Insurance industry’s anti-fraud efforts looking up

Upbeat attitude at IASIU’s annual seminar signals growing strength for the fraud fight

IASIU logoWhen anti-fraud professionals gathered just a few years ago, the talk typically centered on lack of job security, reduced budgets and perhaps even the lack of respect by senior leaders at insurance companies.

How quickly times change. The upbeat attitude expressed at the opening of today’s annual seminar of the International Association of Special Investigation Units is yet more evidence that the anti-fraud community is strong and growing.

Investigators are smiling again. Insurers seem to be loosening their belts on funding for staffing, anti-fraud technology and even sending more fraud fighters to IASIU’s annual seminar. The 700-plus attendance here in Greensboro, N.C. is the best in several years.

The anti-fraud community seems to be maturing nicely. IASIU is now 30 years old. The old guard of investigative managers combined with the influx of young, tech-savvy analysts and investigators gives insurers the best-trained and best-equipped army of insurance fraud fighters the industry has ever deployed.

Add to that the strength of organizations such as NICB, ISO and a growing cast of insurers that support anti-fraud efforts, and there’s good reason for optimism that we’re finally getting a handle on combating fraud.

That’s hardly to say we’re turning the corner and seeing widespread declines of insurance crime. But the fraud fight definitely is looking up compared to just a few years ago.

Consumer education key to combating home contractor fraud

New book gives homeowners step-by-step details on dealing with contractors

contractor bookThis time of year historically has not been kind to insurers and property owners. In the past we have seen Hurricanes Andrew and Katrina as well as Superstorm Sandy wreck havoc on everywhere from South Florida, the Gulf Coast and the Jersey Shore, New York and Connecticut. This year we have the Napa, California earthquake, plus tornados and hail storms in the Midwest.

These and other events underscore the importance of helping homeowners prevent becoming victimized a second time by crooked contractors. Many of these fraudsters are fly-by-night operators who prey on vulnerable property owners desperately wanting to get their lives back to normal again.

The Coalition partners with insurers, consumer groups and government agencies in targeting shady contractors. We support strong legislation giving consumers the ability to rescind a contract if the repairs are deemed unnecessary by their insurer. The contract also must clearly state that the consumer has the right to rescind the agreement within a specified number of days.

We also want to make sure that contractors do not act as unlicensed adjusters to 
act as a “go-between” with the homeowner and their insurer, as well as stopping adjusters from acting as contractors for the repair. Contractors also should be penalized for offering any inducement including waiving an insurance deductible to get a consumer to sign a contract.

Anti-fraud legislation helps a lot, but just as vital is public education. Consumers need to equip themselves with information on preventing contractor fraud — and that needs to happen long before the loss occurs.

A good place to start that education is with a just-published book, Don’t Even Think About Ripping Me Off. It’s a step-by-step guide to help consumers navigate the often-confusing process of dealing with contractors and home repair.

The book was published by Phae Moore, executive director of the National Center for the Prevention of Home Improvement Fraud, who became an advocate after her grandmother was badly victimized by a shady contractor.

The books makes for a good gift, especially for seniors and young homeowners. Insurance professionals should also consider distributing the book to their policyholders and clients. You can order the book online at NCPHIF’s website.

I have one on my bookshelf. Shouldn’t you?

Medical marijuana as a strategy to reduce prescription drug deaths

New study contains strong evidence that painkiller alternatives can save lives and insurers money

After visiting a medical marijuana outlet in Colorado in May, I wrote about the possibility of medical marijuana replacing addictive opoids to help chronic pain sufferers.

A new study says that states that allow medical marijuana consistently had fewer overdoses than other states.

Medical marijuana states reported an overdose death rate of nearly 25 percent less than states without the laws, according to an analysis of data from the John Hopkins Bloomberg School and the Philadelphia Veterans Affairs Medical Center. The correlation between death rates and the availability of marijuana for medical purposes seems very strong.

Hopefully, this new evidence will spur Congress to allow researchers to test of efficacy of marijuana as pain medication. Good studies are lacking because of current law outlawing the possession of pot makes it nearly impossible for researchers to conducted this needed study.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Comp benefits too low for injured Fla. workers, judge rules

Focusing more on preventing fraud reduces need to cut benefits

A judge in Florida delivered a wake-up call to insurers and employers last week in ruling that workers compensation in its present form violates the state constitution. Current benefits aren’t enough to balance workers giving up their legal rights to sue, the court ruled.

Is this the result of a wayward judge, or more mischief by the trial bar trying to throw out a no-fault system that limits lawsuits?


But business-friendly legislatures in many states have cut benefits for several years, to where some contend that injured workers are being shortchanged. Especially in Southern states, critics say it’s too easy to deny benefits and that the ability to appeal has been sharply curtailed.

