Fraud prosecutors in N.J. lose tool against defendants

Loss of pre-trial detention hampers cooperation by fraudsters

NJ_pre-trial_detentionPrisons and jails across the U.S. are overcrowded, costly and at a breaking point in many states. Jurisdictions are working to ease the pressure in a variety of ways. California, for example, has released more than 30,000 inmates early in the last five years. Other states use alternative sentencing.

New Jersey is taking a different approach. It has done away with pre-trial detention except for the most-violent crimes or people who are flight risks.

Fraud prosecutors in the Garden State say the new law makes their jobs tougher. A runner employed by a staged-crash ring who gets caught no longer has to worry about making bail. The threat of pre-trial detention often spurs a runner to cooperate with law enforcement and help nail the gang’s masterminds. But no longer.

Now, runners are  processed and given a summons, kind of like getting a traffic ticket.

The concern here is that the lack of pre-trial detention throws up one more roadblock for many local prosecutors who already are overworked and hesitant to take complex, time-consuming fraud cases.

There are no easy answers. It’s unlikely lawmakers will make an exception to the law for non-violent, white-collar crimes.

Deterring fraud rings is difficult, though achievable. The anti-fraud advertising campaign by the Office of Insurance Fraud Prosecutor and state AG is excellent, though it’s oriented towards everyday consumers, not organized criminals. Perhaps outreach to lower-level gang members about the dangers of committing fraud might help deter.

The best approach might be for insurers to focus even more on taking the profit out of insurance crime. Greater use of technology will detect scams earlier before claims money goes out the door. More civil suits with treble damages against crooked medical providers and other ringleaders will hurt them where it counts.

Fraud fighters around the U.S. will have to rely less on arrests and prosecutions. They still can curb insurance fraud by improvising and relying more on their creative expertise.

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

Selling interstate invites scams

State oversight weakened, consumers vulnerable

health_insurance_interstateI grew up in the Northeast, and now live in a Mid-Atlantic state. I understand Fall. The weather is crisp and the leaves turn colors. Happens every year.

Just like the leaves turning colors in the Fall, someone predictably come up with a supposedly great idea: let consumers buy health coverage from insurers across state lines.

The argument is always the same: Interstate sales increases competition and reduces costs for consumers. This sounds workable on paper. The latest go-around was raised in this past week’s presidential debate as the fall leaves tumbled — just like consumer protections.

Problem is, interstate sales open the door wide for fraud, and water down consumer protection. And, most people advocating this system usually don’t include important and necessary protections when pushing their interstate plans.

Yes, neighboring states can legally create partnerships that allow insurers to cover consumers in any state within the partnership. Yet partnerships have strict, built-in legal protections when states agree to work together. Insurance regulators know who’s doing business. Networks also offer consumers choices of doctors and facilities.

These protections and coverages may not exist under a blanket permit for consumers to buy coverage in any state.

Consumers don’t know what insurance regulator to reach for help. And would the regulator in the state where the consumer lives have much incentive to help if the health insurer is domiciled another state? Would the regulator where the insurer is domiciled help a consumer living in a different state?

We already see crooks peddling bogus health insurance to unsuspecting consumers and small businesses. This problem would be magnified if interstate sale of health insurance was allowed without strict and well-defined oversight. 

Insurers must be state-licensed to do business in a given state. How can state oversight properly protect consumers if anyone can offer insurance to any consumer in any other state?

Who makes certain the insurer is solvent and can do business in another state? And, would an insurer in one state have an adequate network of doctors, hospitals and pharmacies to cover the health needs of consumers in another state?

These questions are raised every time interstate health-insurance sale is broached. Yet we never hear answers — just the simplistic nostrum that interstate sales will help reduce healthcare costs.

Don’t just spoon out more words like falling autumn leaves — prove that consumers would be better protected.

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

Lemonade: smart business or soft fraud target

Crooks likely to probe the P2P insurer with bogus claims

lemonadeThis is a blog about a blog. It’s also a predictor of things to come.

