Clean Sheeting

Posted in Finance, Accounting and Economics Terms, Total Reads: 121

Definition: Clean Sheeting

Clean Sheeting is an activity whereby a person purchases an insurance policy without telling the insurer of the poor health condition of the insured like terminal illness to gain out of the policy. The fact that buyer is aware of the condition and still he doesn’t tells the insurer about it makes it a malpractice.

There are various types of insurance frauds like:

- Life insurance Fraud which involves faking of death for insurance claim

- Health insurance Fraud which includes Clean Sheeting

- Automobile insurance fraud which involves faking accidents

- Property Insurance which involves faking property being destroyed.

Generally during Clean Sheeting the person who is getting the insurance does it with the help of insurance agent who knows about the health condition and after getting the insurance policy he sells the policy to a third party to receive the cash before the insurance company gets to know the fraud. Sometimes there are companies which are known as Viatical companies which buy this type of insurance policy at lesser price than the face value of the policy from the person insured which they resell to investors. Since it may incur a lot of cost for an insurance company to check the viability of a new life insurance policy, therefore it becomes harder for them to detect this fraud. There may be severe penalty for this type of insurance fraud depending upon the country laws whereby the fraud is conducted.

For Example: Suppose a person suffering from stage 3 cancer makes an arrangement with the insurance agent to buy a insurance policy and immediately sells it to a third party to receive the cash.



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