What Is Unauthorized Insurance?

Article Details
  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 18 September 2019
  • Copyright Protected:
    Conjecture Corporation
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Just like the term suggests, unauthorized insurance is used in reference to the illegal offer of insurance to people in various capacities and to different end results that have no bearing in reality. That is to say the practice of unauthorized insurance is largely perpetrated by fraudsters who try to capitalize on various categories of consumers with a view to defrauding them of their money. The source of such unauthorized insurance is based on the reason for issuing the insurance in the first place, which may be for nonexistent benefits flowing from work or for an independent insurance that may be purchased by a consumer. Many countries have their own specific laws that address the issue of unauthorized insurance, including the exact things that constitute the scope of unauthorized insurance.


An example of unauthorized insurance is one that may be illegally offered by certain categories of organizations to workers or contractors based on the services they offer to the organization. Many laws exist regarding the exact description of unauthorized insurance, including the circumstances under which such laws will apply. The main consideration behind these laws is the protection of consumers from unscrupulous fraudsters who tend to utilize the necessity for obtaining an insurance as a means for taking undue advantage of them. One of the means by which this insurance takes place is through the deliberate sale of insurance to consumers by people who do not hold any license to do so as dictated by the laws of the country in which such people are situated. Such a sale is fraudulent due to the fact that selling this type of insurance policy is void from the very inception since it was built on a bedrock of illegality.

Some people may deliberately sell features like health insurance to consumers as regular insurance, even though they know that they do not hold the license to do so. Despite the fact that they are not legally allowed to sell the insurance, they still proceed to sell the same and collect premiums on the fake insurance in the manner that legal ones do. The problem is that the individuals who purchased the insurance may not realize the scam by the fake insurance company until such a time as when they actually file a claim and discover that no money will be forthcoming.



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