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Insurance Fraud Investigation   By Jim Cronin, Cfe
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Insurance Fraud Investigation By Jim Cronin, Cfe

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  • 1. Insurance Fraud Investigations
  • 2. Overview
    Objective
    Definition of Fraud
    Scope of Fraud
    How Fraud Works
    Working Together in:
    Detection
    Analysis
    Investigation
    Resistance
  • 3. 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
  • 4. The Scope and Nature of Fraud
    By their very nature, fraudulent
    claims are designed to appear
    legitimate.
  • 5. Fraud…… the “Iceberg “ Crime
    87% of the
    Iceberg is
    Invisible
    From the Surface
  • 6. Fraud…… the “Iceberg “ Crime
    Only a small
    percentage of fraud
    is Detected. An even
    smaller percentage
    is Reported/Resisted
  • 7. 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
  • 8. Why is Claim Fraud So Prevalent?
    Infamous New York Bank Robber
    Willie Sutton (1920’s) Was once
    asked “Why do you rob banks?”
  • 9. 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.”
  • 10. Why is Claim Fraud So Prevalent?
    It’s PROFITABLE
    Very little investment
    required.
  • 11. Why is Claim Fraud So Prevalent?
    It’s PROFITABLE
    Very little investment
    required.
    It’s SAFE
    Police shoot at robbers
    and burglars...
  • 12. Why is Claim Fraud so Prevalent?
    And of course,
  • 13. Why is Claim Fraud So Prevalent?
    Unfortunately,
    there’s very little
    risk of Punishment.
  • 14. Why is Claim Fraud so Prevalent?
    “Insurance Companies don’t make
    good victims.”
  • 15. Why is Claim Fraud so Prevalent?
    “Insurance Companies don’t make
    good victims.”
    Law Enforcement is focused on
    crimes of violence.
  • 16. 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.
  • 17. Why is Claim Fraud so Prevalent?
    Insurance Companies often make
    Claim Fraud attractive by paying
    people to “go away.”
  • 18. The Challenges
    Recognition
    Reporting
    Analysis
    Investigation
    Resistance
  • 19. Recognition…… the biggest Challenge
    If we only recognize blatant fraud,
    we’re missing a lot of fraud.
  • 20. Without Aggressive
    Recognition and Reporting,
    Investigation and Resistance
    to Fraud suffers.
    Recognition….. The Biggest Challenge
  • 21. When you get a reputation for
    paying everyone that comes
    to your door…….
  • 22. When you get a reputation for
    paying everyone that comes
    to your door…….
    You soon have a lot of people
    coming to your door.
  • 23. 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?
  • 24. Who are the fraudsters?
    Anyone can commit fraud.
    Only a small percentage of claimants/insureds are “professional” crooks.
  • 25. Who are the fraudsters?
    Fraudsters will want to appear honest and deserving…..
  • 26. Who are the fraudsters?
    Their real motives may be far less virtuous…..
    In reality, fraudsters are generally driven by greed and/or desperation….
  • 27. How do fraudsters think??
    From:
    To:
    But, they have one thing in common..
  • 28. How do fraudsters think?
    They all want
    easy money.
    and
    They’re limited
    only by their
    imagination.
  • 29. How do
    fraudsters
    Plan their
    Claims??
  • 30. 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
  • 31. How do fraudsters plan their frauds?
    Fraudsters
    talk to each
    other!!
  • 32. 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.
  • 33. 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……...
  • 34. “Backing Into” Coverage…….
  • 35. “Backing into Coverage”
    Fraudsters have the ability to control all the circumstances surrounding a fraudulent claim:
    Time
    Place
    Persons Present
    Hazard
    Notice of Hazard
  • 36. “Backing Into Coverage”… cont’d
    Type of loss
    Severity of alleged damages
    Ability to circumvent security/safety controls
  • 37. “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.
  • 38. 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”).
  • 39. 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.
  • 40. 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.
  • 41. How do Fraudsters
    Conceal their Crimes?
  • 42. How do fraudsters conceal their crimes?