The new insurer Lemonade thinks it has a winning formula. Get rid of agents and most other personnel. Just digitize policy sales and claims. It’s part of the bigger trend of peer-to-peer firms rapidly sprouting in various consumer sectors.

Dennis Jay wrote about Lemonade last week. I’m so fascinated by the upstart startup’s P2P business model that I had to weigh in with my two cents worth.

Lemonade thinks its formula will lower fraud, blogs board member Peter Diamandis.

Policyholders can have underwriting profits donated to nonprofits they choose. Insurance becomes “a social good, rather than a necessary evil.”

People are less likely to try and bilk Lemonade, Diamandis contends. Why would they defraud the insurer and thus reduce the charity donations?

Many policyholders likely will be kind-hearted, as I see it. They’ll keep applications, renewals and claims sparkling clean for the good of the cause.

Two other classes of insureds may be less charitable. First are the desperate ones. They’re average, everyday people whose finances are sagging. Maybe their home or SUV is near foreclosure, their bank account nearing empty.

They’ll worry more about saving their own skins than what money Lemonade sends to charity. If they can rifle Lemonade to bail themselves out with false claims, their adrenalin-addled brains will impel them to pounce. They could, for instance, trash their car and claim it was stolen or wrecked in a hit-and-run.

Then there’s another class: the greedy.

Some of the greedy are everyday people. They’re not desperate. Many are just opportunists. Maybe they just want to trade up to a bigger diamond engagement ring, and tell Lemonade that, sorrow of sorrows, it slipped off the wife’s finger at the beach. Or double the cost of a sound system lost in a home fire.

Organized rings are another kind of greedy, often led by dangerous sociopaths. Fraud is their business, a science. They’ll study Lemonade and probe for weaknesses in the application and claims system. Just like many crime rings test brick-and-mortar insurers when plotting staged crashes with mass injury claims.

Professional and amateur criminals look for weaklings to exploit, just like wolf packs stalking elk herds. My bet is they’ll try to infiltrate Lemonade to see how much juice is for the taking.

Lemonade’s elysian P2P concept will appeal to tech-savvy millennials — and provide another choice in the marketplace. Maybe Lemonade will inspire traditional insurers to tighten their own operations if they lose large numbers of customers to its community-minded model.

Meanwhile, this trusting P2P business model likely will be tested to the max on the mean streets. Here’s hoping Lemonade’s leadership grasp this truth, and develops new innovative firewalls to protect the company from some very smart street criminals.

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

911 scammers victimized everyone

Fake deaths, bogus damage among the exploitive claims

twin_towersOne postscript to last week’s emotional 911 remembrances is that some folks with little conscience tried to exploit the tragedy by lodging dirty insurance scams.

Every disaster — whether by airliner smart bomb or Ma Nature’s hurricanes  — brings out a sordid bunch who see dancing dollar signs amid the strewn rubble.

The 911 scams were especially sordid because they played off of incalculable human suffering. Less than a week after 3,000 Americans died fiery deaths, Charles Gavett sadly told life insurers that his beloved wife Cynthia had perished in the collapse.

Cynthia was finishing a job interview with the investment firm Cantor Fitzgerald when a hijacked airliner plowed into the gleaming tower, Charles insisted. Cynthia hadn’t been seen since, and Charles sought more than $628,000 to help salve his grief.

How touching … except Cynthia was quite alive and well. She and Charles were living openly in Concord, Ga.

They figured insurers wouldn’t investigate claims involving such a profound national tragedy.

But insurers did investigate. Cynthia even invited a sheriff’s deputy over for the Thanksgiving holiday. The court invited the Gavetts over for 10-year jail terms.

Elderly New York City millionaire Beatrice Kaufman owned a $5-million apartment in Manhattan. She tried to charge insurers and charities about $1 million for renovations to her apartment and non-existent damage to her lawyer-recruiting business office.

Kaufman claimed the attacks forced her to leave her apartment and business for months. She racked up huge bills staying at a swanky hotel. In fact, she moved out before the attacks while renovating her unit. She tried to connive insurers into paying for the work. Kaufman received 52 weekends in an un-renovated jail cell.

