Faces of Fraud 

This dramatic chain of events demonstrates the lengths to which people will go to commit life insurance fraud. As an industry based on trust, life insurance presents an inviting target for fraudsters, and the variety of methods used to commit this sort of fraud continues to expand and evolve. The case above is an example of community fraud, a term applied to the actions of certain groups for whom life insurance fraud is, in a manner of speaking, a way of life. Although these schemes can take many forms, community fraud frequently involves the purchase of life insurance through concealment or misrepresentation of material information, in order to outlive the policy contestable period and/or incur an early death due to an undisclosed illness or circumstance. While the techniques used can be sophisticated, the goal is very simple: windfall profit. While community fraud may be limited to certain groups, anti-selection fraud – perhaps the most common type of fraud – seems to be everywhere. Anti-selection refers to an applicant’s withholding of pertinent medical or behavioral information, from a smoking habit to a hazardous avocation, to earn more favorable insurance rates. According to the Coalition Against Insurance Fraud, 15-30% of applicants will deliberately not disclose relevant information.1 While this might seem a little white lie to many, failure to disclose this type of information can drastically change the face value of the policy.   Take, for example, the following scenarios where an applicant fails to disclose tobacco use.  Scenario 1:

• Female, age 20, standard risk, non-tobacco, 20-year term, $1M face amount. 
• Approximate annual premium: $600.
• Total premium collected over the life of the policy: $12,000.

Scenario 2:

• Female, age 20, standard risk, tobacco, 20-year term, $1M face amount.
• Approximate annual premium: $1,100.
• Total premium collected over the life of the policy: $22,000.
• Loss of collected premiums if issued at the incorrect tobacco class (from Scenario 1): $10,000.

Scenario 3:

• Male, age 60, standard risk, non-tobacco, 20-year term, $1M face amount.
• Approximate annual premium: $9,000.
• Total premium collected over the life of the policy: $180,000.

Scenario 4:

• Male, age 60, standard risk, tobacco, 20-year term, $1M face amount.
• Approximate annual premium: $21,000.
• Total premium collected over the life of the policy: $420,000.
• Loss of collected premiums if issued at the incorrect tobacco class (from Scenario 3): $240,000.

Beyond community fraud and anti-selection, other common forms of fraud include:

• Ghost writing: An insurance agent who may have had his or her license or appointment(s) revoked due to fraud or other business concerns partners with another appointed agent. The appointed agent submits the insurance application in place of the terminated agent and typically engages in the same poor business practices that led to the original agent’s termination.  
• Churning : A broker or agent conducts excessive trading in a client’s account to generate commissions.
• Twisting : A broker or agent replaces an existing policy with a new policy from the same carrier for the purpose of generating additional commission revenue. More often than not, twisting results in an additional cost to the insured, in terms of lost cash value, higher premiums for the same face value, the need for re-underwriting, etc.
• Rebating : An agent, after commissions are paid out, refunds a portion of the premiums back to the applicant in the form of cash or in-kind items. Though illegal in most of the US, this scheme is subtle and can take a year or longer to discover. Rebating burdens the insurer and reinsurer with high acquisition costs and excessive policy lapses.
• False filings : This largely involves misrepresentation of the applicant’s business or personal financial status through document falsification. Examples include the use of unaudited certified public accountant (CPA) statements and overstated income and net worth figures.
• Stacking : A policyholder pursues multiple small policies to increase coverage, while reducing underwriting scrutiny by exploiting limited age and amount requirements.

Costs of Fraud

All told, the annual cost of fraud for the entire insurance industry is estimated at $80 billion. A recent poll conducted at the RGA Fraud Conference estimated the cost for the life insurance industry specifically at $10 to $20 billion annually. More than one-third of insurance companies estimate that fraud accounts for 5-10% of their claims volumes, and nearly 7 in 10 customers believe fraud happens because people believe they can get away with it. 1 There are the obvious financial costs to insurance companies resulting from fraud, including potential lost profits, revenues and client assets. However, the carrier company’s reputation is also on the line. Fraud can impact future business and referrals and lead to negative customer experience. Customers are also affected when the costs of fraud are passed on to them through increasing premiums to offset losses.  Unfortunately, sometimes the costs associated with investigating, pursuing and prosecuting a fraud case do not justify the dollar amounts that would be recaptured by the insurance company. The expense of an investigation is prohibitive, and the need to cut losses ultimately outweighs the benefit of catching the perpetrator. In an ideal world, companies would be catching fraud before it occurs.  This speaks to the extremely important role underwriters and claims specialists have in the insurance value chain. They are the front line in identifying and stopping fraud before it is ever on the books. In this era of accelerated underwriting, it is essential the value of due diligence and critical thinking not be forgotten in protecting the industry and policyholders. The attentiveness of underwriters and claims professionals staying on top of the red flag behaviors that signify fraud is critical to protecting insurance companies and customers. 

When it comes to fraud, industry professionals need to keep their guards up, to watch for common (and not-so-common) signs of fraud, and to have tools at their disposal to help them further investigate any concerns.  As previously mentioned, underwriters play a crucial role in the prevention of fraud. Here are a few red flags for which to watch: 

• Signatures on application and paramedical exam not consistent.
• Inconsistencies in height, weight, physical descriptions, license numbers or Social Security numbers.
• Blatant material misrepresentation on the application.
• The use of a post office box as the primary insured’s residence, employer, mailing address or billing address.
• Money order (or other cash equivalent) used to pay initial premium, particularly a large single premium.
• Premiums exceed the applicant’s apparent means.
• Premiums paid by someone other than the insured or policy owner.
• Premiums financed by unapproved premium finance program.
• Applicants say they do not know how premiums will be paid.
• Financial information provided on the application is false or cannot be verified.
• Applications with multiple carriers in a short period of time, particularly for large face amounts with an accelerated death benefit. 
• Applicant is a recent arrival to the US.
• Applicant resides, works or spends a great deal of time in a foreign country. 
• Applicant cannot provide a driver’s license or other identification or has a temporary or recently issued form of identification.
• Applicant is overly interested in claim procedures or is unusually familiar with insurance terminology or procedures.
• Beneficiary does not have an insurable interest.
• Policy owner does not have a relationship to the insured.
• Initial premium is not valid (e.g., checking account information not valid, premium rejected due to insufficient funds, credit card payment rejected).
• Pattern of agent or broker closing out cases due to lack of requirements, then immediately submitting a new application on the same individual, particularly when the application escalates in premium value.
• Agent or broker submits multiple applications on the same individual without explanation.
• Excessive controlled business submitted by agent or broker.
• Pattern of agent or broker writing identical product, face amount and application information on multiple applicants (especially for products with limited underwriting requirements).

Trust your applicants, agents and brokers, but verify the information they are providing. Trust, but verify! Verify, but validate! Trust your gut, your experience and your training. Ask yourself: Does it make sense? If things don’t quite add up, speak up! Don’t be afraid to ask questions or ask for additional evidence – especially when you see red flags. For an even more extensive list of red flags and investigation tools, see RGA’s list of fraud red flags.2 It is a helpful guide to the many warning signs to keep top of mind, from underwriting and policy application through claims processing. 

Know the Tools Available and Use Them

When it comes to preventing fraud, information is power. In this technological age, there are endless ways to find additional supporting information. Some are easily accessible by anyone; others require registration or even payment. However, a little effort can help protect a company’s bottom line.