At one time, benefits were so rich in some states that it encouraged workers to fake injuries and malinger once they started receiving benefit checks. Remember California in the 1990s with the spike in stress claims? Or Pennsylvania, where you could make more on comp than your regular job because benefits weren’t taxed?

The political pendulum has swung far and wide. Sooner or later it will begin turning back toward increased benefits, especially if more states deem their comp systems are out of balance.

Insurers and employers should prepare for that day because pressure will increase to hold the line on premium hikes. A good start is to beef up anti-fraud measures and go after schemes by claimants and medical providers, as well as premium scams by businesses. Better prevention programs like this one would help as well.

A hostile environment for fraudsters will best serve the interests of insurers, employers and workers who are legitimately injured.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Insurers lodging uncivil civil suits against rings

Court actions can disrupt crash rings, send positive signals to public

A federal judge whacked a Las Vegas-area chiro this week with an order to pay Allstate more than $1.2 million involving 78 bogus crash claims. The insurer’s RICO civil suit alleged that Rit Charette inflated medical reports, gave unneeded treatments, prepared fraudulent bills and made illegal referrals to other healthcare providers.

The recovery speaks to a larger and welcome trend of insurers taking down fraudsters with civil suits. Much of the action centers around networks of crooked no-fault doctors, chiros, attorneys and others. They stage car wrecks, or simply invent medical records of phantom passengers and crashes.

Sometimes crashes are real, involving real victims who are recruited unknowingly for shoddy treatment. Whatever the business model, the crime rings bombard insurers with lavish and false treatment claims.

Crash rings are soaking up billions of dollars in false injury claims a year. They’re hiking auto premiums for honest drivers.

Fed-up auto insurers are striking back with increasing force by lodging civil actions against brazen fraud rings in federal and state courts.

State Farm has sued the heavily promoted clinic network called “1-800-ASK GARY” accident-referral service in Florida. The insurer alleges the large outfit illegally referred crash victims only to medical providers controlled by owner Gary Kompthecras in Florida, Minnesota and Kentucky.

Farmers Insurance is going after more than 40 New York medical providers for an alleged illegal scheme involving unlicensed laypeople who made false claims for treating crash victims.

Geico sued the owners of an Orlando chiro practice in March. The insurer alleges that the practice stole $2.3 million from false claims involving real and staged crashes.

Other auto swindles feel the weight of civil suits. Allstate last week earned a judgement of more than $1.4 million against a firm that billed the insurer for false windshield repairs. Part of that money will also go to the State of California as a co-plaintiff in the case.

Insurers may or may not recoup their typically large investments in attorney fees, staff time and other expenses. Often these suits are financial break-even propositions, at best. Frequently the crooks have spent or laundered the money, or don’t have enough assets to pay off the judgements.

But forcing ringleaders into protracted suits with large-dollar judgments can disrupt rings and drain their finances — thus undermining or putting them out of business.

Civil suits also emit a loud signal to the public that a given insurer takes a no-nonsense approach to crime rings that are driving up premiums and endangering motorists.

Word also spreads in the criminal underworld that certain auto insurers are too dangerous to try and defraud. Some rings avoid insurers that are known to make trouble with civil actions.

Crash rings must come to fear the large prospects of courts gaveling them into ruin. For fraud rings, there’s nothing civil about civil suits.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Fighting fraud starts with the basics

States need fraud law and fraud unit to have an impact

fraud bureau

This week I spoke to the Insurance Regulatory Examiners Society on state fraud bureaus and why they are integral to any state’s anti-fraud effort.

The vast majority of states (and District of Columbia) have fraud bureaus, with most housed inside the insurance departments. Several states have placed these bureaus within the state attorney general’s office, and a couple are housed inside the state police. Still, a handful of states led by Illinois, Michigan and Wisconsin do not have a fraud unit. And Oregon has neither a fraud bureau nor a specific crime of insurance fraud. It is the only state with that distinction.

After working on diverse fraud issues for more than two decades, I feel strongly that a full state infrastructure is essential to effectively fighting this crime. That means a strong insurance-fraud law, insurers doing their part, supportive and alert consumers, and the state having a bureau with prosecutors willing to take on cases. 

States with fraud bureaus have their hands full trying to keep up with the flood of case leads. So you can imagine how much scamming is going untouched in states without a functioning anti-fraud infrastructure. 

A Wisconsin regulator at my session said fraud cases usually are referred to the U.S. attorney’s office. The western part of the state is more likely to take cases, she said.

But that’s hardly the most efficient way to combat fraud. First, cases that go to the U.S. attorney invoke charges of mail or wire fraud. That’s because  insurance scamming is not a federal crime, except for health-insurance scheming. So the feds must find an unrelated law to charge someone. Most U.S. attorneys also have a fairly high threshold before they even consider trying a case. Not efficient at all.

