Tag Archives: Fraud

Feeling Scammed Post-Disasters? Tips for Consumers

This post is was submitted by Lynne McChristian and Janet Ruiz, the I.I.I.’s Florida and California representatives.

Natural disasters (such as a flood, earthquake, hurricane or tornado) sometimes invite another type of disaster: “Storm Chasers” who try to profit from others’ unfortunate circumstances. These profiteers take many forms – from workers posing as qualified contractors to “volunteers” trying to help only themselves to lawyers and public adjusters offering to take over your claim. If you start having second thoughts about anyone who has offered assistance after disaster strikes, here are some tips to get you back on course:

  • Never feel pressured to make a decision.
    While the need to recover quickly is understandable, do not succumb to a high-pressure sales pitch. If you’ve signed an agreement or contract, remember the Federal Trade Commission has rules protecting consumers that allow you to cancel a contract up until midnight of the third business day after entering into it. This applies to door-to-door sales contracts for more than $25, as well as sale contracts for more than $25 made at any place other than a seller’s usual place of business. Additionally, states have similar rules to help consumers having second thoughts on the contracts they’ve signed.
  • Think carefully about signing over your claim to an outsider.
    This may sound like a good idea, since it appears to free you from handling the details of disaster recovery. However, what often happens when a third-party (which can be a contractor or public adjuster) takes over your claim is that you lose control of it and repair costs may be greatly inflated, delayed or not in compliance with building codes. The desire to get the job done right the first time makes a good case for the homeowner to stay involved in the process.
  • Always deal with a licensed, insured contractor for both temporary and permanent repairs.
    Be certain to have a pro handle your job. Unlicensed individuals may actually cause more damage to your property. And, if they are injured on your property, they may hold you liable if they do not have their own insurance. You can request to see their license and verify it with state or county officials. Unlicensed contractors can be reported to your state’s licensing board. Keep receipts for temporary repairs, as your insurer will reimburse you for these expenses.
  • Know that your insurer is an on-call advisor to help you through every step of the claims process.
    Home and business insurance policies comes with claims services, so consult your insurer as soon as possible after disaster strikes. Disaster claims are handled based on the severity of damage, so those most impacted get priority. That is why it is important to provide an accurate preliminary account of the damage when you make the initial call to your insurer. Also, be sure to mention any circumstances that may necessitate expedited claims handling, such as special needs situations. Contact the department of insurance in your state if you have complaints.
  • Report the scam to local police and your state insurance department.
    These scams can happen to anyone, so don’t hesitate to contact authorities. Many states also have consumer affairs departments to assist you in answering questions, protecting your interests and filing charges, if necessary.

 Additional Resources

Disaster Relief: Preparing for Fraudsters

By I.I.I. staffer Brent Carris

While natural disasters have the unique ability to unify people, it is important to stay cognizant of scams and fraud that follow.

PropertyCasualty360 addressed potential scams in this article, noting that hurricane relief fraudsters are some of the first to appear after a storm. One way to avoid scams is to donate strictly to well-known reputable organizations such as the Red Cross or Direct Relief.  The Insurance Industry Charitable Foundation has a Hurricane Harvey disaster relief fund as well.

Affected homeowners should be wary of who they let into their home for repairs. Regulators in Florida are warning consumers not to sign Assignment of Benefits (AOB) forms to get repair work started.

FEMA has launched this page with information on disaster relief and how affected individuals can prepare for the arising fraudsters.

 

Warming Up Your Valentine’s Day With Insurance

Bitter cold and snow may be in the air for some this Valentine’s weekend, but there’s no better way to stay warm than by checking out these Valentine-themed messages from around the risk and insurance community.

First up, the Insurance Information Institute (I.I.I.) reminds us that while there is nothing more romantic than a marriage proposal on Valentine’s Day, getting adequate insurance for that ring will ensure you are financially protected.

Next, did you know that every year, thousands of Americans lose billions of dollars by falling victim to romance scams? The Financial Services Roundtable (FSR) warns that nearly every demographic is at risk, but the people who are most susceptible are the elderly and women over 40 who are divorced, widowed or disabled.

Among the most common romance scams are malicious actors (scammers) who create fake profiles on dating websites and establish relationships with other site members in order to scam them out of money.