Internet Search

Sometimes the simplest tool is the most helpful. Consider the case of the drowning husband:  A death claim was filed on a policy purchased 6 months prior. The cause of death was accidental drowning while swimming in a lake. The body was said to have been found and cremated. The wife was listed as the beneficiary, and she asked that the claim be expedited. Because the matter of death was accidental, the insurance company conducted a limited investigation, which was usual. The insurer first searched online news sources and no articles about the drowning were found. A review of the online obituary showed the wife had a different last name from the insured. In addition, condolences posted with the obituary referenced a similar tragic death a few years prior. Reviews of Facebook showed the insured’s account was deactivated. Posts indicated the insured and beneficiary had recently been married. Other posts referenced the death of her previous husband, who had also died of accidental drowning.

The red flags generated by a simple online search led to an investigation. The investigation proved the drowning was fabricated, the death certificate was fraudulent, and the funeral home was complicit. When a red flag is triggered, an internet search for local newspaper sites for obituaries of life insurance claims, doctors and specialists to match the information provided by a claimant, hotels, accident sites or weather conditions can be used to double-check a client’s story. Below are examples of online resources that can be of assistance: 

• Black Book Online is an extremely powerful, free public record search tool for information including criminal cases, business ownership records and property ownership data.
• Zillow is a website that estimates the market value of a proposed insured’s home.
• Celebrity Net Worth is a reference tool that uses publicly available information to determine the net worth of high-profile individuals.
• The FAA Registry’s airmen search can help determine if your applicant is a licensed pilot.
• The Instant Checkmate Standard Report contains a person’s date of birth, phone numbers, address history, related persons, arrest records, government license information and social media profiles. (Premium reports may include civil judgments, corporate affiliations, watercrafts owned and more.) 

Short-Term Disability Claims Data

The Presley Reed publication (now available as an e-book) is designed for short-term disability claims. It also serves as an excellent medical resource as it lists diagnoses, treatments, medications, co-morbidity issues and more. This can assist in identifying and understanding why a particular treatment has been undertaken, or querying why it has not been recommended.  The following hard-copy information sources can also be helpful. 

An old-fashioned calendar can provide lots of insight into a claim. When a date of an event is reported, pay particular attention to the day of the week and the time of the event – would a person normally be at that place, during that time? This can be a very useful initial inquiry point. For example, why was a construction worker, who died as a result of an accidental fall, at the building site in the evening on a weekend?

Travel Documents

Copies of passports, airline tickets, hotel reservations and more can be used to confirm information, whenever a claim event occurs outside of the country in which the policy was written. For passports in particular, it is typically worth checking if the insured holds more than one (e.g., dual citizenship).

Court Records

Underwriters often run motor vehicle record and criminal record checks during the underwriting process and may rate, add a flat extra or decline based on the findings. This could show a history of fraudulent activity. Embezzlement, fraud, insider trading, blackmail and extortion are considered serious offenses, and most companies will automatically decline anyone with a history of a conviction in any of the listed crimes.

Oftentimes, companies collect data that has been identified as common among fraudulent claims and applications. For example, RGA’s Risk Scoring Model in India is being used very successfully to identify applications that require additional proof, based on certain triggers such as geographic area of residence, educational level attained, income band and more. 

Risk Scoring Tools 

Tools that leverage data such as prescription histories and credit scores to generate a risk profile can be used to help offset fraud as they include verifiable information on an applicant, which the applicant cannot intentionally manipulate. Prescription histories can help to verify medical questions on an application or provide direction for an underwriter to request specific details regarding the results.

Join the Fight Against Fraud

Underwriters and claims professionals cannot fight fraud alone. All insurance professionals need to increase awareness of the many different areas and types of fraud. Life insurance professionals must find ways to share knowledge, perspectives and fraud-prevention ideas. It would benefit us to go outside of our own companies to promote an industry-wide movement. LIMRA/LOMA has teamed up with fraud prevention experts and developers to create FraudShare, a fraud information-sharing and alert platform to combat account takeovers.  Companies should also work with organizations outside the insurance industry to share best practices for fighting fraud. Events such as the RGA Fraud Conference (www.rgare.com/fraud-conference) provide an opportunity for professionals from multiple disciplines and industries to collaborate and learn the latest fraud identification and prevention techniques. The most important thing is to stay vigilant. Working together, sharing information, breaking down silos – this is how insurance fraud will be defeated. Fraud never rests and neither should we. 

More Like This...

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• Articles November 2018 Shades of Fraud: An Actuary’s Call for Others to Join the Fight against Fraud Read More about Shades of Fraud: An Actuary’s Call for Others to Join the Fight against Fraud
• Articles February 2011 Provider Fraud – Detection and Management Read More about Provider Fraud – Detection and Management
• Articles April 2017 Innocents Abroad? Read More about Innocents Abroad?
• Research and White Papers February 2018 RGA 2017 Global Claims Fraud Survey Read More about RGA 2017 Global Claims Fraud Survey
• Articles July 2017 Lieutenant Columbo’s Lessons for Detecting Insurance Fraud Read More about Lieutenant Columbo’s Lessons for Detecting Insurance Fraud
• Articles August 2018 How Demographics and Attitudes Impact Insurance Fraud Read More about How Demographics and Attitudes Impact Insurance Fraud
• Articles November 2018 Nomadic Claims: The Rubik’s Cube of Life Insurance Fraud Read More about Nomadic Claims: The Rubik’s Cube of Life Insurance Fraud
• Research and White Papers August 2017 Investigating Life Insurance Fraud and Abuse Read More about Investigating Life Insurance Fraud and Abuse
• Articles March 2019 Modernizing Insurance Fraud Prevention Read More about Modernizing Insurance Fraud Prevention
• Articles July 2019 Combating Life Insurance Fraud in a Digital World Read More about Combating Life Insurance Fraud in a Digital World
• Articles November 2016 Combatting Fraud through Predictive Modeling Read More about Combatting Fraud through Predictive Modeling
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5 Vacation Rental Scam Red Flags to Watch For

Caroline Morse Teel

Caroline Morse Teel is the Managing Editor for SmarterTravel Media. Follow her adventures around the world on Instagram @TravelWithCaroline.

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You’ve spent hours sifting through hundreds of listings to find that perfect vacation rental for your next trip—but there’s a few precautions you should take before you book. Vacation rental scams are on the rise. Watch out for these five red flags and avoid becoming a victim the next time you travel. 

Requiring Payment on Another Platform

You’ve sent a vacation rental owner a request to book their property, and they reply that they’d love to have you stay—but they want you to send the deposit via a money order, Zelle payment, or check. 

There’s a reason why someone would ask you to pay outside of the vacation rental platform, and it’s not a good one—it’s because they’re scamming you. Vacation rental platforms have built-in protections for buyers (and sellers) to prevent fraud. Instant payment options like Zelle don’t offer the same safeguards, and make it much harder to get money back. Never pay for a vacation rental outside of the platform you’re booking through, as you could be left without any recourse if the listing turns out to be a scam.

Vacation Rentals vs Hotels: Which is the Better Choice?

