Category Archives: Insurance Fraud

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/14/2020)

Automobile Insurance
Auto Insurers Issuing $10.5 billion in Coronavirus Refunds
CA Orders Insurers to Pay Back Premiums Due to Virus
Business Interruption
FL Restaurant Files Class Action Seeking Virus Cover
Trump Suggests Insurers Should Pay Virus Business Interruption Claims
Trump Pressures Insurers Over Coronavirus Business Coverage Gray Area
GOP Senators Urge Trump to Protect Insurers From State Legislation
Pandemic Insurance/Catastrophe Bonds
Pandemic Insurance Has Yet to Pay Out to Poor Countries
World Bank Pandemic Cat Bonds and Swaps Not Triggered for Payout Yet
Workers Compensation
OSHA backtracks on recordability of COVID-19
KY Extends COVID-19 Workers Comp to Grocery Workers
IL expands COVID-19 Comp Protections to Most Frontline Workers
New Workers’ Comp Rule Slammed by Business Groups
Have You Considered COVID-19’s Workers’ Comp Implications for Frontline Workers?
MN Legislature Passes COVID-19 Workers’ Comp Bill for First Responders
CA Boosts Worker’s Comp, Insurance Benefits for COVID-19 Diagnosis
Health Strategy Associates Surveys Workers’ Comp Payers on COVID-19
Coalition Against Insurance Fraud: Rapid National Response Urged to Head Off Coming Wave of COVID-19 Insurance Scams

Coronavirus Wrap-up: Property and Casualty (4/9/2020)

Estate of Illinois Worker Who Died From COVID-19 Sues Walmart
Pricing Impact of COVID-19 Likely ‘Dramatic’: MarketScout
Federal and State OSHAs Overrun With COVID-19 Complaints
Insurance Companies Offering Relief During Pandemic
Options for Those Struggling to Pay Their Auto Insurance Premiums During Pandemic
Addressing Challenges of COVID-19: From Underwriting to Claims
Rise in Searches for ‘How to Set Fire’: A Sign Insurance Fraud Beckons as Economy Crashes?
Zoom Sued for Not Disclosing Privacy, Security Flaws
Sailors Cleaning Coronavirus-Stricken Carrier Lack Protective Gear
Colorado’s Marijuana Businesses Can Remain Open During Pandemic but Say They’re Still Struggling
Practical Business and Insurance Considerations for Hotels, Restaurants During COVID-19 Crisis
Is It Safe To Travel Anywhere? Your Coronavirus Questions Answered
SBA Overwhelmed with Demand. Is it Up to the Task of Responding to Coronavirus?
Driving Less During Coronavirus Outbreak? You Could Get an Auto Insurance Discount
Progressive, Travelers, USAA Latest to Offer Discounts, Other Accommodations
Insurance Industry Charitable Foundation COVID-19 Crisis: IICF Children’s Relief Fund
Museums Hope Thieves Stay Home Too
A.M. Best: Event Cancellation Insurers May Exclude Future Pandemics
U.S., Britain Warn That Hackers Increasingly Use Coronavirus Bait

NICB: Watercraft theft sank in 2018

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The official start of summer is just a few weeks away, and for many that means leisure time spent on the water. Boating is a very popular pastime with an estimated 141.6 million Americans going boating in 2016.  Sales of recreational watercraft (powerboats, personal watercraft and sailboats) reached a high of $39 billion in 2017, up 6.5 percent from 2016.

Like cars, boats are often stolen. But the boat owners among us will be happy to know that watercraft theft was down by 8 percent in 2018 over the prior year. According to the National Insurance Crime Bureau’s (NICB) 2018 watercraft theft report, a total of 4,499 watercraft were reported stolen in the U.S. between January 1 and December 31, 2018.

Florida was the top state for watercraft theft, followed by California, Texas, Louisiana and North Carolina. According to the NICB report, personal watercraft were the most likely type of watercraft to be stolen followed by runabouts, utility boats, cruisers and sailboats,.