In West Chester, Ohio, a man filed a $100,000 life-insurance claim, saying his father died when the Towers went down. His father lived in India.

People tried to bilk charities and relief agencies as well. Dozens of scams quickly showed up. Con artists hoped to quickly slip make-believe stories through the system amid the confusion after the Towers and Pentagon erupted in flames.

Expect similar cons as the Hurricane Hermine floodwaters retreat. You may see claims for flooded cars that drivers purposefully left near the beach. A Florida man filled his six-figure Rolls Royce with a garden hose after Katrina, claiming it was flood-damaged. Claim denied.

Floodwaters carried away (untraceable) high-priced home electronics, supposed Hermine victims might claim. Wind and debris and siding wrecked roofs that the homeowners damaged themselves.

Insurers are on high alert. They want to pay honest claims. Likely they’ll quickly pay as many claims as possible to make homeowners whole. Then the insurers will circle back to investigate claims that bears warning signs of fraud. Some blatant scams will be denied right up front.

So what can you do?

Aside from the obvious — don’t scam because insurers rightfully are watching — why look the other way when a neighbor brags about a Hermine scam, or any insurance con? Report them to the insurance department.

Honest Americans are trying to put their lives back together. Nobody needs knuckleheads taking the easy way out while the vast majority of Hermine victims play fair.

Americans suffer enough after unfathomable disasters. We all grieve for the victims. Insurance scammers who exploit human tragedy are an affront to all of us.

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

$1 billion (in savings) or bust

The Healthcare Fraud Prevention Partnership aims high

When the ground-breaking anti-fraud partnership between the federal government and the private sector was launched in 2012, there were grand expectations that they could jointly combat fraud much more forcefully that going it alone.

More than 60 organizations have teamed up to share strategy and exchange data. They include federal and state agencies, health plans and p-c insurers. Billions of bits of information have been pooled through a trusted third party.The results are encouraging.More than $260 million has been been saved in recoveries and fraudulent claims not paid.

The HFPP executive board met two weeks ago. It set a goal to expand savings to $1 billion by this time next year. It’s an ambitious goal, yet achievable given the early success of this collaborative effort.

The potential success in future years could far surpass $1 billion as more data is shared and more partners sign up., And it should, seeing that healthcare fraud totals tens of billions of stolen dollars each year in the U.S..

The ultimate goal is to get so effective in combating healthcare scams that fraudsters will view the risks too high to even try. We’re a long way from that day, but collaborative efforts and advanced technology offer the best chance of getting us there.

About the author: Dennis is executive director of the Coalition Against Insurance Fraud and serves as co-chair of the Healthcare Fraud Prevention Partnership. 

Drone for anti-fraud cases ready to fly high

Laws and regs should allow legitimate use of insurer surveillance

drone photoDrone use has left the launch pad and is increasing rapidly. Insurers are showing a big interest in drones for anti-fraud operations, underwriting and claims handling.

The feds and states are working to impose order on the evolving dronescape. Recreational users soon will have to register their machines. The Department of Transportation is creating task force with the Federal Aviation Administration to develop a registration system.

Using these little eyes in the skies for anti-fraud operations and other functions is drawing considerable attention in statehouses as well. Privacy is the main issue driving drone debates, says the National Conference of State Legislatures.

Some 45 states considered more than 100 drone bills and inked 20 laws this year alone.

Several bills also required law enforcement to obtain search warrants for drone use. Others were skyway-safety measures limiting where drones can be used (e.g., away from commercial airports).

These bills harken back a decade or more when states began imposing stricter control of video surveillance.

A New York bill, for instance, tried to make it a crime for insurers to shoot surveillance video unless they had permission of the persons being filmed. Critics said the language was so broad it would’ve criminalized tourists filming the sights and sounds of Times Square.

Most state legislation during this time recognized a legitimate insurer purpose in using surveillance video. Society struck a rational balance between allowing crime-fighting while protecting people’s privacy.

New York is back again with another potentially over-reaching surveillance bill. Unless it’s carefully worded, it could put the kibosh on legitimate insurer drone use for anti-fraud operations.