Messaging You to Cancel

Vacation rentals aren’t like hotels—if an issue arises with a property, you can’t just be moved to another room. Things to come up and vacation rental owners may need to cancel your booking. However, be wary of any message that asks you to cancel your trip (rather than the host initiating the cancellation). Vacation rental booking platforms will give you a full refund if your host cancels, but if a guest cancels a booking, they’re usually subject to a hefty penalty. 

A common scam involves a vacation rental owner messaging a guest at the last minute saying there’s an issue with the property and they can’t fulfill your booking or offer to move you to an inferior option. The owner is hoping that you’ll cancel the booking and they can pocket the fees. Instead, wait for the owner to cancel the booking on their end, or reach out to the vacation rental company directly to intervene. 

Fake Photos

Does the property look too good to be true for the price tag? It could be a warning sign that the listing is fake. Many listings use altered or fake photos to entice people into booking, only to find out upon arrival that the property looks nothing like the photos.

To avoid falling victim, search the address of the home and view it on Google Maps to at least see the exterior. You can also see if any bad reviews or warnings associated with the address come up, in case the property has been listed (and banned from) other vacation rental sites. 

You can also run a reverse Google Image search to see if someone has stolen stock photos to use in their listing. Simply copy the images and paste them into Google Photos search to see where else on the internet the photos are used.

The 15 Best Hotel Booking Sites

Fake Damage Fees

You took the trash out, stripped the bed, and even started a load of laundry as directed by the checkout instructions. But a few days later, you get a message from the vacation rental host claiming that you trashed the place or broke things and owe damage fees.

To protect yourself, take photos and videos of the vacation rental as soon as you check-in and before you check-out so that you’ll have evidence of the condition that you left the place in. 

Fake Vacation Rental Emails 

Before you click on that email from the vacation rental company notifying you about a change in your reservation, stop and double check the sender. A common scam involves fraudsters sending out emails that appear to be from a legitimate vacation rental company in the hopes that they will trick you into giving up personal information.

Before clicking any links, always check the domain that an email was sent from. For example, Airbnb has a list of official Airbnb domains on their website—if an email address is not from one of those domains, it’s a scam. So watch out for email addresses that look legitimate (like [email protected]) but aren’t. 

Also, know that vacation rental companies won’t ask you for personal information (like credit card numbers) over email.

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The State of Financial Crime 2024: Download our latest research

23 September 2022

Aml red flags – what are the top 10 indicators.

Insights AML red flags – What are the top 10 indicators?

The growing complexity, diversity and interconnectedness of the financial system is creating new opportunities for criminals . As a result, the anti-money laundering (AML) red flags firms are monitoring will change. So what should compliance teams be looking for, and how do these risks vary by industry? 

What are red flags in AML?

AML red flags are common warning signs alerting firms and law enforcement to a suspicious transaction that may involve money laundering.

The Financial Action Task Force’s (FATF) international standards to fight money laundering and the financing of terrorism and proliferation provides a comprehensive and consistent framework of measures for firms to follow.

Here are our top 10 AML red flag indicators:

1. Secretive new clients who avoid personal contact

Firms should have Know Your Customer (KYC) and customer due diligence (CDD) procedures in place when onboarding new clients. If a customer refuses to answer questions about themselves, firms should consider whether this is suspicious, especially if they have criminal associations, or know an unusual amount about the money laundering process. 

2. Unusual transactions

Customers trying to launder funds may carry out unusual transactions. Firms should look out for activity that is inconsistent with their expected behavior, such as large cash payments, unexplained payments from a third party, or use of multiple or foreign accounts. These are all AML red flags.

3. Unusual source of funds

Transactions involving large amounts of cash or private funding could indicate money laundering, and if cash deposits or complex crypto assets are involved, identifying the source can be difficult.

4. Transaction has unusual features

The size, nature or frequency of transactions, or repetitive instructions involving common features, are all AML red flags. Firms should be particularly alert if a transaction appears unusual for the customer’s profile, or if there is unexplained urgency.

5. Geographic concerns

If a firm is not local to the customer, why are they using it? Unexplained connections with – and movement of money between – jurisdictions should also raise suspicions.

6. Politically exposed persons

Individuals – and their family and associates – in high positions are more vulnerable to corruption and could pose a higher risk of money laundering for quid-pro-quo favors or kickbacks. While no standardized global definition exists, PEPs typically include heads of state, senior politicians or government officials, judicial or military officials, senior executives of state-owned corporations, or important political party officials. 

7. Ultimate beneficial ownership is unclear

Ultimate beneficial owners are the people who ultimately own or manage a company. Complex ownership structures, or the use of shell companies, could be an attempt to disguise criminal activities and carry out financial crime. 

8. Jurisdiction risk

Some countries or jurisdictions have high levels of corruption, unstable governments, or are known as money laundering havens. They could also have inadequate AML/CFT regulatory and judicial frameworks, or be subject to economic sanctions . Transactions that involve these countries should be carefully monitored as AML red flags.

9. Sanctions exposure

It is important that firms review relevant international sanctions lists to ensure that customers are not sanctioned themselves, or involved, or transacting with, a sanctioned entity. As Russia’s invasion of Ukraine has demonstrated, sanctions lists are subject to change at short notice. This means firms need to ensure they have a real-time plan for managing rapid changes. 

10. Adverse media

Additional checks may also be needed if the customer is a subject of negative news media in any part of the world, as this could increase AML risk. Firms should ensure their adverse media screening is appropriately aligned with common predicate offenses.  

How do AML red flags vary by industry?

While the above tips provide general guidance regarding customers and transactions to be wary of, the nature of red flags will vary by customer and industry.

For example, the virtual asset industry faces specific risks that firms should be aware of. The FATF recently issued guidance on virtual asset (VA) red flags, highlighting six key areas of focus:  

• Transactions : Firms should look out for the structuring of VA transactions (e.g. transfer or exchange) in amounts under record-keeping or reporting thresholds 
• Transaction patterns: A new user may attempt to trade the entire balance of VAs, or withdraw the VAs and attempt to send the entire balance off the platform
• Anonymity: Firms should look out for customer transactions involving more than one type of VA and especially VAs that provide higher anonymity, such as anonymity-enhanced cryptocurrency (AEC) or privacy coins
• Senders or recipients: Customers may create separate accounts under different names to circumvent restrictions on trading or withdrawal limits imposed by VASPs
• Source of funds or wealth : The use of one or multiple debit and/or credit cards that are connected to a VA wallet to withdraw significant amounts of fiat currency (crypto-to-plastic), or funds for purchasing VAs are sourced from cash deposits into credit cards
• Geographical risks: Customer uses a VA exchange or foreign-located money or value transfer service (MVTS) in a high-risk jurisdiction with inadequate AML/CFT regulations for VA entities, including inadequate CDD or KYC measures

Following FATF guidance and local legislation, AML programs should ensure a risk-based model that reflects their threat landscape and  regulatory environment , effectively highlighting any AML red flags. This should include suitable  CDD processes , identifying customers for  enhanced due diligence  (EDD), transaction monitoring solutions , and sanctions ,  PEPs and adverse media screening .

Originally published 23 September 2022, updated 15 April 2024

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Travel MLMs: What You Need to Know

We’re about to get a little bit controversial here and chat up on travel MLMs (multi-level marketing) businesses.

Before I launch in, I want to say that this not a “host travel agency vs. MLM face-off” or anything of the like. No way. We’re all about peace, puppies, totality, and trumpets over in our neck of the woods. If you want to go with a travel MLM and you know what you're getting into, go for it.

