Globe Life accused of rampant insurance fraud by short-seller report
Globe Life is reeling after a report Thursday accused brokers at subsidiary American Income Life of widespread insurance fraud, including writing policies for dead and fictitious people, and an alleged kickback scheme that netted millions for senior executives.
Shares of Globe Life dropped more than 50%, following the report from Fuzzy Panda Research, which took a short position on the company. Globe Life denied the allegations, and the stock recovered some of its losses Friday morning.
“We are disappointed today to see self-motivated short sellers push inflammatory allegations in order to drive down Globe Life’s stock price,” Globe Life said in a statement. “We reviewed the report and found it to be wildly misleading, mixing anonymous allegations with recycled points pushed by plaintiff law firms to coerce Globe Life into settlements.”
In its report Fuzzy Panda claimed it “reviewed hundreds of pages of court documents and interviewed dozens of former executives and agents. We uncovered a whistleblower from the executive ranks who showed us where the fraud was hidden. We even went undercover to go through the recruiting process more than 10 times.”
Report: more than 200 emails
Fuzzy Panda alleged that third-party policy sellers known to have committed insurance fraud contributed over 60% of the new business at Globe Life’s American Income Life unit. AIL accounted for nearly half of the total underwriting margins last year.
The report claimed that Globe Life and AIL executives were involved in a bribery and kickback scheme that a lawsuit estimates netted them more than $65 million. Fuzzy Panda said it has spoken with a former executive who sent more than 200 emails detailing fraud to senior executives. The research firm claims to “have documents to prove it.”
Fuzzy Panda said its researchers went undercover and detailed an alleged multi-level marketing scheme that “borders on an illegal Pyramid Scheme in Multiple States.” Alleged drug use and sexual harassment were rampant, Fuzzy Panda claimed, and prospective agents encouraged to lie on licensing exams.
“The motivations behind this short seller’s report are driven solely by short-term profit earned on the backs of the thousands of shareholders, hardworking employees, independent contractor sales agents and customers who know and trust our brand and strong track record,” the Globe Life statement reads.
Based in McKinney, Texas, Globe Life Inc. is a holding company specializing in life and supplemental health insurance for the middle-income market distributed through multiple channels, including direct to consumer and exclusive and independent agencies.
Globe Life vowed to “more fully rebut these allegations in the near future” and added that it will “explore all means of legal recourse against the parties responsible” for the Fuzzy Panda report.
Mounting controversies at Globe Life
The Fuzzy Panda report adds another challenge for Globe Life, which is battling other related issues in court.
In a federal lawsuit against AIL-affiliated Arias Agencies and others, former agent Renee Zinsky alleges shocking acts – such as office wrestling matches, use of date rape drugs and sexual acts carried out in front of employees.
Zinsky initially filed a lawsuit in the Western District of Pennsylvania in April 2022 against Simon Arias, Arias Agencies, Michael Russin, and American Income Life Insurance Co. A judge later granted a motion to compel arbitration filed by Arias and AIL.
The Equal Employment Opportunity Commission is also looking into the allegations. The EEOC took the unusual step of reversing itself in a Nov. 21 decision to reopen the investigation of allegations brought by Zinsky and another woman.
In another case, Globe Life is being sued by a former executive who claims he was fired for blowing the whistle on “potentially illegal” sales practices.
Scott Dehning claims that Globe Life and AIL fired him in May 2023 after he reported “a clear practice of unethical and potentially illegal business practices” to Michigan regulators. Dehning was vice president of field operations from September 2015 until he was fired. In that role, he supervised about 17 state general agents, the lawsuit said.
In the original eight-page complaint filed in August, Dehning said he viewed certain sales practices with growing uneasiness. Dehning does not detail the behavior in question. He eventually investigated and confirmed the “unethical and potentially illegal sales practices,” sharing his findings with the Globe Life executive team, the lawsuit states.
Globe Life denied all claims in a response to Dehning’s lawsuit. The insurer also filed a motion to dismiss for “lack of personal jurisdiction.” Globe Life is “a Delaware corporation with its principal place of business in Texas,” the motion noted.
InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.
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