Check out this story of the Emoji prince who thinks he’s found true love online, but soon becomes a victim of a romance scam narrated by FSR’s director of fraud risk, Roxane Schneider.

Finally, if you’re looking to heat up your romance…or your house…by lighting candles this weekend, the National Fire Protection Association (NFPA) has some timely  candle fire safety tips to consider.

From 2009-2013, U.S. fire departments responded to an estimated 9,300 home structure fires that were started by candles, causing 86 deaths, 827 injuries and $374 million in direct property damage.

On average, 25 home candle fires were reported per day over the five-year period, according to the NFPA.

The I.I.I.’s Valentine’s Pinterest Board has additional tips to ensure your loved ones and their valuables are financially protected.

To Lie Or Not To Lie

Have you ever wondered how far people will go to stretch the truth in order to save a few bucks?

Research out of the United Kingdom by global insurer Zurich sheds light on this behavior.

In a poll of 2,000 adults in the UK, one-in-five (20 percent) admit to lying to their insurance company, despite a separate 82 percent knowing that wrong information registered on an insurance form can render the policy invalid.

Why do people lie to their insurer? The reasons are varied:

– 29.3 percent lie because they are unsure of the correct information or didn’t understand the process to begin with;
– 10 percent knowingly lie because they are scared of the consequences of being totally truthful;
– 8 percent even admit to lying as they don’t take the process seriously.

Despite these numbers, the poll also revealed 87 percent of people would not lie to an official body, such as the police or their accountant, in order to save money.

In the words of Zurich home insurance expert, Phil Ost:

It’s really encouraging that most people don’t feel it’s acceptable to lie to save money and honesty really is the best policy when it comes to things like jobs and insurance. The consequences of being found out can be severe and maybe invalidate a policy and potentially result in claims not being paid.”

Maybe insurers should take note that 32 percent of Brits are more comfortable lying online than over the phone, while 34 percent will lie to put a positive spin on a bad situation, and another 10 percent will lie about their weight.

Dr Patrick Fagan, Lecturer in Consumer Behavior, Goldsmiths University, sums it up best:

People lie about all sorts of things — from their weight to their employment experience — but the ‘white’ lie is still the most prevalent…it’s interesting to see that there are still a sizeable group of people who’d be dishonest in more serious and formal situations.”

More on this story from Post Magazine.

Check out I.I.I. facts and statistics on insurance fraud.

NICB Analyzes Organized Crime In Insurance Fraud

A new report from the National Insurance Crime Bureau (NICB) has found a strong correlation between organized crime and staged auto accidents.

Covering the period from January 1, 2008, through June 30, 2012, analysts reviewed 13,014 questionable insurance claims.

Questionable claims (QCs) are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons.

For this report, just QCs with a referral reason of “organized group/ring activity† (OGA) were identified.

Overall, there were 13,014 OGA QCs referred to NICB during this period. The top five states that generated the most were: Florida (3,530), California (2,679), Michigan (1,080), Texas (1,050) and New York (765).

The top five cities generating the most were: Los Angeles (752), New York (595), Miami (575), Detroit (545) and Tampa (545).

The insurance policy type most represented in the NICB analysis was “personal automobile,† accounting for 10,659 referrals. NICB says:

This suggests a rather strong correlation between the kinds of alleged fraud schemes most perpetrated by OGAs —staged and caused accidents.†

Further proof of this connection is evident when looking at these QCs by loss type. The referral reason most often coupled with the OGA referral was by far “staged/caused accident† — indicated 4,347 times. The loss type with the most referrals was bodily injury with 4,401 referrals.

NICB notes:

The results of this QC analysis correlate with what NICB agents and analysts are seeing in their cases—particularly in the no-fault, personal injury protection (PIP) states like Florida, Michigan and New York.†

The NICB defines organized crime groups as “any specific group made up of entities and/or individuals who systematically and repeatedly conduct pre-planned activities for the purpose of generating fraudulent insurance schemes.†

Staged/caused accidents are perpetrated by individuals who are skilled in committing insurance fraud. Those “accidents† set the stage for subsequent acts of fraud ranging from faked or exaggerated injuries to unnecessary or excessive medical treatment.