Every so often an aspiring travel agent stumbles into a travel MLM thinking it functions like a host travel agency. But that’s just not the case.

But every so often an aspiring travel agent stumbles into a travel MLM thinking it functions like a host travel agency . But that’s just not the case. Host agencies and MLMs are two different types of businesses. I'd say they're like apples and oranges, but it's really more like apples and elephants.

We want to help agents differentiate between full-service travel companies like host agencies (which support agents to sell travel) and travel MLMs (which tend to emphasize selling memberships). Here's the key takeaways:

⭐️ HAR ARTICLE HIGHLIGHTS: ⭐️

• What is an MLM? An MLM, short for Multi-Level Marketing, is a business model that relies on recruiting others to sell products rather than just selling products yourself. You make money by getting commissions on your sales, but also on the sales of the people you recruit (your "downline"). >>> Jump to section
• What is an MLM Travel Agency, Specifically? It's a business model that focuses on recruitment over booking travel. Unlike traditional travel agents, income from travel MLMs comes mainly from selling memberships to build a sales team, not commissions from booking trips. >>> Jump to section
• The Truth About Travel MLMs (An Infographic) Travel MLMs are opaque when it comes to documenting earnings and success rate. This infographic offers a look at travel MLMs in a visual nutshell! It magnifies the "fine print," showing data from income disclosure statements, offering a list of travel MLMs, and more. >>> Jump to section
• A Note on Travel MLM Income Disclosures & Compensation Structures : A review of what travel MLM income disclosures and compensation structures include and conceal with real-life examples. >>> Jump to section
• The Coded Language of Travel MLMs : How do you know if you're in MLM danger zone? Check out these real-life examples of travel MLM lingo. >>> Jump to section
• The Travel MLM Hybrid/ MLM-Affiliated Model : Some companies affiliated with an MLM marketing arm distance themselves given the bad reputation of pyramid schemes. Read more about this model of "hybrid" travel MLMs. >>> Jump to section
• How Did Travel MLMs Start Getting a Bad Rap (An Origin Story)? Travel MLMs started with YTB, Your Travel Business. Here's a rundown on how the emergence of YTB soured the travel industry for the travel MLMs of today. >>> Jump to section
• How Is a Travel MLM Different from a Host Agency? What makes a host agency different from a travel MLM? A lot. This section takes a big-picture look at these differences including how HAR flags travel MLMs and MLM hybrids on their site. >>> Jump to section

What Is An MLM?

In a nutshell, an MLM, short for Multi-Level Marketing, is a business model that relies on recruiting others to sell products rather than just selling products yourself . You make money by getting commissions on your sales, but also on the sales of the people you recruit (your "downline"). MLM marketing is also called “network marketing” and “direct sales,” so if you see a website throwing around that terminology, they’re probably talking about an MLM business model.

MLM expert, Robert FitzPatrick, published a 2008 study that covered ten publicly traded MLMs at its time—including the now-defunct travel MLM Your Travel Business (YTB). What did he find? In short this: ". . . 99% of all [MLM] participants received less than $10 a week in commissions, before all expenses ." 1

We love academic papers, but this fictionalized explanation from The Office is arguably (or factually?) more fun.

With the exception of YTB, FitzPatrick's study take didn't offer a deep-dive on how travel MLMs, in particular, operate. Moving on, we'll focus on how MLM travel agencies are unique. Why? Because travel is a very different product than, say, herbs, vitamins, makeup, or leggings.

But one thing travel MLMs have in common with more conventional MLMs is the high rate of failure. Let's dig in and chat travel MLMs specifically.

What Is an MLM Travel Agency?

In travel MLMs, the dominant revenue stream is from selling memberships to recruits, not commissions from selling travel.

What is an MLM travel agency? It's a business model that focuses on recruitment over booking travel. Unlike traditional travel agents, income from travel MLMs comes mainly from selling memberships to build a sales team, not commissions from booking trips.

Like any other MLM, travel MLMs have two revenue streams for their members:

• Commissions from selling a product (in this case, travel) directly to clients.
• Commissions, overrides, or kickbacks on membership sales from recruiting others into the organization.

In travel MLMs, the dominant revenue stream is from selling memberships to recruits, not commissions from selling travel. Travel MLMs will try to entice you with promises that residual (or passive) income will trickle down from the upper echelon of the downline. (*cough* pyramid scheme.) 

What makes a travel MLM different from other MLMs (like Amway, LuLaRoe, Herbalife, etc.) is that reps don’t have to buy any product to sell like leggings, makeup, or vitamins. ( However, oddly enough, some travel MLMs do also try to push selling vitamins and energy boosters!) In some ways, not having to buy products makes a travel MLM less risky in terms of financial investment (but not without risk).

Travel MLMs are opaque regarding their success rate. Many travel MLMs are not required to publicize their income disclosure statements (they're not publicly traded). Those that do share their disclosures (in the name of transparency) present a pretty grim picture when it comes to income potential. 

You know how in most sales situations, you make the bulk of the commission on the product? Well, with MLMs, the people above you are the ones raking in the dough. (*cough* pyramid scheme). Here's a visual of how MLMs operate, using real-life MLM income disclosures as an example.

Here's a closer look at the three Travel MLM income disclosures mentioned in the infographic.

1. Dream Trips (formerly WorldVentures)

For example, travel MLM Dream Trips (formerly WorldVentures) reported in 2019 ( the most recent disclosures available ) that 14.6% of all Representatives earned a commission or a bonus. 85.4% earned nothing or operated at a loss. The average commission and bonus earnings of all reps was $354.31, including the ones who made $0.

If you take out the group who made nothing (or operated at a loss), you get an average of $2,425.55 and a median of $50.00. But the annual cost to join Dream Trips is a minimum of $769.89 in its first year ( source for annual fees ). (It may not come as a surprise to our perceptive readers that WorldVentures has declared bankruptcy, attempted an acquisition, and rebranded as Dream Trips, all since 2019.)

2. Incruises

Travel MLM Incruises is one of the world's largest subscription-based travel companies whose majority of income-earning "partners" (reps) bring in less than $10,000 annually. 705 Partners earned more than 10,000 dollars in a 12-month period, which is only 2.21% of all "active" reps (what they mean by "active" is clear as mud, which we'll address later).

They actually state quite plainly in their April 2024 disclosure that: "most Partners will not reach the highest levels...where a substantial income can be achieved." The number that does, in fact, is 97 people total. (Friends, that's 0.30%.) 2 . YIKES.

Travel MLM MWR has a unique income disclosure in that they do not tell you:

1. the overall average income

2. how many members are a part of their network

What this means is that we can't tell you what percent of members earn zero income. But the numbers are no less dismal. Most of their membership base, 73%, are among the worst-performing tier. This group (entering pyramid scheme territory) earned an $18 annual average (and no, that is not a typo).

A Note on Travel MLM Income Disclosures

You've have a peek behind the when it comes to income disclosures and compensation structures. Looking at an income disclosure can leave you with more questions than answers. If a travel MLM does provides an income disclosure (they are not required by law unless the travel MLM is publicly traded), you can typically find out:

• the average earnings for active reps at different tiers
• the period in which income was earned
• the percentage who earned some and/or no income during that period

These income disclosures are in stark opposition to the implications of all the residual income and free trips these travel MLMs focus on in their marketing.

