1 texas insurance code chapter 701 insurance fraud investigations texas department of insurance...
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Texas Insurance Code CHAPTER 701
INSURANCE FRAUD INVESTIGATIONS
Texas Department of Insurance Fraud Unit
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Mission
To protect insurance consumers by• regulating the industry fairly and
diligently• promoting a stable and
competitive market• providing information that makes
a difference
The Fraud Unit protects the public from economic harm by investigating allegations of criminal insurance fraud
INSURANCE FRAUD COST
Insurance fraud costs each U.S. familymore than $1,000 per year!
Source: Coalition Against Insurance Fraud
Property & Casualty = $
30BLife, Health, Disability = $
90B $
120B/year
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Organizational Chart
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Texas Department of InsuranceCompliance Division Insurance Fraud Unit Section
(1) Attorney IV
(1) Program Specialist II
Claimant InvestigationsDirector
Manager III
Administration & Training OfficeDirector
Manager III
Insurance Fraud Unit Director III
Associate Commissioner
(1) Attorney V
(5) Investigator VII
(11) Investigator VI
(1) Investigator IV
(2) Attorney V
(2) Investigator VI
(1) Program Specialist III
(3) Program Specialist II
(2) Insurance Specialist III
Insurer InvestigationsDirector / Chief Investigator
Manager III
(10) Investigator VI
(4) Investigator VII
(1) Insurance Specialist II
Fraud Unit Sections Insurer Fraud
Investigates allegations of fraudulent activity by insurance company employees or unlicensed entities/individuals
Claim Fraud Investigates allegations of fraud against an insurance
company by consumers Investigates allegations of workers’ compensation
fraud Administrative Office Supports investigative teams and management
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The Fraud Unit Investigates insurance fraud cases for referral to
district attorneys and federal prosecutors. Fraud Unit staff includes:
Certified peace officers (31) Average 22 years’ law enforcement – investigation
experience; TDI experience = six years Attorneys (4)
Average 12 years’ criminal law experience; TDI experience = nine years
Nationally recognized fraud prosecutor program Certified fraud examiners (4) Fraud analysts (2) Administrative staff 6
Fraud Unit History1991 – Statute establishing the TDI Fraud Unit Sec. 701.101 Insurance Fraud Unit
(a) The purpose of the department's insurance fraud unit is to enforce laws relating to fraudulent insurance acts
Sec. 701.001 Definitions
(2) "Fraudulent insurance act" means an act that is a violation of a penal law and is:
(A) committed or attempted while engaging in the business of insurance;
(B) committed or attempted as part of or in support of an insurance transaction; or
(C) part of an attempt to defraud an insurer 7
Fraud Unit History1995 – Statute enhancing Fraud Unit’s investigative authority
Licensed by TCLEOSE as a law enforcement agency Employed peace officers as insurance fraud investigators Acquired access to the FBI National Crime Information Center
(NCIC) Expanded the Penal Code offense of insurance fraud
2005 – Statute enhancing the Penal Code offense of insurance fraud
Extended the statute of limitations from three years to five years
Added insurance application fraud as an offense Established an aggregation clause for multiple claims Expanded statute to include all lines of insurance
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Chapter 701 Key Statutory Provisions
§701.051 Duty to Report
§701.052 Immunity
§701.106 Subpoena Authority
§701.151 Confidentiality of Information
§701.154 Disclosure of Information
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Criminal Laws That Govern Insurance Fraud in Texas
Texas Labor Code (penal violations)
Texas Insurance Code (penal violations)Unauthorized insurance
False statements
Texas Penal CodeChapter 35
Theft statutes
Misapplication of fiduciary funds
Federal Statutes18 U.S. Code Sections 1033 and 1034
Mail fraud
Wire fraud10
Proving a Criminal Fraud Case
TX Penal Code Sec 6.02, culpable mental state
(1) intentional(2) knowing(3) reckless(4) criminal negligence
Documentary evidence Business records, banking records, claim files,
correspondence, etc. Testimonial evidence
Obtained through interviews 11
Insurance Fraud Is
Intentional Committed against an insurance company or a
consumer
For financial gain or personal benefit May occur during the process of buying, using,
selling, or underwriting insurance Motivated by greed and or financial distress
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Elements of a Comprehensive Fraud Report
Names of persons Date(s) act occurred Claim payment or value Claim location Description of suspected claim or fraudulent
act Description of supporting documents Complainant’s contact information
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Types of Insurance Fraud Agent/adjuster Company officer Unauthorized/
unlicensed entity
Claim fraud Health insurance Ins premium
conversion Organized fraud
schemes
Life insurance Arson Provider fraud Disability fraud Workers’ comp fraud Application fraud Mortgage/title
insurance Fraudulent insurance
plans/policies14
Who Commits Insurance Fraud
Agents, adjusters, insurance company employees, and their executives
Medical practitioners and providers Attorneys Organized fraud rings Policy owners Third-party claimants
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Intake
Agency receives 11,000-12,000 reports of fraud annually thru various reporting means.
