Overview Objective Definition of Fraud Scope of Fraud How Fraud Works Working Together in: Detection Analysis Investigation Resistance
Definition of Insurance Fraud “Any deliberate deception perpetrated against or by an insurance company or agent for the purpose of unwarranted financial gain.” Source: Coalition Against Insurance Fraud
The Scope and Nature of Fraud By their very nature, fraudulent claims are designed to appear legitimate.
Fraud…… the “Iceberg “ Crime 87% of the Iceberg is Invisible From the Surface
Fraud…… the “Iceberg “ Crime Only a small percentage of fraud is Detected. An even smaller percentage is Reported/Resisted
Fraud.. The Scope “33% of Property and Casualty Claims have some element(s) of Fraud. Approximately 3% of Claims are Totally Fraudulent. P&C Fraud costs Americans between $24 and $30 Billion each year. Approximately $200-$300 per average household. Sources: Coalition Against Ins. Fraud/ Ins. Info Institute
Why is Claim Fraud So Prevalent? Infamous New York Bank Robber Willie Sutton (1920’s) Was once asked “Why do you rob banks?”
Why is Claim Fraud So Prevalent? Infamous New York Bank Robber Willie Sutton (1920’s) Was once asked “Why do you rob banks?” He replied, “Because that’s where the money is.”
Why is Claim Fraud So Prevalent? It’s PROFITABLE Very little investment required.
Why is Claim Fraud So Prevalent? It’s PROFITABLE Very little investment required. It’s SAFE Police shoot at robbers and burglars...
Why is Claim Fraud so Prevalent? And of course,
Why is Claim Fraud So Prevalent? Unfortunately, there’s very little risk of Punishment.
Why is Claim Fraud so Prevalent? “Insurance Companies don’t make good victims.”
Why is Claim Fraud so Prevalent? “Insurance Companies don’t make good victims.” Law Enforcement is focused on crimes of violence.
Why is Claim Fraud so Prevalent? “Insurance Companies don’t make good victims.” Law Enforcement is focused on crimes of violence. If Insurance Companies don’t look out for themselves, nobody else will.
Why is Claim Fraud so Prevalent? Insurance Companies often make Claim Fraud attractive by paying people to “go away.”
The Challenges Recognition Reporting Analysis Investigation Resistance
Recognition…… the biggest Challenge If we only recognize blatant fraud, we’re missing a lot of fraud.
Without Aggressive Recognition and Reporting, Investigation and Resistance to Fraud suffers. Recognition….. The Biggest Challenge
When you get a reputation for paying everyone that comes to your door…….
When you get a reputation for paying everyone that comes to your door……. You soon have a lot of people coming to your door.
HOW FRAUD WORKS… Who are the fraudsters? How do they think? How do fraudsters plan their frauds? How do fraudsters conceal their crimes? What are fraudsters counting on?
Who are the fraudsters? Anyone can commit fraud. Only a small percentage of claimants/insureds are “professional” crooks.
Who are the fraudsters? Fraudsters will want to appear honest and deserving…..
Who are the fraudsters? Their real motives may be far less virtuous….. In reality, fraudsters are generally driven by greed and/or desperation….
How do fraudsters think?? From: To: But, they have one thing in common..
How do fraudsters think? They all want easy money. and They’re limited only by their imagination.
How do fraudsters plan their claims? Fraudsters learn from: Prior legitimate claims Other Fraudsters Professional Crooks Cappers Dishonest Attorneys Dishonest Medical Providers Dishonest Body Shop Owners
How do fraudsters plan their frauds? Fraudsters talk to each other!!
How do fraudsters plan their frauds? Fraudsters learn from each others’ experiences. Fraudsters know the reputations of different companies. Professional fraudsters may even know individual adjusters’ names, reputations and authority limits.
How do fraudsters plan their frauds? Insurance companies unwittingly “teach” fraudsters how to file successful fraudulent claims. Fraudsters learn all the elements of successful claims, and go to great lengths to ensure that all necessary elements are present…….. This is called……...
“Backing into Coverage” Fraudsters have the ability to control all the circumstances surrounding a fraudulent claim: Time Place Persons Present Hazard Notice of Hazard
“Backing Into Coverage”… cont’d Type of loss Severity of alleged damages Ability to circumvent security/safety controls
“Backing into coverage” Fraudsters will almost always seek to engineer each facet of the circumstances to their best advantage. Fraudsters will almost always seek to maximize their damages to maximize their profit. This ability to control the circumstances is both their main strength and their main weakness.
What are Fraudsters Counting On? That their claim will appear legitimate and they will be paid. That if questioned, the investigation will be cursory. Regardless of the outcome of the investigation, the insurance company will pay them something .. Just to go away. (“Nuisance value”).
What are fraudsters counting on? Even if the company denies the claim, they will have learned something which will help them on their “next” claim… If denied, that there will be no referral to law enforcement. If referred to law enforcement, that there will be no prosecution.
What are fraudsters counting on? If prosecuted, they can flee the area. If apprehended and prosecuted, they can hire lawyers to “beat the rap.” If convicted….the punishment will be very light.
Address Histories You need to know what addresses your subject has used in order to know where to look for records.
Address Histories cont’d Once you know addresses your subject has used… Determine what county these addresses are in. Remember that a city/zip code can fall into more than one county! Once you know the count(ies) you know where to look for records.