But there's a lot that an income disclosure doesn't tell you. Many income disclosures will not include information such as: 

• Churn Rate & Attrition:  How quickly reps turnover and leave the MLM. The data may only include the number of reps who are still signed on with them at the end of the disclosure period, and do not account for the number of reps who left within that time frame. 
• Total Number of Distributors at Different Levels of the Organization:  This masks the total number of reps and distributors in general, then further obscures the data by not revealing how many reps sell at what level. How does this affect things? It skews the average income of the typical rep since the income spread between the bottom and top of a pyramid scheme can be significant (hundreds of thousands or even a million).
• How Much Income is from Travel Commissions:  The data also does not disclose what percentage of the income earned is from actual travel commissions (vs. residual income from referrals).
• Definition of "Active" Distributor:  Is active defined as someone that has sales during that period? Or any distributor paying fees? We have no idea. 

What this means is that if you're interested in aligning yourself with a travel MLM, you'll want to arm yourself with curiosity. The FTC published a pdf chapter from Jon M. Taylor, PhD, 2011 book, "The Case For (and Against) Multi-Level Marketing." Here, Dr. Taylor cautions those interested in MLMs to ask about attrition (dropout) rates. Here's what he says:

" Prospects should ask their recruiter to furnish the company’s attrition (dropout) rate; i.e., the percentage of recruits who sign up only to drop out within a year — and over a five or ten-year period. If they can’t or won’t furnish it, you can assume that it exceeds the minimum of 50% per year . . . Over a five-year period, at least 95% typically have left the company; and usually after ten years, nearly all but those at or near the top of their respective pyramids will have dropped out." Source (pg. 6)

Herein lies the illusion of transparency when it comes to a travel MLM's income disclosure : As bad as the disclosures look already, it gets even worse. The info included does not (and is not required to) offer to a complete picture of earning potential of MLMs, which can further mask losses. 

And this is really just the tip of the iceberg. There's a ton of other juicy information that many MLMs (not just travel MLMs) conceal in these types of statements. 3

The Coded Language of Travel MLMs

In general, travel MLMs get real shady when they make more money by recruiting other sales reps into the organization than they do actually selling a product (in this case, travel). This is entering serious pyramid scheme territory. And that’s a major DANGER ZONE folks.

But how do you know if you're entering the travel MLM danger zone before it's too late? Marketing language is one key! Travel MLMs use their own jargon for their travel agent members. They actually use this wording to make their offer more attractive. Be your own boss! Work independently! A travel MLM will more likely refer to its participants with terms like: representatives (PlanNet Marketing), builders (Surge365), referring travel agent (YTB) . . . you get the gist.

Alternately, with a host agency, it's 99% likely that they'll refer to you as an " independent contractor, " travel business , or travel advisor .

The TV show Schitt's Creek nails the jargon for their fictional MLM, Allez Vous.

But you don't need to rely on fiction, you can see it in action. This "Your Travelution" promotional video clip outlines some of the misleading and manipulating marketing strategies travel MLMs will use to try and recruit members:

Halfway through the TraVerus video below, it attempts to sell you on a nutritional supplement (another MLM product), which reps, in turn, would sell to others—verging from its original appeal and trying to woo you with promises of feeling and looking great while you lounge on the beach. 

The MLM Hybrid/ MLM-Affiliated Model

[Editor’s note: This section was added Oct. 12, 2018 and updated April 18th, 2024.]

The HAR desk often gets inquiries about InteleTravel host agency. I didn’t want to go too deep into InteleTravel when I first wrote this because I knew I’d already be kicking a hornet’s nest. But here I go now, about to take a swing at it.

While InteleTravel is not an MLM, anyone who wants to sign up with them must go through their MLM marketing arm, PlanNet Marketing

While InteleTravel is not an MLM, per se, anyone who wants to sign up with them must go through their MLM marketing arm, PlanNet Marketing, in order to sign on. And this is where it gets a little sticky.

As is typical of an MLM, earnings from PlanNet Marketing do not compensate for the level of investment required . Here’s the cliff notes in their own words: "During the period January 2023 to December 2023, 20.92% of all IRs earned a commission or override, while 79.08% did not."

For PlanNet marketing's "Rep" level (the entry point), the average annual income reported was $41.64. 4 . This lowest-earning segment is 93% of PlanNet marketing's membership.

But how does PlanNet link in with InteleTravel? Inteletravel uses PlanNet marketing for marketing. To be very clear, someone can join Inteletravel without joining PlanNet Marketing. Borrowing from PlanNet Marketing's terminology, this means that Inteletravel agents are not required to sell ITAs ("independent travel agencies"). But again, the caveats:

1. If you want to join Inteletravel, you must go through a PlanNet Marketing Rep. You cannot sign up directly with them. What does mean? It means you will be a part of someone's downline whether you engage in recruiting or not.

If one wants to steer clear of the the MLM and sign up for InteleTravel only, they may be pressured (depending on the rep they purchased their agency through) to also sell ITAs (InteleTravel travel agencies) through PlanNet Marketing. A PlanNet Marketing rep will send you their personal page to sign up. This is a huge red flag.

2. PlanNet Marketing strategy draws hoards of advisor to Inteletravel. In July 2023, InteleTravel reported having "more than 90,000 independent home-based advisors." For perspective, if you add the total number of travel advisors all 197 of HAR's host agencies report, the total is 76,298, and the average number of ICs is 387.

It looks like this: 

The small print (on the image above) also indicates you can only enroll through the PlanNet Marketing rep account first if you're interested in joining InteleTravel.

Several InteleTravel agents I spoke with (who I will not name for privacy purposes) have reported that an InteleTravel agent is not required to sign up for PlanNet Marketing to sell ITAs . The important thing to know is that when you sign up for InteleTravel, you'll be a part of someone's downline whether you personally participate in the MLM side of things or not. When host agencies rely on these MLM marketing arms, we call them "MLM hybrids."

Though InteleTravel is not technically an MLM,  for us there are red flags with InteleTravel due to their reliance on PlanNet Marketing's MLM branch.  

This might be more information than you ever wanted to know. However, InteleTravel is one of a handful of host agencies that partner with MLM marketing branches in the same way and we want you to be informed! (Archer Travel, who affiliates through Evolution's MLM marketing branch is another.)

Do you know of other travel MLMs or MLM hybrids that are not mentioned in this article or infographic? Drop a comment below!

How Did Travel MLMs Start Getting a Bad Rap?

The shady reputation of MLMs certainly is not limited to the travel industry, but when it comes to travel MLMs in particular, it was the rise and fall of YTB (Your Travel Business) that really left a bad taste in the mouth of the travel industry.

Long story short: founded in 2001, YTB was modeled after a typical pyramid scheme structure that preyed on hopes of those who were economically vulnerable with promises of get-rich-quick schemes that required little time and relatively low financial investment. In 2008, California's then-Attorney General Edmund G. Brown Jr., won the lawsuit he filed against YTB to halt their operations.

85% of YTB’s revenue was from selling memberships and materials for marketing courses to new recruits rather than travel sales. This from a company that had claimed you were a travel agent!