The national debates over proper drone use are gaining steam. Protecting privacy rights will be a major aspect of the debates once again. Rules and limits will be imposed. Upcoming laws, regulations and court decisions also must allow legitimate insurer use of drone surveillance to protect society from insurance schemes.

It’s time to fly high with a national dialogue on insurer drone use. And fraud fighters should be front and center.

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

Are insurers evolving as fraud-fighting entities?

2015 SIU benchmarking study seeks to answer that question and many more

Are property/casualty insurers getting more adept at detecting and investigating insurance crime? Are they managing their anti-fraud operations for optimum impact?

benchmarkingIt’s hard to tell sometimes. The 2013 SIU benchmarking study by the Coalition Against Insurance Fraud and Ward Group gave us a snapshot of where insurers stood on a wide range of metrics. No doubt we’ve seen huge advances by insurers in becoming more-astute fraud fighters over the last several years.

But how are they doing lately?

We’re about to find out. The Coalition and Ward Group are teaming up again to conduct another comprehensive benchmarking study. The results will help determine how things have changed with budgets, staffing, structure, quality assurance and varied input/output metrics.

Has the percentage of claims referred to SIU, for example, risen or declined? Have insurer referrals sent to fraud bureaus changed, and if so, why?

The study is an excellent weather vane to understand fraud-fighting trends. Participating insurers also will better compare their own programs with insurers of similar size and scope.

We encourage all property-casualty insurers to take part in this study — the only one of its kind. More information is available at

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

Michigan needs sledgehammers to level crash rings

Fraud units are crucial players taking down rings in Mass. and Fla.

As if we need another reminder that states benefit heavily from fraud bureaus, just look to a lengthy article posted on Mlive this week.

“Lawsuits and legal filings by insurance companies and others describe an insurance fraud network of ‘accident runners,’ who work with lawyers and doctors to find clients involved in auto accidents and milk their (often unnecessary) medical treatments for maximum payouts, through private insurers and under Michigan’s no-fault insurance law,” the article notes.

Organized rings are feeding off of the state’s unlimited no-fault benefits — the most-generous in the U.S. Arguably an entire culture of crime has sprouted around the no-fault feeding trough, with many rings operating in the Detroit area.

Economically hard-pressed Michigan hardly needs another set of troubles, yet the state has no fraud bureau to act as a central coordinating agency for pushback against rings that most observers agree are widespread and contributing to high auto premiums for drivers.

Fraud fighters are gearing for another push to seek a new law creating an auto-fraud prevention authority for next year (see Howard Goldblatt’s FraudBlogs, July 11 and June 23).

If anyone has to ask why Michigan needs a fraud unit, just look to Massachusetts and Florida.

The Massachusetts fraud bureau was a driver in creating task forces that continue rolling back staged-crash rings. The scammers were almost literally out of control in the early 2000s. The task forces intervened with thudding impact. They’ve saved drivers in targeted cities at least $875 million in lower premiums with fewer dirty injury claims to hike auto premiums.

Then comes Operation Sledgehammer in South Florida — another region where staged-crash gangs have spread out like cockroaches. Body shops were wrecking cars with sledgehammers — get it, Operation Sledgehammer? — to inflate insured damage. Chiro and other clinics have lodged hundreds of thousands of dollars in false crash injury claims. It’s a familiar pattern, though involving exceptionally large networks of criminals.

At least 92 suspects have been charged, with numerous convicted.

The takedowns involve a coordinated federal-state-local collaboration. The Division of Insurance Fraud has been a central player in the effort.

Imagine how far behind the investigations would be today if Florida had no fraud unit to bring statewide staffing, strategic thinking and real-time field intelligence to bear.

How many premium dollars could Michigan drivers save if the state had its own Operation Sledgehammers and task forces to apply steady pressure on insurance criminals? How much safer would the roads be with fewer predatory vehicles trying to maneuver innocent drivers into wrecks for insurance payouts? Right now, a much-needed Operation Sledgehammer in Michigan isn’t possible.


