Anatomy of insurance fraud

“Hey, Bob, so sorry to hear about the fire.” Bob replies, “Thanks, but it’s not until tomorrow.”

If only perpetrators of insurance fraud spent their time being honest, consumers in the United States could save an FBI-estimated $40 billion a year on the cost of insurance fraud. According to insure.com, fraud costs add between $400 and $700 in annual premiums for property/casualty insurance coverage. So what is the insurance industry doing to fight back?

The National Insurance Crime Bureau (NICB), an organization that works with insurers and law enforcement to detect and prosecute fraud, has a variety of indicators that are common to fraudulent claims. Claims with these attributes allow investigators to take a closer look to determine if someone is, in fact, taking unfair advantage of the system.

Greed and hardship are common motivators that manifest themselves with the following behaviors or circumstances:

• The serial claimant is a good indicator that someone may be pushing the limits. A history of frequent insurance claims allows investigators to see patterns of either abuse or just plain bad luck.
• People who are too cool, calm and collected also set off alarms when a claim is submitted. Theft, accidents and fires are emotional events for most people but if someone calls with very little anxiety, claim managers tend to probe.
• Theft of family heirlooms or jewelry that have no documentation from an appraiser or jeweler also prompt a little more attention from investigators – particularly when the theft has not been reported to the police.
• Claims adjusters also flag hand-written receipts that purport to establish value on various items. A penned receipt from Bob’s Wicked Good Pawn Shop is going to prompt a call to the business for more information.
• If someone filing a large claim is financially stressed as indicated by a poor credit report or forensic accounting, their house fire or stolen vehicle claim will be given more attention than the routine fender bender.
• And, of course, someone who increases coverage on their home or business not long before a fire or theft occurs may be given some extra scrutiny. Investigators may talk with neighbors to see if any property has recently been removed prior to the claim being made.

Liability claims also are the playground of creativity and sometimes methodical planning. Workers’ compensation claims for job-related injuries and illnesses always have been a challenge for both insurance companies and employers. A favorite tale is about the gal who claimed she had a debilitating back injury from her job as a patient care giver. Investigators discovered the ailing aide was running her own home renovation company while collecting workers’ compensation benefits. At a formal hearing, the insurance company called upon a few of her construction clients who testified that she not only ran the job but hefted building materials. One added that the work wasn’t all that good. Outraged at having her workmanship questioned, the claimant blurted out, “What do you mean it was shoddy work?” Case closed.

Other kinds of indicators get attention of liability claim investigators:

• A slip, trip or fall that has no witnesses
• A worker who claims an on-the-job injury occurred late Friday or first thing Monday morning when, instead, it may have been an injury from a weekend softball game or other non-work related activity.
• “I just found a dead mouse in my meal!” Though a great conversation starter for a quick financial settlement or complimentary dinner, it also is an allegation that likely will become a more serious fraud investigation.
• Claims of whiplash from rear-end accidents are legendary turf for fraud. Whether carefully staged or subsequently exaggerated, investigators will perform surveillance and third-party questioning to determine if the claimant has been physically active or is truly injured.
• Another gold mine for investigating fraud is Facebook and other social media. For some reason, perpetrators think that, somehow, just their friends are surfing the net when they brag about their illegal exploits. Not so.

All of us have a stake in reporting potential insurance fraud. If you suspect fraud, you contact NICB or can call the insurance department in Maine 800-300-5000 or New Hampshire 603-271-2261. You also may want to contact your local district attorney.