And there’s more … guess how much the average YTB rep earned each year? The average annual commission paid to a YTB rep was $44.29. Sounds bad, right? Well it gets worse, because 81% of all YTB reps earned no money at all, and 4% of YTB reps (those at the top of the upline) received 96% of all commissions paid to the company.

And the travel MLMs' habit of primarily booking personal travel (rather than travel for consumers) is something vendors noticed. Vendors felt that non-professionals were exploiting travel agent benefits (such as FAM trips) for personal gain. So much so, that many travel vendors severed ties with YTB.

TW image sources here , here and here .

YTB was subject to lawsuits from CA, IL, as well as a class-action lawsuit and eventually went bankrupt. But the vestiges of YTB exist today in modern-day travel MLMs. The founder of YTB (J. Lloyd “Coach” Tomer) is now the Chief Visionary Officer for Surge365 (one of the companies featured in our infographic earlier).

David E. Manning was president of now-defunct Travelworks International, Inc. and is currently the president of Paycation (which now shows up as TraVerus, over which he also presides) and he is also the chairman of XStream travel. All of these are travel MLMs.  5

MLMs will often run strong for a few years, but implode once they get too big to sustain themselves. The MLM may close its doors, possibly reemerging if its founders will start a new one, or rebrand and operate under another name. 

And The Oscar Goes to . . . A Travel MLM Mashup!

Steph put together a great travel MLM mashup video to illustrate exactly how MLMs and their reps operate by preying on vulnerabilities, making big promises with zero info to back them up, and how they eventually become saturated and collapse (yes, it's essentially a more entertaining version of what I just wrote 🙂)

If you're still not convinced, and you want to give MLMs a shot, the FTC has a resource page with some great questions to ask your sponsor before signing on with an MLM. 

How Is a Travel MLM Different from a Host Agency?

At its most basic, the major difference between a travel MLM and host agency is what comprises their primary revenue streams. Host agencies don't earn money unless you sell travel (not so with a travel MLM, that makes more money from membership sales). This means that hosts are motivated to support you to sell as much travel as possible.

But there's many differences beyond revenue channels. Here's some more:

How you book travel

Some travel MLMs such as WorldVentures (which filed for bankruptcy in Dec. 2020) do not allow their reps to book directly with vendors . Rather, vendors require that travel bookings are made through a designated MLM HQ, where the MLM permanent staff (not any of its members) make the actual booking for agents.

This may sound nice but the downside is that you're not in control of your reservation. This is problematic if you sign on believing you’ll be able use vendors’ travel agent portals, call in direct to the travel agent support lines, and build a relationship with the sales reps.

With a host agency, you are able to connect with suppliers either directly or through the hosts proprietary booking portal (or both!)

Transparency

Travel MLMs and MLM hybrids offered little to no concrete information about commissions, backend support, Seller of Travel  (which you need if you’re selling travel in certain states), E&O insurance —not even basic information about joining without signing onto their email listserv or participating in a sizzle call.

Heck, many of these sites don't even include profiles of people who run the business. So if the only way to get support for your agency is to send an email to an address with no name or employee attached to it, I'd be wary. By and large, they offered a lot of promises without any information to back it up. 

The host agency profiles on HAR's site (and on host's websites) are very clear about this information from accreditation, licensing, technology, IC volume, sales and more. Here are just a few of the other differences between a host agency and a travel MLM.

Travel Advisor Volume

Host agencies will typically have much lower volumes of travel advisors compared to travel MLMs. These days, most MLM income disclosure refer to their member volume.

What we do know is that MLM hybrid InteleTravel reported 90k advisors. With InCruises reporting 31.73% of their members are membership free, we can extrapolate they have ~32,067 members. Most other travel MLM don't disclose their volume.

Host agencies, which do no focus recruitment, have a much lower IC volumes. At the time of writing this, 197 host agencies averaged 387 ICs.

In fact, if you want to become a travel agent with a focus on creating a client base, receiving a constant travel education, building relationships with suppliers, and providing great customer service over recruiting other sellers, I’d steer you (far) away from an MLM and direct you to a host agency.

If you're a travel agent or an aspiring travel agent who wants to earn money planning trips and selling travel, we here at HAR do NOT think a travel MLM is a good option for you. No sirree. Not by a long shot.

The HAR crew has mind-melded on the travel MLM issue. Originally, when this article was first published, we didn't even list MLMs on the site. Since then, we decided it's important to list them because our whole purpose is for travel agents to make informed choices. So here's the drill: if you see an MLM or an MLM hybrid (more on hybrids soon), you'll notice an alert on their profile.

Why do we advise such caution? It's our opinion that MLM travel business models use deceptive advertising, prey on people who are at an economic disadvantage and do not provide adequate support to serious travel agents.

Want to Become a Travel Agent Without Joining a Travel MLM?

If you're interested in becoming a travel agent without falling into the costly trap of a travel MLM, Host Agency Review's 7DS Accelerator course can help you breeze through your travel agency setup process. Whether you want to sell travel part time or build it into a full-fledged dream career, the course ensures that you will align with legitimate host agencies, franchises, or accrediting organizations who are not highly regarded by travel suppliers.

The course gets you off the ground faster so you can start earning commissions faster. That right, earning a solid income from selling travel . . . not recruiting people. Check it out!

Travel MLMs were something of an uncharted territory for me. So when I started by digging into the Google-verse, I was surprised to find how little concrete information was provided about joining a travel MLM organization on their site.

Heck, many of these sites don't even include profiles of people who run the business. So if the only way to get support for your agency is to send an email to an address with no name or employee attached to it, I'd be wary. By and large, they offered a lot of promises without any information to back it up.

Travel MLMs have gotten shiftier. No longer will they make promises of how much income you can earn in a month (because, according to the FTC, they need to be able to provide support of any income claims 6 ). Rather, they make appeals to lifestyle and promises of free or discounted travel. 

Ultimately, I was just really confused. I was left with more questions than answers. Which I interpreted as “proceed with extreme caution" and I hope you will too!

*Editor's Note: This post was updated April 26th to update the infographic. "World Ventures" reorganized and co-branded as "Dream Vacations" in 2022, "with Verona International Holdings as a plan of reorganization sponsor under the bankruptcy code." ( Source )

• Source: PlanNet Marketing Income Disclosure for 2023 (plannetnow.com) ↩
• Source: FTC : ↩

About the Author

Mary Stein has been working as a writer and editor for Host Agency Reviews since 2016. She loves supporting travel advisors on their entrepreneurial journey and is inspired by their passion, tenacity, and creativity. Mary is also a mom, dog lover, fiction writer, hiker, and a Great British Bake Off superfan.

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9 Red Flags to Watch for When Picking a Real Estate Agent

Pass on agents who are family members and those who have never bought or sold in your neighborhood.

iStockPhoto

Make sure the agent you pick specializes in the kind of property – single-family home, condo, investment property – you want to purchase.

The proliferation of online real estate information makes it easier than ever to be an informed consumer when buying or selling a home. Yet the digital revolution has done little to lessen the importance of choosing the right real estate agent to work with you.

The right agent can help you buy your dream house or sell your existing home quickly . The wrong agent can botch the transaction, leaving you with egg on your face and nowhere to call home.

Despite the high stakes, many buyers and sellers give little thought to choosing an agent, whether they’re buying or selling.

