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Introduction to Insurance Fraud

A Crime for Which We All Pay

FraudSmartSM

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Course Objectives

When you finish this course you’ll be able to:Define insurance fraud Identify indicators of fraudName two different ways to attack fraudulent claims

Plus topics you want to cover

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Fraud Defined

An intentional perversion of truth in order to induce another to part with some valuable thing or to surrender a legal rightFraud in insurance might be defined as the abuse of the insurance mechanism for financial gain

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FRAUD IS:

OROR

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FRAUD IS:

OROR

Stealing

Theft

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“Seriousness” of Crimes

1. Crimes against people2. Crimes against property3. Fraud

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The Fraud Problem

$30 billion a year

Costs each family $200-$300 per year

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Is It Fraud?Schemes include:

“Honest” people inflating claim to cover deductibleLess “honest” people taking advantage of a situationPeople who wake up in morning thinking of ways to steal from insurance companies

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PreviewFor the rest of the course…

“Parties” to fraudFraud schemesFrom application to prosecutionAttacking fraudReview and test

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The insuredThe insured

“Parties” to Fraud

1stParty1stParty

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The insuredThe insured The 1st party’sinsurance company

The 1st party’sinsurance company

1stParty1stParty

2ndParty2ndParty

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The insuredThe insured The 1st party’sinsurance company

The 1st party’sinsurance company

1stParty1stParty

2ndParty2ndParty

3rdParty3rdParty

A claimant against the 1st party

A claimant against the 1st party

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Who Are the Fraudulent Parties?

1stParty1stParty

3rdParty3rdParty

• Application• Claim• Application• Claim

• Fraudulent claims

• Fraudulent claims

OthersMedical personnelBody shopsDurable medical goods supply firmsPublic adjusters

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Why Do Insurance Companies Care About Fraud?

Cutting fraud saves moneySaving money means more profits Saving money may mean reduced premiums for policy holders

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Why Do Insurance Companies Care About Fraud?

It is a good public image to be viewed as a fraud fighting companyIt is the right thing to doFinally, some states mandate that insurance companies fight fraud

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Parties to Fraud: Conclusion

ReviewQuestion and answer

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The Schemes

Pool your knowledge

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The SchemesResidential and commercial building damageStaged or enhanced burglariesApplication fraud (rate evasion)Policy fraudCounterfeit documentsBodily injury fraud arising from slip and fallProduct liability Premium fraudWorkers’ comp

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The Schemes (continued)

Medical millsDoctor/lawyer kickback schemesStaged and caused accidentsFraudulent vehicle theftsBodily injury fraud arising from vehicle accidentsEnhanced vehicle collision damagePaper accidents

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The Schemes (conclusion)


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Insurance Fraud from Application to Prosecution

The fraud “process”How it happensWho’s involvedHow a fraudulent claim moves through the insurance system

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Applicant gets insurance from agentInnocent agentNot-so-innocent agentApplicant may lie about himself or the property being insured

Applicant or a third party makes a claim against the policy

Totally bogus claimInflated claim


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Claim is “called” into the first report center or to the claims officeClaim representative has anywhere from 150 to 300 pending claims at one timeGets four or five new ones each dayState mandates that claims be processed in an expeditious manner (30 to 45 days)Claims people are often rated by the claims they resolve…not the amount paid


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Claims representative Conducts investigation

Interviews insuredInterviews claimant(s)Interviews witness(es)Gets police reportGets receiptsHas proof of loss signed by insured and/or claimant


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AppraiserLooks at the damaged propertyDetermines the dollar value of the damage


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SIU (Special Investigation Unit)Investigates to assist claim representative in determining if claim is meritorious or notIf a claim is determined to not be worthy of payment…

The claim representative along with his/her supervisor will make a decision about denial


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Sometimes…depending on the company, a “business”decision will be made to pay a claim even though it may not merit paymentJustified by balancing the cost of “defending” the denial against the cost of the claim


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When SIU identifies a questionable claim they submit it to the State Fraud Bureau, a local law enforcement or prosecuting agency and to NICB®

NICB® will review to determine if the questionable claim is or has potential for multi-claim, multi-carrier investigation


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Questionable Claims Database

Single, most important tool in identifying fraudulent claimsAllows cross referencing on single claimsBuilds intelligence, trends and patternsUsed to initiate major cases

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Reporting Vehicle TheftsWhy ???