    Fraudsters will often change
    their Identity and Address
  • 43. Background Checks
    Uncover Aliases
    Address Histories
    Identify SSN’s
    Persons Related to Claimant/Insured
    Assets
    Financial Profile
    Litigation/Criminal History
  • 44. Cronin’s Law #1
    “If you’re not who you say
    you are, you don’t have a
    claim!!”
  • 45. Alias Identification
    Start with known identity.
    Check databases
    by name, SSN, & address
    Three key elements:
    Parallels
    Disconnects
    Overlaps
  • 46. Alias Identification
    Look for overlaps
    Vector off overlap and expand search
    Develop new addresses, SSN’s and Names
    Cross-referencing is the key to alias identification
  • 47.
  • 48. Address Histories
    You need to know what addresses your subject has used in order to know where to look for records.
  • 49. 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.
  • 50. Litigation Histories
    These are very important.
    Superior Courts:
    Civil, Criminal, Domestic, Probate, Juvenile, Judgment,
    Federal Courts:
    Bankruptcies, Civil & Criminal Filings
    Small Claims Courts
  • 51. 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
  • 52. 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.
  • 53. 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.
  • 54. Recognizing, Reporting,
    Analyzing, Investigating
    and Resisting Fraud
  • 55. 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.
  • 56. Recognizing Fraud
    What is the most powerful weapon in our arsenal against fraud?
    Is it a Cray SuperComputer?
    NO!!!
  • 57. Recognizing Fraud
    The most
    effective
    weapon in
    recognizing
    fraud is the
    dedicated
    claims
    representative.
  • 58. 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.
  • 59. Recognizing Fraud
    What are the best
    Indicators of possible
    Fraud?
  • 60. 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.”
  • 61. 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…”
  • 62. 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…
  • 63. 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.”
  • 64. 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.
  • 65. 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”
  • 66. How do we analyze a claim
    to determine if possible fraud
    is present?
    One segment at a time…….
    The Pole Vault Method
  • 67. Analyzing the Claim…. Pole Vault Method
    Each claim is
    made up of
    segments, like
    short pieces of
    the pole.
  • 68. Analyzing the Claim… Pole Vault Method
    The vaulter needs
    a “full pole” to “clear the bar”
    (get their claim
    paid.)
  • 69. 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.”
  • 70. 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.
  • 71. 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.
  • 72. 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
  • 73. 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..
  • 74. Claim Segments Cont’d
    That the insured was truthful during the application and underwriting process.
    Regarding loss history, value/condition and ownership of property
  • 75. 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
  • 76. 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.
  • 77. “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?
  • 78. Analyzing the claim
    Look for the LIE.
    Focus on the segment associated with it.
  • 79. “Stretches” will often found to be “lies” in a fraudulent claim
  • 80. Stretches make the “pole’ (claim) weak.
  • 81. “Stretches” are
    Exponential!
    The more stretches there are, the weaker the “pole”/claim.
  • 82. The answer to your questions may already be in your file.
    Periodic reality checks are important.
  • 83. Analyzing the claim
    and the claimant…..
  • 84. 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?
  • 85. 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?
  • 86. Analyzing the claim and the claimant...
    Are we seeing all the players?
    Is this a “set up” for a bad faith claim?
  • 87. Investigating the Questioned Claim
  • 88. 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.
  • 89. 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
  • 90. Investigation Tools cont’d
    Use of specialized experts
    Origin & Cause
    Laboratory
    Handwriting Experts
    Accountants
    Medical Experts
    Legal coordination
    Professional contacts.
  • 91. Professional Affiliations
    The most effective
    Investigators have
    Extensive
    Professional
    Contacts
  • 92. 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.
  • 93. Subluxation!!!!
    “Dirty Doctors” and Atty’s
  • 94. Private Investigators can help Adjusters be more effective in managing their workload.
    Claim Rep
  • 95. Future Expectations??
    If the…...
    ECONOMY
  • 96.
  • 97. Partners in Claims Investigation
    Seattle Insurance and Legal Investigations
    (206) 992-1555
    www.seattle-investigations.com