Report
Scam Insurance Company Reports
Report
What It Is and Why It’s Illegal
These so-called “coverage” plans are often marketed by tech startups or eCommerce apps with no insurance license, no underwriting partner, and no regulatory oversight — making them fake insurance under state and federal law.Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.
Insurance Fraud Awareness
What Constitutes Fake or Fraudulent Insurance
Under the law, insurance is any arrangement in which one party transfers the risk of loss to another in exchange for payment. If the entity lacks a license or fails to disclose its underwriting carrier, it is engaged in unauthorized insurance activity, which constitutes fraud.
Reimbursement
Collects money for coverage or reimbursement
Insurance Promise
Collects money for coverage or reimbursement
Insurance Benefits
Markets protection against theft, loss, or damage
The Bright Line Between Legal and Illegal
The “If/Then” Rule: The Bright Line
Between Legal and Illegal
This is the simplest test regulators use — and the one most violated by scam shipping insurance schemes: If you make an “if/then” promise and charge money for it, you are selling insurance.
If you make an “if/then” promise and charge money for it, you are selling insurance.
If your package is lost, we’ll reimburse you.
If your package is lost, we’ll reimburse you.
If your package is lost, we’ll reimburse you.
It does not matter what you call the product
Shipping Protection
Delivery Assurance
Order Guarantee
Premium Handling
Package Coverage
Worry-Free Shipping
Substance-over-form analysis
Common Red Flags of Scam Shipping Insurance
No Proof of Licensed Insurance
Unfiled Coverage Language
Conflict of Interest in Claims
Unlicensed Claims Adjustment
Misleading Disclaimers
Legal Penalties and Fines
Legal Penalties and Fines
Each U.S. state regulates insurance through its Department of Insurance (DOI). Violating insurance laws can trigger severe penalties, including. California’s Insurance Code §1631 and §700(a), for example, make it illegal to solicit, sell, or advertise insurance without a valid license. Similar statutes exist in every state.
Fines up to $50,000 per violation
Fines up to $50,000 per violation (per fake policy sold)
Cease-and-desist orders
Cease-and-desist orders halting all sales immediately
Criminal prosecution
Criminal prosecution for unlicensed insurance activity
Restitution
Restitution requiring repayment of all fees collected
Personal liability
For founders, officers, and affiliates who promoted or profited from the fake insurance
Website and Platform Liability
How Website Owners and Platforms Become Liable
Shipping Protection
Protection Fee
Insured Shipping
Consumer and Merchant Risks
Real Consumer and Merchant Risks
Fake insurance isn’t just illegal — it’s dangerous:
Unregulated
Claims can be denied arbitrarily (no regulator to appeal to).
Unsecured
No state guarantee fund backs the payments.
Chargebacks
Merchants can face chargebacks and refund demands when customers discover the coverage was fake.
Reputation
Trust, credibility, and brand reputation are destroyed overnight.
legitimate Shipping Insurance Looks Like
What Legitimate Shipping Insurance Looks Like
it’s not legitimate insurance.
Policy Reference
Monitor compliance with state and federal insurance regulations
Regulated Claims
Include claims processes regulated by state law
Approved Terms
Disclose terms approved by a Department of Insurance
Licensed Issuance
Issue coverage through a licensed producer or MGA
Protect Yourself and Your Customers
Protect Yourself and Your Customers
If you suspect a company or app is selling unlicensed shipping insurance:
Check License
Check their license via your state’s Department of Insurance lookup.
Underwriting Details
Ask for the underwriting carrier name and policy number.
Consumer Complaint
File a consumer complaint with your DOI or the (NAIC).
Deceptive Report
Report deceptive advertising to the Federal Trade Commission.
Final Word
Selling or profiting from fake insurance is not a gray area — it’s a violation of state insurance law and a form of consumer fraud. If you charge money for a promise like “if it’s lost, we’ll reimburse you,” you are selling insurance — whether you call it Shipping Protection, Order Guarantee, or Premium Handling.