• If a vehicle theft is reported to ISO, when Law Enforcement or NICB recovers the vehicle, your company will be notified electronically of the recovery.

• NICB theft/recovery, vehicle impound and NICB activity are the primary sources that generate the automatic vehicle recovery notice to the insurance industry.

• A vehicle theft reported to ISO is a permanent record of the theft or thefts of the vehicle.

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Vehicle Theft

• NCIC Theft/Recovery• Vehicle Impounds• Manufacturer Shipping &

Assembly• Vehicle Exports

Automatic Recoveries from NICB

Managed Data

Law Enforcement and Manufacturer Data(LEMD)

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Ways to Report Vehicle Thefts

• Computer Systems–Monoline–Universal Format–UF System to System–The Web

• Theft Report Form

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If NICB® makes the questionable claim submission part of a multi-claim, multi-carrier investigation, it may be as long as two to three years before arrests are made and trials are conducted


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Levels of proofPreponderance of evidence

To prove, you must show that the existence of a fact in question is more probable than not

Beyond a reasonable doubtIt means simply that the proof must be so conclusive and complete that all reasonable doubts of the facts are removed from the mind of an ordinary person


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Elements of proofKnowledge/intent to defraudMaterial misrepresentation

Must be the basis for claim/policy approval

Monetary gain or expectation of gainIdentification of the perpetrator


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Insurance Fraud from Application to Prosecution:

Conclusion


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Attacking Fraud: Introduction

We’ve learned about parties to fraud, proof of fraud, fraud schemes, and the fraud “process”There are two ways to attack fraud

One is proving that a claim has no merit. You can do that by investigating the fraud indicators. We’ll cover that nextLater we’ll cover rescinding the policy

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Attacking Fraud: Fraud Indicators

What are they?Who discovers them?What do you do when you identify them?

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Attacking Fraud: Actual Fraud Indicators

Claimant, insured, applicant has a P.O. Box for an addressClaimant, insured, applicant is reluctant to use the US MailsClaimant, insured, applicant owns a vehicle not commensurate with his/her lifestyleClaimant has extensive medical treatment, yet little or no damage to the his/her vehicle

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Three or more claimants in the claimant vehicle and all have the same injuriesClaimant has an extensive claims historyClaimant has financial problemsBusiness is about to declare bankruptcyApplicant does not live or work near insurance agency

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Workers comp claimant is never home when claim rep callsClaimant has no receipts even though high value items were recently purchasedInsured leased the vehicle and vehicle was near the end of the lease when stolenApplicant has had a drivers license for a long time yet no vehicle ownership or insurance

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Attacking Fraud: Rescinding the Policy

You’ve seen how to attack fraud by identifying and investigating fraud indicators to disprove the merit of the claimThe second method of attacking fraud is to rescind a policy obtained under false pretense

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A policy is a contractIf the insured lied to get policy, then the contract is not valid

Since the policy is not valid, rescind the policy…And you don’t have to deal with the fraudulent claim

Attacking Fraud: Rescinding the Policy

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Attacking Fraud: Conclusion


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Review and Test

ObjectivesDefine insurance fraud Identify indicators of indicators of fraudName two different ways to attack fraudulent claims

Question and answerComing up next: a test

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1. Preponderance of evidence is a lower level of proof than beyond a reasonable doubt.

Test

a. True

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2. Fraud is:

Test

Stealing or Theft

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3. The “first party” in insurance jargon is the insured’s insurance company.

