Kelly Riddle of Kelmar Global shares tips for conducting insurance investigations. To watch the webinar recording, visit: http://i-sight.com/webinar-investigating-insurance-fraud/

1. Investigating Insurance Fraud
Kelly E. Riddle, President and Founder, Kelmar Global

2. Kelly E. Riddle
Kelly Riddle has more than 35 years of investigative and
law enforcement experience. Prior to founding his own
company, Kelmar Global, in 1989, he worked for two
other private investigation companies and in the
insurance industry as an adjuster and an investigator.
On the law enforcement side, Kelly has been a member
of the SWAT Team, a training officer, emergency medical
technician, evidence technician, arson investigator,
traffic investigator and breathalyzer operator.
Kelly has a Bachelor of Science degree in Criminal
Justice from the University of North Alabama.

3. Understanding Insurance
Philosophy of Insurance: The concept of insurance is to spread the threat of
loss over a large, diverse segment of the populace. Insurance is based on
risk: NO RISK = NO INSURANCE.
Risk is everywhere
Risk is an uncertainty (which implies doubt about the future)
Risk is a chance or probability of loss
Risk is based on a lack of knowledge—if we knew a loss was going to
happen, we could act to prevent it
Insurance attempts to quantify the likelihood of an event and the severity
of damage from the event if it occurs

4. Causes of Loss
Peril: An event that will give rise to a loss — often beyond control
Hazard: A factor that may influence the outcome of a loss. A hazard are not
the cause themselves — they increase the likelihood of a peril occurring.
Chance of Profit or Loss: Pure risk entails a chance of loss without a
chance of profit. Insurance companies attempt to “wager” the possibility of
loss versus profit.

5. Life Insurance Scam

6. History of Insurance
 Code of Hammurabi (Robbery):written by the King of Babylon
around 2000 BC is one of the earliest known applications of
insurance. A man was robbed and not caught. The Code described
restitution for the loss.
 Cargo Insurance: Babylonian caravan owners pledged their assets
(including family) as security for safe transport of others goods.
Restitution was made if the goods were not safely delivered.
 Marine Insurance: The sea-faring Phoenicians used the cargo
insurance idea while transporting cargo by sea.
 Fire Insurance: The great fire of London in 1666 sparked the
formation of numerous insurance companies. Insurance companies
owned the early fire brigades.

7. Payment of Claims: Companies philosophies include paying “exactly
what is owed — not a penny less, and not a penny more”
The Enabler of Insurance Fraud: The philosophies of insurance help
create fraud. Paying “exactly what is owed” becomes the issue —
what exactly ARE the DAMAGES?
Is exaggerating a claim considered insurance fraud?
Until a loss occurs, an insured is the holder of an expensive piece of
paper that contains a promise. This is also a time to “regain” the
money spent for the policy.

8. Responsibilities of Insured
• Must give prompt notice of loss
• Must protect property from further damage — not abandon
• Must separate damaged from undamaged property
• Must prepare an inventory of damaged items
• Must complete all proof of loss forms, etc.
• Must cooperate with investigation
Failure to perform these actions can void the policy and allow for
legal denial of the claim.

9. Insurance Definitions
S.W.I.B.: The term that designates the Southwest Index Bureau. An
insurance company can subscribe to their service. If a person turns in a
claim for a bodily injury, the adjuster sends in a "SWIB" form. The
Southwest Index Bureau will notify the insurance adjuster of any other
claims filed by the person. Commonly used to assist in determining similar
injuries or a pattern of claims.
P.I.L.R.: Pronounced, "pillar." The term designates the Property Insurance
Loss Register. Insurance companies that subscribe to the services can use
the service to determine if the person has filed any other similar claims or
listed similar property as being stolen.
Activity Check: A term used by the client to request a P.I. to determine the
subject's current activities.

10. Claims department: This is the department that handles the claims
filed against the insured (person or company who bought the
policy).
Sales department: This department is responsible for selling the
insurance policy to the consumer.
Underwriting department: The underwriters are responsible for
reviewing insurance applications for potential risk and determine
the profitability for insuring the applicant.
Engineering department: This department has the loss control
and safety review agents that attempt to prevent losses by
recommending changes to the insured's property or business.
Auditing department. The auditor's review the books of companies they insure
to make sure that the company is being billed correctly based on payroll
guidelines.

11. Legal department: This involves staff attorneys that assist the
insurance company departments in legal issues.
Accounting department: The department accounts for the money
coming in and going out of the company.
Actuarial department: This department records, classifies and
interprets data for use in the individual rate determinations.
Declaration: This portion of the policy outlines the name and
address of the person being insured, the dates of the policy, the
amount of insurance, the location and the premium.