Check out this I.I.I. backgrounder for more info on no-fault insurance fraud, and insurance fraud in general.

Insurance Fraud Has Greater Impact Than Previously Estimated

It’s been commonly understood that insurance fraud accounts for up to 10 percent of property/casualty insurance industry losses, but a new survey of U.S. insurers indicates that fraud may be much more prevalent.

Some 45 percent of insurers responding to the FICO and Property Casualty Insurers Association of America (PCI) survey estimated that insurance fraud costs represent 5-10 percent of their claims volume, while 32 percent said the ratio is as high as 20 percent.

The survey also found that more than half (54 percent) of insurers expect to see an increase in the cost of fraud this year on personal insurance lines, while less than three percent of insurers expect to see a decline in the cost of fraud on personal lines.

Insurers responding to the survey said they expect the most significant increase in the cost of fraud will affect personal property, workers’ compensation and auto insurance. The majority (61 percent) attribute the increases in fraud to sustained economic hardship by policyholders.

While only 17 percent of insurers attributed the expected increase in fraud to a rise in the sophistication of criminal gangs, 60 percent expect a rise in workers compensation fraud rings, and 61 percent expect a rise in auto fraud rings.

The survey also found that 76 percent of insurers believe there is increased risk of fraud in no-fault states compared to states with tort systems.

When asked about fraud-fighting initiatives that can have the greatest impact on insurance fraud, predictive analytics was identified as the most effective by 45 percent of respondents.

Insurers also included the use of anti-fraud teams for specific books of business (37 percent), link analysis for detecting fraud (31 percent), business rules for stopping known fraud types (29 percent), and external databases (29 percent) as other useful approaches to fight fraud.

In a press release, Russ Schreiber, who leads FICO’s insurance practice, says:

The insurance fraud problem is estimated to exceed $40 billion globally and is showing no signs of abatement. The findings of the FICO PCI Insurance Survey demonstrate that insurers recognize the problem and are looking to improve ways to detect and prevent fraud earlier in the claims process.†

Insurance Journal has more on this story.

Check out I.I.I.  facts+statistics on insurance fraud.

Florida Drivers Paying For Auto Fraud

Florida is a hotbed for auto insurance fraud and the problem is growing worse, according to a new study from the Insurance Research Council (IRC).

The IRC findings confirm recent Insurance Information Institute (I.I.I.) analysis that staged accidents, excessive or unnecessary medical treatment and inflated or questionable claims are driving up the cost of auto insurance for Florida drivers.

Elements of fraud appeared in 10 percent of all Florida no-fault auto insurance claims – known as personal injury protection (PIP) claims – closed in 2007, according to the IRC.

Almost one in every three no-fault auto insurance claims closed in Florida in 2007 appeared to involve the exaggeration of an injury or to be inflated by unnecessary or excessive medical treatment. The IRC sums up the problem:

The apparent amount of fraud and excessive billing by some health care providers in Florida is growing rapidly. Although these findings describe conditions of more than three years ago, indications are that the situation has continued to deteriorate.†

The IRC found that average no-fault claim losses per insured vehicle grew 55 percent in just the last two years, from $100 in 2008 to $155 in 2010. Claim fraud and abuse were major factors in that growth.

Some 30 percent of Florida claims appear to involve either overbilling or excessive utilization of medical services, known as claims buildup.

I.I.I. analysis recently found that no-fault fraud has already cost Florida vehicle owners and their insurers an estimated $853 million since 2008. The cumulative costs from 2009 through 2011 could exceed $1.5 billion if current trends continue.

I.I.I. Florida representative Lynne McChristian has more on this story in her Straight Talk blog.

Check out the I.I.I. white paper No-Fault Auto Insurance In Florida.

Check out further I.I.I. information on insurance fraud.

NYC: Paying For Auto Fraud

Preliminary findings from a new study confirm that the New York City metro area is a hotbed for auto insurance fraud and drivers are paying for it.

Analysis by the Insurance Research Council (IRC) finds that no-fault auto insurance claims costs are far higher in the NYC metro area than in the rest of the state and there is significant evidence of increased utilization of medical care.