Fraud bureaus help complete the state infrastructure. Where does an insurer or consumer go with a case lead unless the state has a fraud bureau? Should a local police or sheriff’s office be relied upon to investigate a case? Would a local prosecutor take a case? That’s far from certain. 

A state created a fraud law and fraud bureau several years ago. A legislator there said his state didn’t have much of a fraud problem until the law and fraud bureau were activated. He understood that the crime exists but goes unreported without the infrastructure. He was joking, but legislators in states without an anti-fraud apparatus can’t afford the luxury of joking.

Common sense tells us that we must spend enough time, budget funds and political will to have an impact on this crime. And that begins with an insurance-fraud law and a fraud bureau. The return will be a large benefit for consumers, and the state itself. 

Ultimately, everyone — except fraudsters — comes out ahead with a broad, well-funded anti-fraud infrastructure. Most states seem to “get it.” Now we need the remaining states to realize this commitment is in everyone’s best interest. 

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Subsidies with fake IDs prompt premature howling

Fraud a needless political football, give Obamacare time to succeed or fail

Critics of Obamacare were handed another case of ammunition with the revelation that undercover federal investigators used fake identities to obtain taxpayer-subsidized health coverage.

Operatives slipped through the system in 11 of 18 tries, the nonpartisan Government Accountability Office says.

Republicans jumped all over the findings, contending this is more evidence that Obamacare is a mismanaged boondoggle that’s wide open to fraud and abuse.

Six of the GAO’s fake online applications were blocked by eligibility checks built into computer systems at But the GAO says its undercover agents evaded that and enrolled anyway.

GAO investigators created fake identities using invalid Social Security numbers and falsely claiming citizenship or legal residence. Some operatives invented income levels that should’ve disqualified them from obtaining subsidies.

Some contractors handling the applications told the GAO that they weren’t hired  to root out fraud, the GAO found.

In the bigger picture of things, Republicans and Democrats are trading blows over whether nearly 3 million inconsistencies found in consumers coverage applications suggest rampant fraud.

Republicans are predictably squealing with apocalyptic rhetoric. Yet nobody knows how deeply the revelations about Obamacare subsidies and application inconsistencies suggest deeply rooted and possibly fatal fraud. These are initial findings, not wrote truths.

Yes, football season is approaching, but let’s not make fraud such a political football. Obamacare is a new program. Any program of this size and complexity will leak some water at first. America itself was an experiment after the Civil War. The nation was untidy and full of deep structural problems as it rebuilt during the Reconstruction period. Critics could’ve easily howled that the America was a doomed train wreck of a nation.

Let’s allow the followup findings to paint a more-accurate picture of fraud in Obamacare. If there’s a lot, then work to fix the system at its leakage points. Obamacare and consumers are better-served by intent problem solvers. Give it a chance to succeed or fail on its merits, not on premature and single-minded badmouthing for political gain.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Ridesharing: Old laws, regs collide with new technology

Explosive industry raises concerns about fraud, and who’s covered when

The issue of ridesharing has exploded in recent months. Concerns about whether the drivers have proper insurance are just one of the questions raised by regulators, insurers and consumer groups. Insurance fraud is a side concern for now, but is growing with the rideshare industry.

News coverage has mostly focused on state and local oversight of ridesharing, and complaints by local taxi drivers and companies about their new competitors. In the past several weeks taxi drivers here in Washington D.C. demonstrated against the ridesharing firm Uber’s growing presence in the nation’s capital.

Cabbies are worried that the largely unregulated rideshares will cripple the mainstream taxi industry. Ridesharing firms should meet the same regulatory standards as taxis and other for-hire vehicles, the cabbies argue.

State insurance regulators, state attorneys general, consumer groups and local taxi commissions increasingly are vocal about insurance and oversight issues. The California insurance commissioner has actively voiced insurance concerns. A big question is for rideshare drivers to manage auto coverage so a private vehicle is covered when it’s operating both privately and as a commercial rideshare.

I have a friend who owns a livery service. He’s affiliated with Uber. He has an app on his smartphone that when turned on tells Uber he’s available to pick up passengers.

We talked while he drove me to the airport recently. He has a proper state license and insurance for livery use of his vehicle. Still, he’s unsure when Uber’s auto policy protects him when driving an Uber passenger, and whether Uber’s insurance covers him while driving to or from picking up a passenger.

This raises questions about insurance fraud. At least one insurer has been reported to denying several damage claims by San Francisco rideshare vehicles the insurer says were personal vehicles used commercially. Several fraud-related issues thus arise from this new industry:

  • Do ridesharing drivers and cars have adequate insurance to act as a commercial driver and vehicle?
  • Does a rideshare driver’s personal-auto insurer know that the vehicle also is being used commercially?
  • Is the driver lying to his or her personal auto insurer that the vehicle is used commercially for part of the time?
  • Is the driver filing a fraudulent personal auto claim for a loss that occurs when driving commercially?
  • What protections do injured passengers have if the personal auto insurer denies claims because the vehicle was used as a rideshare outside the scope of the policy?