“They get dazzled by these great listing presentations,” says Michael Soon Lee, regional manager of Better Homes and Gardens Mason-McDuffie Real Estate in Walnut Creek, California , who likens the relationship to dating. “It’s a longtime, intimate, trusting relationship. If it doesn’t start out feeling good at the beginning, it’s probably not going to get any better.”

Get recommendations from friends and relatives, and see which agents are buying and selling the most homes in your neighborhood. Read online reviews, but realize they don’t tell the whole story, since most clients, satisfied or dissatisfied, don’t write reviews. Interview three or four agents to find the one who is the best fit for you.

Most real estate agents are independent contractors who are paid a commission based on the number of homes they sell. The commission, paid from the sales proceeds, is usually split equally between the listing agent and the selling agent. Once the deal is closed, each of those agents usually has to pay a share to the broker who owns the office where he or she is affiliated.

Don’t be afraid to ask questions about how many listings the agent has, how many homes she has sold in your area, how often she will communicate with you – and in what format – and who she will represent in the transaction.

If you’re a seller, ask how the agent will market your home, who the target buyer is and how he will get your home in front of those preferred buyers.

If you’re a buyer, ask how often the agent will send you listings and whether he has worked with other buyers in your situation. A transaction involving a Federal Housing Association or VA loan, for example, includes some steps that aren't required for a conventional loan. Some buyers may want to sign a buyer-broker agreement, agreeing to pay a share of the commission if the agent shows them homes where the seller won’t pay a commission, such as for-sale-by-owner houses or new construction properties.

Here are nine red flags to watch for when choosing a real estate agent:

The agent suggests the highest price for your house. If you’re selling your house , get listing presentations from at least three agents, who will tell you what comparable homes have sold for and how long they take to sell. The agents are all looking at the same data, so the suggested listing price should be close. Pricing a home too high at the start often means it takes longer to sell and ultimately sells for less. “If you’re too high for the market, buyers will not even look at it because they know you’re not realistic,” says Lee, the author of eight books and a frequent speaker at real estate conferences. “The longer your property sits on the market, the more people are going to think there’s something wrong with it.”

The agent does real estate on the side, part time. Whether you’re a buyer or seller, you want to choose an agent who is actively following the market every day. If you’re buying, you want an agent who can jump on new listings and show them to you immediately. If you’re the seller, you want an agent who is always available to show your home to prospective buyers.

The agent is a relative. Unless your relative is a crackerjack full-time agent who specializes in your neighborhood, he or she is unlikely to do as good of a job as another agent. That can breed resentment, as well as derail your transaction.

The agent doesn’t know the real estate landscape in your neighborhood . Finding a neighborhood expert is especially important in areas where moving a block can raise or lower the value of a home by $100,000. An agent who specializes in a neighborhood may also be in touch with buyers who are looking for a home just like yours or sellers who haven’t put their home on the market yet. “It’s really a very local business,” Lee says.

How to Vet Real Estate Agents

Devon Thorsby Jan. 15, 2016

The agent charges a lower commission. In most areas, commissions are traditionally 5 to 7 percent, split between the buying and selling agent. If the commission on your house is lower, fewer agents will show it. This doesn’t mean you can’t negotiate a slightly lower commission if one agent ends up both listing and selling the house. Some newer companies rebate part of the commission to the buyer or seller, but don’t use that as the sole reason to choose an agent. That’s only a bargain if the agent is otherwise a good fit.

The agent’s face shows up with online listings. The agents’ faces are there because they paid to be there. They may or may not be the best choice for you. Don’t accept the online portal’s assertion that the agent is a neighborhood expert. Interview him or her yourself and find out.

The agent doesn’t usually deal with your type of property. If you’re buying or selling a condominium, don’t pick an agent who rarely sells condos. If you’re looking for investment property, find an agent who traditionally works with investors. Many agents have multiple specialties, but you want to make sure the agent is well-versed in the type of transaction you’re doing.

The agent doesn’t usually work with buyers in your price range. Some agents specialize in homes of all types in a specific area. But if you’re a first-time buyer looking for a $200,000 entry-level home, you are unlikely to get much attention from an agent who mostly handles $10 million luxury listings.

The agent is a poor negotiator or fails to keep up with details of the transaction. In many cases, the most important work of an agent is not to find the home but to make sure the sale closes. That includes making sure the buyer is preapproved for a mortgage, the home is free of liens before it goes on the market, the appraisal is accurate and issues raised by the home inspection are resolved.

10 Unorthodox Ways Your Real Estate Agent May Market Your Home

Unorthodox ways your real estate agent may market your home.

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Types of Insurance Fraud: Recognizing the Red Flags

Insurance fraud is a pervasive issue that affects both insurers and policyholders alike. From faked accidents to inflated claims, fraudsters employ various tactics to deceive the system and reap undeserved benefits. Therefore, recognizing the red flags of insurance fraud is crucial for individuals and insurance companies to protect themselves. 

This blog will explore the different types of insurance fraud and highlight the warning signs that can help identify fraudulent activities. By understanding these red flags, we can all contribute to combating insurance fraud and fostering a more transparent and trustworthy insurance industry.

Different Types of Insurance Fraud

Insurance fraud can manifest in various ways, each requiring vigilance and effective preventive measures. Identifying the diverse forms of insurance fraud is crucial for insurers and consumers to protect themselves from scams. Here are some additional lines exploring other types of insurance fraud:

Auto Insurance Fraud

This fraud involves individuals trying to trick an insurance company regarding a claim related to their personal or commercial motor vehicle. It encompasses various deceptive tactics such as providing misleading information or submitting forged documents to bolster their claim.

The majority of arrests related to automotive insurance fraud typically revolve around the following activities:

• Orchestrating staged auto accidents and making false injury claims.
• Filing false reports of stolen vehicles.
• Making claims for accidents that allegedly occurred after purchasing a policy or coverage.
• Submitting false claims for pre-existing damages.

Healthcare Fraud

This fraud involves submitting false or deceptive information to a health insurance company to illicitly obtain unauthorized benefits for the policyholder, another party, or the service provider. The insured individual and the healthcare service provider can be responsible for committing this offense.

Individual subscribers may engage in health insurance fraud by:

• Allowing someone else to use their identity and insurance information to access healthcare services.
• Using insurance benefits to cover prescriptions that their doctor did not prescribe.

Healthcare providers can commit fraudulent acts by:

• Billing for services, procedures, or supplies that were never actually provided.
• Charging for more expensive services than those that were rendered.
• Performing unnecessary services solely for financial gain.
• Misrepresenting non-covered treatments as medically necessary.
• Falsifying a patient's diagnosis to justify tests, surgeries, or other procedures.
• Billing each step of a single procedure as separate procedures.
• Overcharging patients beyond the agreed co-pay under the insurer's terms.
• Offering or receiving "kickbacks" in exchange for referring motor vehicle accident victims for treatment.

Workers' Compensation Fraud

Similar to other types of insurance fraud, workers' compensation insurance can be compromised when employers or employees provide false or misleading information to insurance companies.

Individuals commonly commit insurance fraud in the following ways:

• Faking an injury at work to receive paid time off.
• Exaggerating the severity of a genuine injury to obtain additional time off or benefits.
• Claiming an injury occurred on the job when it happened elsewhere.
• Taking a new job and deceiving the insurance company about the inability to return to the previous place of employment or concealing income from another job.