Elements of fraud appeared in 22 percent of all NYC metro area no-fault auto insurance claims (known as personal injury protection (PIP) claims) closed in the fall of 2010, while another 14 percent appear to involve either overbilling or excessive utilization of medical services.

In contrast, when IRC looked at PIP claims filed in the rest of the state, only 4 percent of closed claims appeared to be fraudulent, while signs of claims buildup were seen in just 4 percent of upstate PIP claims.

Auto injury claimants in the NYC area are seeing more doctors and going for more visits.

The IRC found that some 44 percent of NYC area PIP claimants visited four or more health care providers in 2010, whereas only 14 percent of claimants elsewhere in the state did the same.

NYC claimants were also much more likely to seek treatment from chiropractors, physical therapists, and acupuncturists than their upstate counterparts.

The typical PIP claims payout for claimants in the NYC area in 2010 was nearly double the payout for claimants in the rest of the state.

The Wall Street Journal’s Metropolis blog has more on this story.

As we’ve noted before, when claim costs rise due to fraud, policyholders are forced to pay for it through higher premiums.

Insurance Information Institute (I.I.I.) analysis shows that fraud in the New York no-fault system accounts for roughly 20 percent of every no-fault claim paid – or about $1,561 per claim.

As a result, in 2009 policyholders paid the equivalent of a $229 million tax on their auto insurance policies due to these unethical and often fraudulent activities.

Check out  further I.I.I. information on insurance fraud.

Data Theft Tops Physical Loss At Companies

Theft of information and electronic data at global companies has risen in the past year and overtaken physical theft for the first time as the most widespread fraud, according to the latest edition of the Kroll Annual Global Fraud Report.

The study reveals that data theft was reported by 27.3 percent of companies over the past year, up from 18 percent in 2009. In contrast, reported incidences of theft of physical assets or stock declined slightly from 28 percent in 2009, to 27.2 percent in 2010.

Information-based industries reported the highest incidence of theft of information and electronic data in the past year. Financial services (42 percent in 2010 vs. 24 percent in 2009) and professional services (40 percent in 2010 vs. 27 percent in 2009) are most vulnerable to data theft.

As for the cost of fraud, Kroll says the total amount lost by businesses to fraud in the past year went from $1.4 million to $1.7 million per $1 billion of sales – an increase of more than 20 percent.

Kroll also observed that the speed of technological developments poses new challenges in the fight against fraud.

Nearly one-third of companies (28 percent) reported information infrastructure complexity as the single most important factor in raising exposure to fraud. However, despite the increased risk, only 48 percent of companies are planning to spend more on information security in the next 12 months, down from 51 percent last year.

The findings are the result of a study commissioned by Kroll with the Economist Intelligence Unit or more than 800 senior executives worldwide.

The  Financial Times has more on this story.

Check out I.I.I. information on identity theft insurance.

Medical Mills Drive up Rates

Sad, but true. When claim costs rise due to fraud, policyholders are forced to pay for it through higher premiums.

A good example is New York State’s no-fault auto insurance fraud crisis. New data shows that the problem of excessive billings by medical mills in the Empire State is growing.

During the first six months of 2010, questionable liability insurance claims involving excessive medical treatment in New York surged 42 percent to 431, up from 304 in the first half of 2009, according to the New York Alliance Against Insurance Fraud (NYAAIF).

Many of these questionable liability claims referred by insurance companies to the National Insurance Crime Bureau (NICB) for investigation involved no-fault auto insurance claims submitted by medical mills, NYAAIF reports.

These fraudulent claims submitted to auto insurers are for treatment that was either excessive or not necessary, and in some instances the treatments are never even performed.

Fraud and abuse pushes up the total cost of claims and in turn the cost of insurance. Insurance Information Institute (I.I.I.) analysis shows that fraud in the New York no-fault system accounts for roughly 20 percent of every no-fault claim paid – or about $1,561 per claim.

As a result, in 2009 policyholders paid the equivalent of a $229 million tax on their auto insurance policies due to these unethical and often fraudulent activities, I.I.I. estimates.

For more information, check out an I.I.I. backgrounder  on no-fault auto insurance  and an I.I.I. presentation on the issue of no-fault insurance fraud.