Test

b. False

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4. In order to convict someone of a crime, elements of the crime must be proven beyond a reasonable doubt.

Test

a. True

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5. Fraud indicators are enough to deny a claim.

Test

b. False

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6. Two ways to avoid paying fraudulent claims are rescinding a fraudulent policy and identifying and investigating fraud indicators to prove no merit to the claim.

Test

a. True

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7. The claimant car, a 1986 Yugo, has four passengers in it. According to the insured, who was driving his 1999 Lexus, the claimant car stopped suddenly in front of him for no apparent reason. All of the claimants are suffering from either a sore back or sore neck.

What are the fraud indicators?

Test

The claimant car was a clunker

The insured was driving a high priced car

The accident was apparently “caused” by the claimant

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FRAUD

Truly an Obscene Five Letter Word

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FraudSmartSM

Tips For Improving Your

Listening Skills

And

Controlling Your Listening Environment

Part I

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Course Objective

The student will demonstrate the difference

between “hearing” and “listening”, using this

skill as a tool to effectively manage claims

and detect questionable activity.


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Learning Objectives

The student will recite the difference between hearing and listening

The student will list 16 barriers to listeningand concentration

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“I know that you believe that you understand what you think I said, but, I am not sure you realize that what you heard is not what I meant”

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Why Listening?

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Hearing

The process, function or power of perceiving sound

Hearing is part of listening

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ListeningThe total process of receiving, interpreting, analyzing and retaining data

Listening is:Receiving information through your ears (and eyes)

Giving meaning to that information

Deciding what you think (or feel) about that information

Responding to the information received

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Listening

Most of us use only 25 percent of our listening capacity

We Ignore, Forget, Distort or Misunderstand 75 percent of what we hear

To listen one must concentrate

Not easy in a fast paced business setting

MULTI-TASKING

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CONCENTRATION IS:

Close mental application

Exclusive attention

In Other Words: – Paying attention

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And Now…A Exercise !!!

Listen carefully, I’m going to tell you a story.

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Reasons For Lack of Concentration

Time Constraints

Distractions

Self-consciousness

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Perhaps another reason for lack of concentration

Boredom…..

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Thinking about what I’m going to say

Surroundings out of your comfort zone

I know what the person is going to say

I’m used to having things repeated

I’m mentally overloaded

It’s not my job

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I’m tired

I’m confused by the topic

The speaker is confusing

I’m daydreaming

What difference does this make?

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Pompous speakers

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Tips for Improving Listening

Take notes

Listen now, report later

If taking a recorded statement don’t depend solely on the machine - try to forget it’s there

Learn to want to listen

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Be present

Anticipate excellence

Become a “whole-body” listener

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Control your emotional buttons

Control distractions

Listen to understand…not to refute or question

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Thought speed

Average speaking rate 125 words per minute

Thought rate approx. 400 words per minute

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Listen for Comprehension

– What is the person’s point, direction and/or purpose

– Mentally summarize

– Listen between lines to get total meaning

– Listen to the concept…not just the words

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Catch yourself in the act

Fight the habit

Substitute the old habit with a new habit

Acknowledge your success

Be patient with yourself


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Interviewer Demeanor

Put interviewee at ease

Show interest

Do not give clues or indicate what answer is expected

Do not ask complicated, multi-part questions

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Questionable Questions

1. Were you present when your picture was taken?2. Were you alone or by yourself?3. Was it you or your younger brother who was

killed in the war?4. Were you there until the time you left?5. How far apart were the vehicles at the time of the

collision?6. Doctor, how many of your autopsies are

performed on dead people?

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Do not ask “yes” or “no” questions

Be objective

Be yourself

Be professional

Interviewer Demeanor

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Interview questions

Difficult to answerDoes your mother know you steal?

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Questionable Answers

The guy was all over the road. I had to swerve a number of times before I hit him.

Man Driver: I was on my way to the doctor's with rear end trouble when my universal joint gave way causing me to have an accident.