Each report is read and evaluated by admin staff to determine whether it meets criteria for investigation.
If approved for investigation, intake documents are entered into case management system for further action.
If no action is to be taken, information is entered into CMS and documents are filed.
The report may also be referred to another section within TDI for further action.
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Criminal Analysts
Analysis of financial records Link chart analysis Photo line-ups Criminal history queries May provide testimony in criminal
proceedings
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The Investigation
Receive report of suspected fraud Conduct interviews Acquire and analyze financial, business,
banking, and legal documents Document the flow of money transactions Develop link associations of business and
individuals Prepare comprehensive investigative report Testify in criminal proceedings
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Elements of a Successful Insurance Fraud Investigation
Access to information Tenacity, determination, and
commitment Skillful analysis of documentation Careful interview and interrogation Appropriate laws Clear and concise reporting Willing prosecutors
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Prosecution Referral Report
Accurate Written in plain language Impartial Include description of each offense Identify all suspects and witnesses Illustrate the flow of money or association of
people Answer who, what, when, where, and how
the offense was committed Support the case with evidence
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Adjuster Fraud Scheme
Assumed name of legitimate business Used a deceased relative’s bank account
and a P.O. box under the assumed company name
Started small and tested claims/payment system
Payments entered into workers’ comp claim files for alleged medical treatment
Payments issued when file was being closed22
The Investigation Gathered facts, interviewed witnesses Identified bank accounts, credit cards, loans,
and post office box records Prepared analysis of 12 years of bank account
transactions, followed the flow of money Documented the theft Worked with TDI’s Fraud prosecutor to prepare
referral
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The Sentence
12 Years – Texas Department of Criminal Justice (Corrections Division)
Fine - $3,000 Restitution - $1.2 million
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Performance MeasuresMeasure Code
Measure Description
1.2.3 oc 2 2.2.2 oc 42.2.3 oc 5
Percent of referrals to state and federal prosecutors resulting in legal action
1.2.3 op 1 (Key) 2.2.2 op 1 (Key) 2.2.3 op 1
Number of referrals of alleged fraud to state and federal prosecutors
1.2.3 op 22.2.2 op 22.2.3 op 2
Dollar amount of court ordered restitution for fraud cases referred
1.2.3 ef 1 2.2.2 ef 12.2.3 ef 1
Average number of days per fraud case referred
1.2.3 ex 12.2.2 ex 22.2.3 ex 2
Estimated dollar amount of fraud referred
1.2.3 ex 22.2.2 ex 12.2.3 ex 1
Number of reports of fraud received26
FY 2012 Annual StatisticsFraud reports received 12,736
Cases opened for investigation 518
Cases referred for prosecution 215
Amount of fraud identified in referred cases $35,875,000
Indictments resulting from investigations 134
Judgments from cases referred 88
Restitution assessed by courts on Fraud Unit cases
$2,417,347
Subpoenas issued 483
Open records requests processed 86
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Initiatives
Host the 15th Annual Fraud Conference, Feb 11 –12, 2013
Identify and obtain a CMS to auto import suspected fraud reports
Evaluate opportunities for the consolidation of performance measures
Expand the Special Prosecutor initiative
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Challenges Recruit, hire, and retain qualified
personnel Training – peace officer safety Data management – data analysis of
key metrics Spatial storage, and physical security
issues Staying ahead of the next big scheme
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What’s Next Hire key personnel Obtain training in the latest techniques to
investigate financial/business transactions
Enhance internal and external relationships
Evaluate opportunities to expand the special prosecutor initiative in Texas
Balance our statutory duties while protecting the integrity of criminal evidence
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Insurance Fraud Hotline
1-888-327-8818
Online Fraud Reporting Online Fraud Reporting AvailableAvailable
www.tdi.texas.gov/fraudwww.tdi.texas.gov/fraud
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