Ridesharing reveals how 21st technology is outstripping laws and regulations that have been mainstays for at least a century. Consumers can use a smartphone to arrange a ride without hailing a taxi from a street corner.

Clearly we are heading into a new era. Taxis are heavily regulated. Laws and regulations must be updated and adapted to ridesharing — it is here to stay. Fraud fighters must ensure that ridesharing companies do an honest business with their insurers — and the consumers entrusted to their care.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

More courts need to hear from insurers about how fraud affects them

In many states, fraud victims have a right to have their say in court

Justice imageLawyer Joseph Haddad stood in a Connecticut courtroom yesterday and pleaded guilty to masterminding an auto fraud ring that swindled millions from insurers.

Before the judge announced Haddad’s sentence, the court heard how crimes like his negatively affect insurers and society.

John Sargent, investigations director for MetLife, read an impactful statement in court that detailed how automobile fraud schemes raise rates, disrupt the lives of innocent crash victims, compromise medical records and cost insurers a ton of money.

The statement helped educate the judge, other court officials, reporters in attendance and even the convicted fraudster about how fraud is detrimental to society and erodes trust.

The fraud-fighting community does a good job of reaching out to consumers, legislators, the news media and others, but sorely lacks in educating the judiciary. Many states have enacted “victims’ rights” laws that allow victims — including insurers — to make a statement in court either during a trial or at sentencing, but few insurers take advantage of this opportunity.

We don’t know if John’s statement influenced the sentence in this case (51 months in prison, $1.7 million in restitution), but hopefully this information will be recalled the next time a fraud mastermind comes before the court.

As John concluded in his statement: “With all the resources the insurance industry and law enforcement dedicate to combating fraud, we will never be able detect, investigate and prosecute all of the schemes like this one. We must rely on deterrence to encourage professionals not to cross the line into committing fraud. We must rely on the criminal justice system to administer swift and sure punishment that will send a clear message to others that society will not tolerate such unethical and criminal behavior — and if they do cross that line, they will pay the price.”

The Coalition has posted facts, figures and a sample statement on a webpage for anyone wishing to make such a statement in court.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

How Obamacare likely will impact p/c insurance

Changes will be both positive and negative, but real impact still unknown

obamacare logoFull implementation of the Affordable Care Act — with tens of millions of added people covered by healthcare policies — will have substantial impact on property/casualty insurers and their policyholders. Some of the effects, including coverage, regulatory and legislative changes, will be positive for insurers. Other unintended consequences could hurt.

Four years after passage, there’s no consensus on the net effect of Obamacare, said a panel of experts from yesterday’s ACE claims conference in Washington, D.C. Yet, there was agreement that insurers and state regulators must prepare for upcoming changes, including a likely uptick in medical fraud.

Among the interesting observations made by panelists:

• Gamesmanship involving provider upcoding will accelerate, and unfortunately property/casualty insurers usually do not respond quickly enough to detect and counter these schemes, says Dr. Rick Wakefield of International Health Consultants. State insurance regulators should give insurers more flexibility to respond quicker to upcoding schemes, he said.

• With Obamacare squeezing some medical disciplines, providers likely will turn to property/casualty insurers to make up the difference, Dr. Wakefield also predicts.

• With universal healthcare, a major reason for keeping no-fault automobile coverage is fading, says Peter Foley, vp of claims administration for the American Insurance Association. No-fault was enacted in many states because low-income drivers lacked healthcare coverage. With Obamacare, no-fault is not as necessary as it once was.Lawmakers and policyholders may be apt to dump no-fault and its added fraud costs.

• The collateral-source rule, which prohibits admitting evidence that plaintiffs have received compensation from some source other than the damages sought against the defendant, could encourage “double dipping” where medical providers get compensated from healthcare policies and from auto or comp insurers, says Kevin Hilyard, claims vp for Nationwide.

• The Affordable Care Act includes 39 anti-fraud provisions that have helped the federal government recoup $8 for every $1 spent in combating fraud, says Marc Smolonsky, a former senior official with Health & Human Services. Yet the added resources aren’t nearly enough to counter the potential increase in fraud. The planned data-sharing project between private insurers and the federal government to detect medical fraud may be in jeopardy because of lack of funding, Smolonsky added.

• Lastly, there was concern that some states may no longer require businesses to buy workers compensation insurance since most workers now will be covered for illnesses and injuries under Obamacare. Some dishonest employers already are demanding that their workers claim injuries under health policies.

Changes are afoot, and it would serve insurers and the fraud-fighting community to be well-prepared as the impact of the Affordable Care Act becomes clearer.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.