Woman Driver: I was sure the old fellow would never make it to the other side of the roadway when I struck him.

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Questionable AnswersI saw a slowly moving, sad-faced old man as he bounced off the roof of my car .

The indirect cause of the accident was a little guy in a small car with a big mouth.

I had been driving for forty years when I fell asleep at the wheel and had an accident.

The pedestrian had no idea which way to run, so I ran over him.

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Listening Exercise

Write 1 - 8 on a piece of paper

Listen to 4-5 sentence story

Mark “T” for True “F” for False; or a “?”for did not say

Assume nothing

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REVIEW

Defined listening

Looked at barriers to concentration

Tips on improving listening skills practices

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Thank You for Listening!

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Listening Skills

Indicators of untruthfulness and

non-responsive answers

PART II

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WHY TELEPHONE TECHNIQUES?One way of getting the truth

There’s the story of a man at a pay phone in a restaurant making a call:

“Hello, Mr. Smith? I understand you have been looking for an assistant”. He paused to listen to the response. “Oh, you hired one two months ago and are pleased with your choice? Well, thank you anyway. I hope you continue to be satisfied with your decision.”

When he hung up the phone, the restaurant manager commented, “I happened to overhear your conversation. I’m sorry you didn’t get a shot at that job”

“Oh, that’s all right”, the man replied “ That was my boss. I was hired as his assistant two months ago and I was just phoning to find out how I’m doing”.

(from a speech by Southwestern Bell Vice President for external Affairs-Cassandra Carr)

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Course Objective

The student will demonstrate knowledge of theindicators of untruthfulness and non-responsive answers to assist your ability tospot questionable claims


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Learning ObjectivesThe student will list 10 indicators of untruthful responses, stretching the truth or non-responsive answers to your claims questions

The student will recognize four categories of non-responsive answers to your claims questions

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Interviewing Must Dos

LISTENIdentify emotionsShow empathy

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Interviewing Goals

Develop investigative informationSubject’s versionDetails of the claimPossible motivesCorroboration

Develop Behavioral informationDid the insured or claimant provide untrue information?

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Observations

Specific mannerisms noted to develop baselineOnce you have a baseline ask questions that will make the person recall details and then observe his mannerisms.Baseline indicators

Angry- change voice tone, speak louder, become defensive

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RapportDevelop a rapport

Find common ground away from statement issues

Ask how their day is goingTalk about the weather

Make the person feel comfortable talking with you

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Fraud Defined

An intentional perversion of truth in order to induce another to part with some valuable thing or to surrender a legal right. Fraud in insurancemight be defined as the abuse of the insurancemechanism for financial gain

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LIEAn untruth deliberately told, which is false for the purpose of deceiving, an intentional uttering or acting of the misstatement

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Behavior Symptom Analysis

Behavior either supports credibility or suggests possible deceptionYour behavior may influence the subject’s behaviorBehavior symptoms become more obvious as anxiety of the subject increases

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Rules for Evaluation of Behavior

Establish normal behavior patternsOverall behavior patterns- watch throughout the interviewEvaluate behavior in addition to the claim evidence and facts

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Tools of Deception Detection

SCAN- Scientific Content AnalysisStudy what was saidObtain informationDetect DeceptionUse verbs, pronouns and sentence structure to analyze what was really said

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Example

Which is real mother?

Your son is dead, mine is alive

My son is alive, your son is dead

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Which could be lies?My guns were stolen from my basementMy stereo was stolen from my bedroomThe TV was taken from my denThe CD player was taken from the rental car

My = attachmentThe = no attachment

Change from MY to THE when telling a lie

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Susan Smith

I wanted to end my life so bad and was in my car ready to go down that ramp into the water..."

I then got out of the car and stood by the car a nervous wreck.