Michigan needs an auto authority, and a law to create and fund the unit. Just ask drivers who pay the premiums, and insurers who must pass those increases along to their policyholders.

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

The unspoken danger of optimizing auto premiums

Why give consumers another excuse to defraud?

price imageAny first-year college student studying insurance is taught that premiums must be commensurate with the degree of risk. It’s a basic concept at the heart of insurance pricing.

Over the years the industry has driven this point home to explain to consumers why 18-year-olds pay more than older people for car insurance. Or why a home far a from a fire hydrant is a greater risk for loss, and thus, requires a higher premium.

This concept is a basic tenant of insurance and risk, and is law in most states.

Some insurers now want to change the pricing model of auto insurance to allow them to charge more to people willing to pay more. Price optimization uses sophisticated computer algorithms to identify such people.

Some state regulators are crying foul. Seven states — Florida, Maryland, Ohio, Indiana, Washington, Vermont and California — have banned the practice. Opponents say price optimization deviates from risk-based pricing, and unfairly hits some lower-income people who may not be savvy enough to shop around for the best price, or even have the means such as an Internet connection.

My problem with price optimization is that it sends a terrible message to insurance buyers looking for another reason to justify fraudulent behavior.

If insurers are willing to price insurance at whatever the market will bear, why shouldn’t I look for every advantage at my disposal — legal and otherwise — to reduce my premiums, such as rate evasion or filing a questionable claim to get a rebate on those high premiums?

There’s a tidal wave of insurance buyers on the horizon — the Millennials — who show little loyalty to businesses unless those businesses act socially responsible. As a group, Millennials also are more likely to tolerate some unethical behaviors such as exaggerating claims and auto rate evasion.

Let’s not give them more excuses to commit fraud.

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

Guest blog: Staged crashes a common theme in N.C.

Insurance swindlers growing more sophisticated

North Carolina insurance commissioner Wayne Goodwin is the new chair of the NAIC’s antifraud task force. He replaces long-time chair Sandy Praeger, who retired as Kansas insurance commissioner at the end of 2014. 

We invited Commissioner Goodwin to be our guest blogger this week. He discusses emerging fraud trends his fraud bureau sees, and ongoing schemes he battles year in and year out.

We have the oldest insurance fraud bureau in the country. We are celebrating our 70th anniversary this year. We have a proud history, but we know that success in fighting fraud hinges on keeping in front of evolving criminal trends.

Fraudsters can cripple our economy unless we find a way to combat their unscrupulous acts. Far from being a victimless crime, every policyholder foots the bill for insurance fraud.

Technology is a common denominator in many of the fraud trends we are currently seeing. It’s amazing how sophisticated criminals have become. With the hardware and software currently on the market, criminals are becoming more and more sophisticated. With the advent of digital currency as a method of payment, I am sure we will see this become a factor in insurance fraud.

Cyber laundering is a new way to hide the proceeds of crime, and fighting money laundering in cyberspace is a daunting task for law enforcement agencies. There is little to no training available, and it is my hope the antifraud task force can draw attention to this issue and create training to combat this new criminal element.

Staged crashes have been a common scheme over the years, but more recently they’ve taken on a new twist. We are seeing more cases in which people stage actual car crashes rather than cases in which the accidents only occur on paper in insurance documents.

Furthermore, to take advantage of the medical payouts associated with staged crashes, some people include children into their schemes. When individuals resort to involving children in a car accident for money, there is a whole new level of concern.

We have to get ahead of the trends, and we can do that with proper training and equipment. I read that the Coalition has determined 95 percent of states are using some form of anti-fraud technology. With the reductions to state budgets, I was excited to hear this. States do take insurance fraud seriously.

The mission of the antifraud task force is to serve the public interest by assisting the state insurance regulatory officials, individually and collectively.  We are promoting the public interest through the detection, monitoring and appropriate referral for investigation of insurance crime, both by and against consumers.

I want those who commit insurance fraud to know that we are united in our efforts, and will do all that we can to stop them. I look forward to our relationship with the Coalition and can’t wait to get started.