12. Current Trends in Fraud
Identity theft
Internet fraud (Ebay, etc.)
Financial fraud
Newspaper fraud (obituaries, garage sales)
Vendor fraud
Agent fraud
Travel-related fraud (theft, deaths)
Life insurance fraud
Nigerian scams
Fake hail claims

13. Bank and Financial Fraud
1) Domestic Bank Fraud:
a) Embezzlement or poor record keeping?
b) Tracking missing assets
2) International Bank Fraud:
a) Fake Banks
b) Methods of Hiding Assets
3) Stock Fraud
4) Sources for tracking assets
a) Law Enforcement
b) Following the Money Trail

14. Homeowner and Property Claims
Types of claims
1) Faking Burglary and Theft Claims
2) Exaggerating Burglary and Theft Claims
3) Arson
4) Water Damages
5) Liability
6) Slip and Fall Claims

15. Fake Documentation of Claim
1) Unusual Amount of Receipts
2) Receipts Returned
3) Fake Affidavits
4) Reused Photographs
5) Fake Walls & Floors
6) Family Albums

16. Legal Name Change Scam (Seattle, WA)
Teeshawndra Nelson used the legal system to change
her name 11 times in three years. Each time she changed
her name, she obtained a new Washington state ID card
or driver's license.
Nelson then used the IDs and stolen Social Security
Numbers to open bank accounts under her new name
and allegedly wrote scores of bad checks. Once the
bank caught on to the fraud, she would go back to court
to change her name and begin the cycle anew.
Nelson is one of 11 defendants facing federal charges as
a result of "Operation Name Game," a lengthy
investigation of a sophisticated new form of identity theft
that exploits the surprisingly easy process for legally
changing names.

17. Heavy Machinery and 18 Wheelers
1) 18-Wheeler Theft:
a) Witnesses
b) Location of Keys
c) Debt
d) Shops
e) Maintenance Records
2) Cargo Theft:
a) Driver Involvement?
b) Organized Crime
c) International Connections

18. Cargo and Transportation Theft
• Domestically, cargo thieves target five main
product types:
• Computer components and software
• Consumer electronics
• Cigarettes and pharmaceuticals
• Fashion apparel
• Copper and metal

19. Cargo Theft by Day of Occurrence

20. Top Cargo Theft States
Top10 Cargo Theft States
80
70
60
50
40
30
20
10
0
AL AR CA FL GA NC NJ OH TN TX
States
#of Reported Incidents

21. Main Target Items
Most Stolen Item Per Commodity
9
7
8
24
19
3
2
8
7
13
Tires (9)
Clothing (7)
Computers (8)
TV's (24)
Pharmaceuticals (19)
Drinks (7)
Collagen/Lotion (2)
DVD's (3)
Cigarettes (8)
Copper (13)

22. Methods of Crime Activity
• Local gangs concentrate on local distribution centers, truck stops
and drop yards.
• Follow loaded tractor/trailer from DC awaiting an opportunity to take
the unit and will follow for hundreds of miles if necessary.
• Once driver leaves unit alone, they will steal the entire unit, by either
hot-wire or master keys.
• They immediately disable any QUALCOMM or asset control GPS on
the tractor or trailer.
• They either drive the stolen unit a short distance and park in a
remote or crowded area, and place it under surveillance for LE
response.

23. • If no one comes within a few hours, they either move it on or
trans-load the freight to a clean trailer.
• If freight is not recovered within 16 hours, chance of recovery is
very limited.
• Gangs will often put someone in a warehouse as a stake-out
employee to determine shipments and security.
• Gangs will often put a GPS in the shipment to track without
having to use direct surveillance.
• Must be able to work quickly and across borders if the equipment
and cargo is going to be recovered.

24. False Reporting of Vehicle Damage

27. Faking the Injury

28. Personal Injury
1) Fake Claim/Documentation
a) doctor involvement
b) Attorney involvement
2) Auto Accidents
a) Claimants not really in car
b) Car previously damaged
3) Proper Defense of Claim and Use of Investigators

29. Plaintiff Attorney Abuse of System
1) Know insurance companies that investigate claims
2) Have “buddy” system with doctors and clinics
3) Use of forms from Doctor’s office
4) Knowledge of claimant’s fraud
5) Coaching to assist in fraud.

30. Arson: The Easy Insurance Abuse
1) Faking the Electrical Short
2) Signs of abuse:
a) No household goods
b) Rental Properties
c) Flame and Smoke Patterns
d) Pending Divorce or Financial Litigation
3) Agent Conflict

31. Unusual Statements
 Mental or Physically Disabled (should obtain affidavit from physician
attesting to ability)
 Children: Parental permission
 Illiterate Individuals: use of witnesses
 Different Language: use of interpreters
 Telephone Statements: use of personal identifiers

32. Locating Insurance Coverage
1) Automobile Insurance:
a) Run license plate
b) Check lien holder
c) Police Survey
2) Property Insurance
a) Tax Assessor
b) Appraisal District
c) Mortgage Company

33. Vendor Fraud
1) Outside Investigators
a) not performing actual surveillance
b) conflict of interest
c) use of more than one PI company
2) Medical Review/Third Party Administrators
a) improper coding
b) conflict of interest
c) failure to investigate due to contract/budget

34. Subrogation
1) Hiding Insurance Coverage
2) Hiding Assets
3) Hiding Business Affiliations
4) Hiding Prior Litigation
5) Accident History