Employers can commit insurance fraud through the following actions:

• Understating the company's payroll amount to lower premium payments.
• Wrongfully classifying employees as independent contractors.
• Providing false information about employees' job duties to qualify for lower premium payments.

All these types of insurance fraud constitute a severe criminal offense, with potential consequences including imprisonment of up to seven years and fines reaching a maximum of $15,000 . In addition, individuals involved in such fraudulent activities may face additional financial burdens such as court costs and legal fees. Moreover, being convicted of insurance fraud carries lifelong repercussions, including the social stigma and limitations of being a felon.

Red Flags to Look Out for When Detecting Insurance Fraud

Detecting insurance fraud requires a keen eye and attention to detail. However, several red flags and warning signs can help insurance companies, and consumers identify potentially fraudulent activities. Here are some key red flags to look out for when detecting insurance fraud:

Inconsistent or Suspicious Claims

Pay attention to claims that contain inconsistencies, such as contradicting statements or medical records that don't align with reported injuries. Also, look for overly complex claims that involve excessive medical treatments or show a sudden increase in the frequency of claims from the same policyholder.

Prior Loss History

Review the claimant's previous insurance history. Individuals with frequent claims or a history of suspicious or denied claims may indicate a higher likelihood of insurance fraud.

Recent Policy Purchase

Be wary of policyholders who have recently purchased an insurance policy and then quickly filed a claim. This could suggest the intent to defraud the insurer by purchasing coverage to make a fraudulent claim.

Unusual Circumstances

Pay attention to claims filed immediately after a new policy takes effect or shortly before the policy is due to expire. Also, be cautious when multiple claims are filed from the same accident or event by different policyholders or when the loss coincides with a significant life event, such as divorce, job loss, or financial distress.

Witness and Provider Discrepancies

Look for inconsistencies between witness statements and the policyholder's account of the incident. Additionally, verify the credentials of medical providers involved in the claim, as fraudulent actors may use fictitious or unqualified professionals.

Case Studies of Real-Life Examples of Insurance Fraud

Numerous real-life case studies demonstrate that insurance fraud is an unfortunate reality. These examples serve as cautionary tales, highlighting the need for vigilant investigation and stringent measures to combat fraudulent activities.

Case Study 1: Nicholas Di Puma – "Straight out of Three Stooges

A comical incident in slapstick comedy triggered concern for a home insurer in Delaware when a resident asserted that a kitchen mishap led to his house and convertible being engulfed in flames.

As reported by the Daily Star, Nicholas Di Puma's attempt to extinguish a blazing pan using a dishrag resulted in the cloth caught fire. In desperation, he hurled the pan out of his front door, but misfortune struck when it landed on the backseat of his convertible, causing it to ignite. Another pan caught fire, and just as Di Puma prepared to discard it, he stumbled over a box, causing the pan to land on his leather sofa, which instantly burst into flames.

Authorities remained skeptical of his explanation, with the presiding judge likening the events to the storyline of a Three Stooges film. Nevertheless, Di Puma eventually pleaded guilty to attempted insurance fraud charges of both second and third degrees. He received a sentence of five years of probation and was ordered to pay restitution totaling $37,997.

Case Study 2: John and Anne Darwin – The Case of the Canoe Conman

One of the most well-known instances of life insurance fraud involves a British couple named John and Anne Darwin , whose actions have been the subject of numerous documentaries. Burdened by substantial debt, the couple devised a plan to have John fake his own demise, aware that their financial obligations would be absolved. In 2002, with Anne's assistance, John allegedly disappeared during a canoeing accident.

Taking advantage of the situation, Anne successfully collected life insurance payouts amounting to £680,000, which enabled them to settle their debts. Subsequently, the duo embarked on a fresh start in Panama, assuming false identities. 

However, their scheme unraveled after a social media post raised suspicion, leading to their apprehension. Both individuals were subsequently sentenced to six years of imprisonment.

Case Study 3: Imad and Bahaad Dawara – Arson fail

Brothers Iwad and Bahaa Dawara , featured prominently on the Coalition Against Insurance Fraud's (CAIF) Hall of Shame, devised a devious plan to rescue their failing hookah bar enterprise. In a desperate bid for financial gain, the siblings set fire to their establishment. They cunningly sought to capitalize on a recently acquired accidental fire coverage amounting to $750,000, which they had obtained a few weeks earlier.

Regrettably, the brothers' endeavor to commit insurance fraud was a catastrophic failure, surpassing even their mismanagement of the hookah bar. Moreover, the act of arson they orchestrated devastated a cherished, historic neighborhood along Chestnut Street and its prolonged closure for several months. 

The repercussions were severe, leading to the permanent closure of numerous businesses and the unfortunate displacement of dozens of employees who lost their livelihoods. The brothers received substantial penalties for their actions, including lengthy nine-year prison sentences and an astonishing $22 million in restitution. Their ill-conceived scheme brought their intended hookah bar to ruin and set ablaze a part of the community that will forever bear the scars of their destructive choices.

Fight Insurance Fraud with Pilotbird Fraud Monitoring

Introducing Pilotbird Fraud Monitoring, the cutting-edge solution in the fight against insurance fraud. With its advanced AI technology, Pilotbird analyzes vast amounts of data to detect suspicious patterns and anomalies, helping insurers identify potential fraudsters in real time. In addition, by leveraging machine learning algorithms, Pilotbird continuously improves its fraud detection capabilities, adapting to evolving tactics employed by fraudsters. 

By implementing Pilotbird Fraud Monitoring , insurers can safeguard their operations, prevent fraudulent claims, and protect their bottom line. So stay ahead with Pilotbird and ensure a secure and fraud-free insurance environment.

"Types of Insurance Fraud." Insurance Fraud Prevention Authority, 2022

https://helpstopfraud.org/insurance-fraud/types-of-insurance-fraud/

"Potential signs of insurance fraud." State Auto Insurance Companies, 2022

https://www.stateauto.com/insurance-fraud-signs#:~:text=The%20claimant%20has%20a%20history,insurance%20for%20recently%20damaged%20vehicle

"Revealed – the 10 worst insurance fraud cases of all time." Insurance Business, 2023

https://www.insurancebusinessmag.com/us/guides/revealed--the-10-worst-insurance-fraud-cases-of-all-time-433114.aspx

"Insurance Fraud Hall of Shame — 2022." Coalition Against Insurance Fraud, 2022

https://insurancefraud.org/publications/insurance-fraud-hall-of-shame-2022/

“Types of fraud.” Texas Department of Insurance, 2022

https://www.tdi.texas.gov/fraud/types-of-fraud.html

“Insurance fraud: Red flags to help agents spot potential fraudsters.” Arrowhead, 2020

https://www.arrowheadgrp.com/blog/insurance-fraud-red-flags-to-help-agents-spot-potential-fraudsters/

“Don't Ignore Fraud's Red Flags: The Key to Fighting Fraud is Preventing It.” RGA Central, 2023

https://www.rgare.com/knowledge-center/article/don't-ignore-fraud's-red-flags-the-key-to-fighting-fraud-is-preventing-it#:~:text=Premiums%20paid%20by%20someone%20other,false%20or%20cannot%20be%20verified .

Mani Kaur is an industry thought leader in the insurance industry with numerous articles on technology, innovation, and financial services.

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