Litigation Histories These are very important. Superior Courts: Civil, Criminal, Domestic, Probate, Juvenile, Judgment, Federal Courts: Bankruptcies, Civil & Criminal Filings Small Claims Courts
Uses of Litigation Histories: Confirm identities Identify aliases Address History Financial Profile Character & credibility Earnings Potential Assets Persons knowledgeable of subject Prior injuries Many injury suits relate to matters not found in ISO database
ISO Claimsearch The ISO database is one of the most powerful tools for insurance fraud investigation. Millions of claims, searchable by name, address, SSN, telephone number, & VIN.
Leveraging Information By uncovering aliases, felony criminal histories, and undisclosed tort incidents , many questionable or fraudulent claims will “go away” or can be significantly mitigated.
Recognizing, Reporting, Analyzing, Investigating and Resisting Fraud
Recognizing fraud This is the greatest challenge for insurance companies. If they don’t recognize & report fraud, the rest of the claims process is moot.
Recognizing Fraud What is the most powerful weapon in our arsenal against fraud? Is it a Cray SuperComputer? NO!!!
Recognizing Fraud The most effective weapon in recognizing fraud is the dedicated claims representative.
Recognizing Fraud What about existing automated controls in the system? Don’t they deter and detect fraud? Existing controls catch only the “dumb” crooks. Fraudsters know the system and many know how to circumvent controls.
Recognizing Fraud What are the best Indicators of possible Fraud?
Cronin’s Law #2: An active claims history is the single best objective indicator of probable claims fraud. Translated: “If they’re scamming you now, chances are they’ve done it before.”
Recognizing Fraud Another excellent indicator is your intuition. “I just have a bad feeling about this claim…..” “There’s probably nothing you can do , but can you take a look at this claim……” “ I can’t put my finger on it, but there’s something that’s not right here…”
Recognizing Fraud You don’t have to be a fish expert to know you’ve got a dead mackerel in your drawer… If it doesn’t pass the “smell test,” There’s probably something fishy going on…
Recognizing Fraud…. Indicators cont’d Lack of verifiable source of income. People with “real” jobs rarely are professional claimants. Overly knowledgeable of insurance. “Stretches of the imagination.”
Fraud Indictors…. “Stretches” “Stretches” are difficult to believe fabrications created by fraudsters to allow them to “Back Into Coverage” by tailoring their version of the events surrounding the alleged loss to best serve their interests.
Not every unusual circumstance is indicative of fraud, but when considered in the totality of a claim, “stretches” can help alert us to questionable claims. Fraud Recognition….”Stretches”
How do we analyze a claim to determine if possible fraud is present? One segment at a time……. The Pole Vault Method
Analyzing the Claim…. Pole Vault Method Each claim is made up of segments, like short pieces of the pole.
Analyzing the Claim… Pole Vault Method The vaulter needs a “full pole” to “clear the bar” (get their claim paid.)
Analyzing the Claim….The Pole Vault Method If any segment of the “pole” is weak or missing, it may not be possible to clear the “bar.”
Segments of a Claim That there is a insured/claimant who is whom he/she says they are. That there was a policy of insurance in effect… at the time of the loss.
Segments of a claim… cont’d That the loss actually occurred.. At the place alleged.. A the time/date alleged.. In the manner alleged.. That the loss was a covered peril.
Claim Segments cont’d That the object damaged was of the condition and value alleged before the loss.. That there were damages… which were caused by the occurrence
Claim segments….. Cont’d Which are of the extent and value being claimed That the insured/claimant did not cause the loss. That the insured/claimant have been truthful regarding the loss..
Claim Segments Cont’d That the insured was truthful during the application and underwriting process. Regarding loss history, value/condition and ownership of property
Claim Segments……. That the insured has performed all duties required in case of loss: Notice to company Report to police Cooperation Mitigate Damages Examination under Oath Proof of Loss
Examining each segment of a claim can help us identify questionable areas and can help us focus our investigations. The “logic path” will help us further focus our investigation.
“Logic Path” What do I know about this claim? What do I suspect? (Which segments of the claim are in question?) What issue(s) am I trying to resolve? What information would help resolve the issue(s) in question? Where can I get this information?
Analyzing the claim Look for the LIE. Focus on the segment associated with it.
“Stretches” will often found to be “lies” in a fraudulent claim
Analyzing the claim and the claimant.. How much planning went into the preparation of this claim? How much scrutiny did the insured/claimant expect this claim to receive? How much scrutiny is the insured/claimant prepared to withstand?
Analyzing the claim and the claimant.. How has the insured/claimant pursued claims in the past? Litigious? What motivated the insured/claimant to make the claim? Desperation? Greed? Legitimate claim? Build-Up?
Analyzing the claim and the claimant... Are we seeing all the players? Is this a “set up” for a bad faith claim?
Planning the Investigation Consider the issues which need to be addressed, what information is already known, and the tools available to find needed info. Each “tool” in our toolbox is different. Know what tools are available, how to use them, and which ones to use when.
Conducting the Investigation… Tools Insured/claimant Interviews . Cross-referencing and verifying data. Examinations under oath. Scene investigations. Witness interviews. Public records checks Database checks Claims histories. Surveillance Neighborhood Canvasses
Investigation Tools cont’d Use of specialized experts Origin & Cause Laboratory Handwriting Experts Accountants Medical Experts Legal coordination Professional contacts.
Professional Affiliations The most effective Investigators have Extensive Professional Contacts
Benefits of Using Private Investigators Knowledgeable of local area Knowledgeable of state laws Work closely with defense counsel Face to Face contact Special expertise in interviewing Special expertise in fraud investigation. Cognizant of good faith, coverage, liability issues.