You can do a lot to help prevent someone stealing your boat. The NICB recommends the following tips to protect watercraft from theft:

  • When you “dock it, lock it” and secure it to the dock with a steel cable
  • Remove expensive equipment when not in use
  • Chain and lock detachable motors to the boat
  • Do not leave title or registration papers in the craft
  • Disable the craft by shutting fuel lines or removing batteries
  • Use a trailer hitch lock after parking a boat on its trailer
  • Install a kill switch in the ignition system
  • Ensure your marine insurance policy includes your equipment, boat and trailer
  • Take photos of the boat and mark it with a Hull Identification Number (HIN)

 

 

Michigan arson hotline gets a second life

If it weren’t for the intervention of a determined National Insurance Crime Bureau (NICB) agent and the staff of the Michigan Basic Property Insurance Association (MBPIA), a valuable Michigan arson prevention program would have bitten the dust.

The Michigan Arson Hotline and Rewards Program was run by the Michigan Arson Prevention Committee (MAPC), an agency that provided many services to the state’s fire/police departments, insurance carriers, and the public. But the agency was defunded in 2017 and the hotline ceased to exist. That was unfortunate because the hotline was so successful that from 2014 through 2018, the number of arson-related suspicious claims referred to NICB from Michigan decreased by nearly 50 percent.

During its 30 years of operation the hotline paid out nearly $1 million to confidential informants whose information lead to the arrest and conviction of numerous arsonists, some of whom were involved in very high-profile arson fires within the state.

So, when the hotline was shut down, NICB Supervisory Special Agent Joseph Hanley, working with the Michigan Basic Property Insurance Association (MBPIA), decided to act to revive it. In January, 2018, Hanley and representatives of the MBPIA approached the Detroit Crime Commission (DCC) with a proposal for the DCC to assume the administrative responsibilities of the arson hotline and rewards program. Acknowledging the mutual support and success of the arson hotline, the DCC enthusiastically agreed to the proposal.

Arson is the act of deliberately setting fire to a building, car or other property for fraudulent or malicious purposes and is a crime in all states. According to the National Fire Protection Association (NFPA), there were 22,500 fires intentionally set in structures in 2017, an increase of 13 percent from 2016. The 2017 structure arson cases resulted in 280 civilian deaths and $582 million in property loss. Additionally, there were an estimated 8,500 intentionally set vehicle fires in 2017, these fires resulted in $75 million in property loss, an increase of 88 percent from 2016.

The I.I.I. has facts about arson here (members only content).

Study: One third of Americans lie on auto insurance applications

Most people agree that honesty is the best policy, but when it comes to filling out insurance applications, many consumers are willing to fudge the truth to get a better rate. According to a study from finder.com, an estimated 35 million Americans have lied on an insurance application.

Almost one in three (29 percent) of the people who have lied on an insurance application have done so for car insurance. That amounts to 10.2 million Americans who were willing to lie to get the best coverage for the road.

Following car insurance, false information is most likely to appear on applications for health insurance (22 percent), life insurance (21 percent), income protection insurance (8 percent), travel insurance (7 percent), home and contents insurance (7 percent) and pet insurance (5 percent).

More men lie than women, but women are more likely than men to lie on an application in five of seven categories: health insurance, income protection insurance, travel insurance, home and contents insurance and pet insurance. Men lead women when it comes to lying on car insurance and life insurance applications.

“Taking creative liberties on your insurance application may seem like an innocent white lie, but it’s actually considered fraud, and the repercussions can be serious. If found out you may be charged a higher premium, denied a policy or even charged with fraud, requiring you to pay a fine or even do jail time,” said Finder’s consumer advocate Rachel Dix- Kessler.

There are numerous ways to save money on car insurance. The Insurance Information Institute has these tips for shopping around for the best policy.

