Category Archives: Insurance Fraud

Deepfake: A Real Hazard

By Maria Sassian, Triple-I consultant

Videos and voice recordings manipulated with previously unheard-of sophistication – known as “deepfakes“ – have proliferated and pose a growing threat to individuals, businesses, and national security, as Triple-I warned back in 2018.

Deepfake creators use machine-learning technology to manipulate existing images or recordings to make people appear to do and say things they never did. Deepfakes have the potential to disrupt elections and threaten foreign relations. Already, a suspected deepfake may have influenced an attempted coup in Gabon and a failed effort to discredit Malaysia’s economic affairs minister, according to Brookings Institution

Most deepfakes today are used to degrade, harass, and intimidate women. A recent study determined that up to 95 percent of the thousands of deepfakes on the internet were pornographic and up to 90 percent of those involved nonconsensual use of women’s images.

Businesses also can be harmed by deepfakes. In 2019, an executive at a U.K. energy company was tricked into transferring $243,000 to a secret account by what sounded like his boss’s voice on the phone but was later suspected to be thieves armed with deepfake software.

“The software was able to imitate the voice, and not only the voice: the tonality, the punctuation, the German accent,” said a spokesperson for Euler Hermes SA, the unnamed energy company’s insurer. Security firm Symantec said it is aware of several similar cases of CEO voice spoofing, which cost the victims millions of dollars.

A plausible – but still hypothetical – scenario involves manipulating video of executives to embarrass them or misrepresent market-moving news.

Insurance coverage still a question

Cyber insurance or crime insurance might provide some coverage for damage due to deepfakes, but it depends on whether and how those policies are triggered, according to Insurance Business.  While cyber insurance policies might include coverage for financial loss from reputational harm due to a breach, most policies require network penetration or a cyberattack before it will pay a claim. Such a breach isn’t typically present in a deepfake.

The theft of funds by using deepfakes to impersonate a company executive (what happened to the U.K. energy company) would likely be covered by a crime insurance policy.

Little legal recourse

Victims of deepfakes currently have little legal recourse. Kevin Carroll, security expert and Partner in Wiggin and Dana, a Washington D.C. law firm, said in an email: “The key to quickly proving that an image or especially an audio or video clip is a deepfake is having access to supercomputer time. So, you could try to legally prohibit deepfakes, but it would be very hard for an ordinary private litigant (as opposed to the U.S. government) to promptly pursue a successful court action against the maker of a deepfake, unless they could afford to rent that kind of computer horsepower and obtain expert witness testimony.”

An exception might be wealthy celebrities, Carroll said, but they could use existing defamation and intellectual property laws to combat, for example, deepfake pornography that uses their images commercially without the subject’s authorization.

A law banning deepfakes outright would run into First Amendment issues, Carroll said, because not all of them are created for nefarious purposes. Political parodies created by using deepfakes, for example, are First Amendment-protected speech.

It will be hard for private companies to protect themselves from the most sophisticated deepfakes, Carroll said, because “the really good ones will likely be generated by adversary state actors, who are difficult (although not impossible) to sue and recover from.”

Existing defamation and intellectual property laws are probably the best remedies, Carroll said.

Potential for insurance fraud

Insurers need to become better prepared to prevent and mitigate fraud that deepfakes are capable of aiding, as the industry relies heavily on customers submitting photos and video in self-service claims. Only 39 percent of insurers said they are either taking or planning steps to mitigate the risk of deepfakes, according to a survey by Attestiv.

Business owners and risk managers are advised to read and understand their policies and meet with their insurer, agent or broker to review the terms of their coverage.

Unethical Contractors Emerge After Disasters; Know How to Avoid Them

Natural disasters create opportunities for unethical contractors, and consumers need to be on the alert.

Post-disaster repair scams typically start when a contractor makes an unsolicited visit to a homeowner and pressures the homeowner to pay the contractor their insurance claim money – then disappear without doing the work.

Triple-I is teaming up with the National Insurance Crime Bureau (NICB) during the NICB’s Contractor Fraud Awareness Week (July 12-16) to educate the public about such frauds and how to avoid them.

Before hiring any contractor, consumers affected by a natural disaster should call their insurer. There’s no need to rush into an agreement. Homeowners should inspect all work and make sure they are satisfied before paying. Most contractors will require a reasonable down payment, but no payments should be made until a written contract is in place.

The NICB offers these tips to homeowners before hiring a contractor:

  • Be wary of anyone knocking on your door offering unsolicited repairs to your home. 
  • Be suspicious of any contractor who rushes you or says the government endorses them.
  • Shop around for a contractor by getting recommendations from people you trust.
  • Get three written estimates for the work and compare bids.
  • Check a contractor’s credentials with the Better Business Bureau.
  • Always ask for a written contract that clearly states everything the contractor will do.
  • Never sign a contract with blank spaces because it could be altered afterward.
  • Never pay for work up front and avoid paying with cash; use either a check or credit card.

The NICB Post-Disaster Contractor Search Checklist explains the contractor hiring process step by step.  Anyone with information concerning insurance fraud or vehicle theft can report it anonymously by calling toll-free 800-TEL-NICB (800-835-6422) or submitting a form to the NICB.

“Acting as communities’ financial first responders, insurers rebuild damaged homes, cars, and lives after a natural disaster,” said Triple-I CEO Sean Kevelighan.  “The Insurance Information Institute is proud to join forces with the NICB to educate consumers and communities about how to best prepare and recover economically.”

“Victims of disasters are under tremendous stress as they are often pulled from their homes, fight heavy traffic attempting to get to safety, all while leaving their home and belongings behind,” said NICB President and CEO David Glawe. “When they go home, they are exhausted and strained, a time when they are most susceptible to these fraudulent schemes.”

RELATED LINKS:

Article: Insurance Fraud

Facts & Statistics: 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.