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Kinetic Interview TechniquesBody language

Tapping your foot, moving in chair, crossing armsLook for leakage

“involuntary body movements” twitching, sweating, heart pounding

Repressed emotion almost always comes to the surface in some form of body motion or lack of motion - Charles Darwin

Fight or flight

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Attitudes Truthful vs. DeceptiveTruthful

Calm & composedCooperativeOpen & sincere

DeceptiveOverly anxiousDefensiveComplaining & guarded

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VERBAL CLUES OR INDICATORS OF UNTRUTHFULNESS

“To tell you the truth”“Frankly speaking”“Like I told the police”“I was in my house, I left my house to go to the store. When I got back, the house was on fire”

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“I did not” versus “I didn’t”

Third Person answer Versus First Person

Answers a question with a question


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Repression

Watch forTelling you everything before the event but not remembering what happened during the event.Ex: I got up, made breakfast, got dressed for work, but I don’t remember if I locked the front door before I left.

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Negation

Watch for positives all through the statement and then a negative.Ex: I had a great day at work, I closed several claims, made initial contacts and I did not make drafts out to myself.

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Modifiers or Hedgers

For the most partKind ofBasically Generally

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Qualifiers

The subject was going to do something but didn’t.Ex: I just kind of borrowed the money from my mother until I could pay it back. I did not intend to deprive her of the money permanently.

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Retractors

Are like an eraser on a pencilBut AlthoughHowever

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Other Verbal Clues

Religious inferences

Scary answers

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Truthful vs. DeceptiveTruthful answer

YesWhy should I believe you?

Because it is the truthDeceptive answer

Because I was raised not to lie or I wouldn’t lie about something like this.

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“I don’t REALLY know”

“Not that I recall”

“To the best of my memory”

“I can’t really say”


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Debating the small stuff: “ While driving down the avenue, did you see any other deer?” Answer: “I wouldn’t call it an avenue, it’s more like a country road”


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Realistic languageSteal, Falsify, Fraud, Forge or Embezzle

Softer languageImproper use, an error, an honest mistake


Versus

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Feelings about an incident– What should happen to someone who

does something like this

– Severe punishmentVERSUS

No punishment or light punishment


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Stretching the Truth

Bending or omitting

Can’t give details - just an overview of key points

Answering question before it is asked

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Non-Responsive Answer Review TestQualifying answers

Repeat tactics

Not worth the effort

Debate the smallest of details

Band wagon

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Linguistic Interpretationsby The Reid TechniqueGeneralization StatementsQ: What time did you leave work today?A: My wife prepares supper for me around 6pm so I generally leave the office at 5 or 5:15.

A non-answerEx's: I generally, typically, as a rule, as habit, policy requires, procedure is.

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Ambiguous reference

Ex: I left work at about 5:10 and drove to the restaurant. After finishing supper I drove home

Ex’s Finishing, finished, Completing, complete, Ending, end

Linguistic Interpretationsby The Reid Technique

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“I remember”

Significant?


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“I’m certain that I worked last Monday”.

Significant?


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Evaluating Verbal Responses

Does the subject's response provide a definitive answer to your question?

If not follow upNever assume what you think a subject intended to tell you or what you think the subject probably meant to say.

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Pure version of story

Let the subject tell you what happened from beginning to endUse words like “I see” or “go on” to get them to continueIf you have any questions ask them after they are finished to clarify and see of the story changes

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CAUTIONSEstablish what is a normal behavioral pattern for the interviewee (calibration) One indicator does NOT make the interviewee a liar (watch for clusters of clues)Do not confront interviewee with observationsContinue to try to clarifyLeave door open to future interviews either face-to-face or by telephone

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REVIEW

Tips on improving listening skills

Discussed deceptive responses and reporting practices

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Test

List 10 indicators of untruthful responses, stretching the truth or non-responsive answers.

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NICB®

Questionable Claims Database

Single, most important tool in identifying fraudulent claims

Allows cross referencing on single claims

Builds intelligence, trends and patterns

Used to initiate major cases

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Ears up!

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