For more information on insurance fraud click here.

Assignment of Benefits and Hurricane Loss Creep

We’re putting the finishing touches on a major research project on the assignment of benefits problem in Florida, a phenomenon in which a quirk in that state’s laws becomes a lever with which the less-than-scrupulous can supersize a claim settlement.

Our paper looks at how the problem has spread across lines of business – from no-fault insurance to homeowners to auto physical damage claims – and across the state – what started in South Florida has metastasized into the Interstate 4 corridor. Even far west on the Panhandle,  Escambia County (Pensacola) has had 346 assignment of benefits lawsuits this year through November 9. Five years ago it had 20.

Our research focused on the growth from one line of business to another and the spread of the problem over time. Artemis.bm has an interesting take on the knock-on effect from the way the problem is rolling through Hurricane Irma claims. Artemis is a website that is expert in alternative sources of insurance capital like catastrophe bonds, collateralized reinsurance and industry loss warranties.

That marketplace is fretting, in part, because after one major event, the capital that insured (or reinsured) that event is locked up. It can’t be used to insure against a second event until it is clear that it won’t be needed for the first.

And losses from Irma, a 2017 storm,  keep rising. In August, four insurers raised their loss estimates more than $1 billion.  The total  this month passed $11 billion, according to Florida’s Office of Insurance Regulation. More than 76,000 remain open.

What is causing the creep? Assignment of benefits issues are a prime suspect. Unscrupulous contractors dupe policyholders into letting the contractor settle directly with their insurance company – without letting the insurance company know. The insurer gets the news in the form of a bill to pay – never having had a chance to ensure the repairs were appropriate or done competently.

Disputes often go to court, where if the insurer loses, it must pay the plaintiff’s legal costs as well as its own.

As Irma’s loss estimates grow, reinsurers and alternative capital sources worry that the same thing will happen to Hurricane Michael claims. Michael struck six weeks ago, but the number of claims is accelerating.

Artemis cautions against overreacting to Irma’s situation, but notes that reinsurance markets may need to price for loss creep (read: charge more for reinsurance), which ultimately pushes homeowner premiums higher.

 

 

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.

IRC Warns On Rising Auto Injury Claims Costs

Insurers and drivers awoke to some not so good news this morning. According to new findings from an Insurance Research Council (IRC) study of auto injury claim trends, insurance claim costs countrywide have recently increased, reversing previous trends of declining or relatively stable costs.

The IRC reports that although injury claim severity (the average cost of injury claims) has been increasing steadily in the last several years, much of the increase has been offset by declining claim frequency, producing relatively stable injury claim costs per vehicle.

However, recent data indicate that claim frequency on a countrywide basis is no longer decreasing.

In the case of personal injury protection (PIP) claims, the effect of rising claim severity has been magnified by a simultaneous increase in claim frequency. PIP claim costs per insured vehicle countrywide increased by more than 18 percent from 2008 to 2010, the IRC said.

For bodily injury (BI) liability claims, the effect of rising claims severity has been mitigated somewhat by stabilization, rather than an increase, in claim frequency. However, 2010 marks the first year since 1994 that BI claim frequency did not decline.

Elizabeth Sprinkel, senior vice president of The Institutes, summed up the findings:

While we hope these findings represent temporary conditions, we can’t be sure that is the case and can’t afford to ignore the factors driving rising claim costs.†

The IRC notes that much of the deterioration in PIP trends has been concentrated in three of the largest states with no-fault approaches to compensating auto injuries – Florida, Michigan and New York.

In Florida, the average PIP claim cost per insured vehicle in the state jumped 62 percent in just two years (2008-2010).

PIP costs per vehicle in Michigan have been increasing rapidly for several years now – rising more than 120 percent over the last decade, while the New York system has been on a roller coaster of rising and falling costs driving by a surge in suspected claim abuse.

Check out the I.I.I. issues update on no-fault auto insurance.