35. Conducting Investigations
1) Obtain a copy of the police report
2) Talk to the investigating officer and/or detective. Determine if the area has
been getting hit on a regular basis, if they have any suspects and what their
impression of the insured was when they talked to them.
3) Meet with the insured and obtain a recorded statement from the insured
regarding when the theft occurred, when it was reported, etc…
4) Obtain receipts for the reported items that were stolen.
5) If receipts are not available, obtain copies of owners manuals or similar
documentation

36. 6) Obtain copies of credit card statements to assist in verifying the purchase
7) Obtain copies of family photographs that may show the items in the
background.
8) If no receipts or other tangible proof of ownership has been provided,
determine which of their family members or friends you can contact to get a
sworn statement that the items were observed in the house.
9) If there are other similar items in the house, obtain the serial and model
numbers off the items.
10) Take photographs of the point of entry as well as the shelves or other
locations where the items were sitting when stolen.

37. 11) Determine if the insured had an alarm. If so, obtain the name of the alarm
company and contact them to see if they had any alarms on the day of the
theft.
12) Make an overall observation to determine if the person appears to live the
type of lifestyle that would indicate they could afford the items.
13) If things associated with hobbies such as guns, instruments or other items
were reported stolen, observe whether they live the lifestyle that suggests
they may have been involved in the hobby.
14) Do a neighborhood canvas and determine if anyone saw anything
suspicious, heard anything unusual or happens to know the financial
condition of the insured. Be sure to ask if the neighbors saw any trucks or U-haul
type vehicles and determine if they know if the insured is actually living
at the house.

38. 15) Conduct a preliminary civil and criminal search regarding the
insured and their spouse.
16) Attempt to validate the purchase of the stolen items through the
stores.

39. Interviewing: Make or Break a Claim
Setting the Stage for a Successful Interview
1) Know your interviewee
a) compile background information on subject
b) compile background of other parties involved
c) compile information about geographic area
2) Know the facts of the case
3) Select specific questions that will provide insight
4) Prepare Recording Equipment ahead of time

40. Control the Setting
You choose the location for the interview
a) Interview on your turf
b) Don’t conduct the interview where the subject knows everyone and
feels secure
c) Choose a location with limited distractions
d) Be early for the appointment
e) Make sure the interviewee has was if wanted
f) Inquire if they need to use bathroom facilities before the interview begins
g) Make sure interviewer & interviewee turn off cell phones and pagers

41. Set the Tempo of the Interview
a) Make small talk to relax the interviewee
b) Advise subject (in gentle & non-threatening manner) of rights to leave
or terminate interview
c) Ask very general and basic questions initially
d) Smile and be polite to ease the subject
e) Allow enough time for interview
f) Provide ample time for subject to answer

42. Study the Interviewee
1) Does the subject appear confident, nervous, afraid or timid?
2) Does the subject return smiles?
3) Study the interviewee’s eyes:
a) do they look you in the eyes before questions?
b) do they look you in the eyes while you talk?
c) do they look you in the eyes while answering?
d) do they glance away often?
e) do they look around often?
f) do they blink abnormally?
g) do their pupils dilate under pressure?

43. Study the Subject’s Body Language
a) do they sit upright and confident?
b) do they sit with arms folded?
c) do they fumble with a pen or other item?
d) do they sit with both feet on the floor?
e) do they hold on firmly to a purse/briefcase?
f) do they move their hands a lot while talking?
g) do they fumble with hair, beard, etc.?
h) do they shift positions while seated/standing?
I) do they stutter or swallow excessively?

44. Study the Interviewee’s Rhythms
a) do they sigh a lot?
b) do they take deep breaths?
c) does their respiration appear to change?
d) does the subject have a noticeable rhythm to their answers?
e) does the subject’s face turn red or pale?
f) does the subject’s ears, nose, neck or fingers turn red or pale?
g) does the subject take longer to answer with tougher questions?
I) does the subject request frequent breaks?

45. Proper Questioning
1) Proper questioning provides proper answers
2) Determine tendency of subject to answer truthfully from the onset:
a) ask questions with known factual response
b) ask basic questions about the incident
3) Insert a tough/key question during simple, relaxed questioning
4) Rephrase the same key question several different ways and ask again
several times
5) Utilize different voice fluctuations and rhythms to encourage responses
6) Utilize head/hand gestures to encourage response

46. Signed, Sealed and Delivered
1) Know ahead of time what wording to use for confession
2) Have access to witnesses for statement
3) Encourage subject by advising of your intentions with/without
cooperation
4) Be prepared to use statutes such as RICO
5) Have predetermine guidelines for arresting or escorting subject off
property
6) Have predetermine understanding of prosecutor’s requirements

47. Thank-you for participating
If you have any questions, please feel free
to email them to:
Kelly Riddle, President, Kelmar Global
kelly@kelmarglobal.com
or
Joe Gerard, Vice President Marketing and Sales, i-Sight
j.gerard@i-sight.com