Capabilities of Seattle Insurance and Legal Investigations.

1. Insurance Fraud
Investigation

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

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. 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

72. 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..

73. Claim Segments Cont’d
• That the insured
was truthful during
the application and
underwriting
process.
• Regarding loss
history,
value/condition and
ownership of
property

74. 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

75. 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.

76. “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?

77. Analyzing the claim
• Look for the LIE.
• Focus on the
segment
associated with
it.

78. “Stretches” will
often found to
be “lies” in a
fraudulent claim

79. Stretches make
the “pole’
(claim) weak.

80. “Stretches”
are
Exponential!
The more stretches
there are, the
weaker the
“pole”/claim.

81. • The answer to your questions may
already be in your file.
• Periodic reality checks are important.

82. Analyzing the claim
and the claimant…..

83. 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?

84. 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?

85. Analyzing the claim and the claimant...
• Are we seeing all
the players?
• Is this a “set up” for
a bad faith claim?

86. Investigating the Questioned Claim

87. 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.

88. 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

89. Investigation Tools cont’d
• Use of specialized
experts
– Origin & Cause
– Laboratory
– Handwriting Experts
– Accountants
– Medical Experts
• Legal coordination
• Professional
contacts.

90. Professional Affiliations
The most effective
Investigators have
Extensive
Professional
Contacts

91. 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.

92. “Dirty Doctors” and Atty’s

93. Private Investigators can
help Adjusters be more
effective in managing their
workload.
Claim Rep

94. Future Expectations??
ECONOMY
If the…...

96. Partners in Claims Investigation
Seattle Insurance and Legal
Investigations
(206) 992-1555
www.seattle-investigations.com