Insurance FraudBlog

Should law enforcement share case information?

Posted on July 27, 2007 by Dennis Jay

gavel A common complaint from insurer investigators is that the information flow in dealing with law enforcement often is woefully one-sided. That is, an SIU will submit a referral to a fraud bureau or package a case for a DA, and won’t hear anything back on the progress of the case.

Some law enforcement agencies have strict policies about releasing any information concerning investigative and prosecutorial efforts. Others have loosened policies over the years as relations and trust between insurers and law enforcement have grown. Still, it’s a frustrating process for many SIUs to be left out in the cold while law enforcement investigate and prosecute their cases.

A meeting with fraud prosecutors in California this week helped shed some light on why many in law enforcement feel they must remain tight-lipped in dealing with insurers. In many cases that go to trial, insurer investigators are called to testify about evidence they’ve gathered. In the eyes of the law, the investigator is an independent witness. Under cross-examination by defense attorneys, if it’s found that there was a high-level of collaboration between prosecutor and investigator, the perceived independence of the witness diminishes. The status of the witness shifts from independent to adversarial. In the words of one prosecutor, the investigator then becomes a “contaminated” witness and the value of the testimony in the eyes of the jury is diminished greatly.

Prosecutors are sensitive to defense strategies that paint big government teaming up with big business to go after the little guy. They fear a free-flow of information will give defense attorneys an edge with juries that are already less than sympathetic in seeing insurers as victims.

So, for many prosecutors, maintaining an arms-length relationship with insurer investigators is crucial.

There also are other problems with sharing information with insurers. One DA recently closed down an undercover operation involving a workers comp case because it was learned that an insurance investigator failed to keep the operation confidential. Fearing the case was compromised and the safety of the undercover officer jeopardized, the DA felt he had no choice but to abandon the operation and the investigation, which he deemed “a very good case.”

And then there is the case of an insurer investigator a few years ago who used information from meetings with DA investigators to attempt to extort money from a fraud suspect. Granted, that’s an extreme example, but you can understand why prosecutors and others in law enforcement are apprehensive about sharing information.

We invite your opinions and experiences on this issue.

I now pronounce you Fraud & Deceit

Posted on July 19, 2007 by Dennis Jay

Chuck and Larry Reading a review of the latest Adam Sandler movie made me cringe. Not because the movie is about gay lifestyles, but because the story line supports the attitude that committing fraud is not only OK, but it can be fun, too.

In “I Now Pronounce You Chuck and Larry,” Sandler and Kevin James play two Brooklyn firefighters who pretend they are gay in order to receive “domestic partner” benefits, including insurance.

As more municipalities offer domestic partner benefits — and require insurers to do the same — this fraud scenario likely will became more common.

Now, I don’t believe people are going to rush out of the theaters and commit fraud. But it does represent one more nail in the coffin of ethical behavior. The job of convincing ethically challenged people to make positive decisions becomes a bit tougher. Young people especially are on the receiving end of a deluge of messages in the popular media — including television and video games — that reinforces bad behavior – and there are so few voices out there countering those messages.

Thankfully, this movie is receiving rotten reviews, but that’s little solace.

No need to swerve on Mass. auto insurance?

Posted on July 11, 2007 by Dennis Jay

The campaign by some insurers to alter the automobile insurance system in Massachusetts could run afoul thanks to the success in fighting fraud. Massachusetts is the only state where the insurance commissioner sets auto rates. There’s no competition and no market forces to keep rates in line. Those looking to change the system had their hopes raised by a new governor and legislators who indicated their willingness to consider a more competitive system.

But an editorial in this morning’s Boston Globe says there’s no need to change the system now that auto rates are falling:

AUTO INSURANCE rates in Massachusetts are going in the right direction — sharply downward. Insurance commissioner Nonnie Burnes should steer clear of any policy changes that interfere with this beneficial trend.

And the reason?

For years, fraud was driving rates through the roof in Massachusetts. But recent crackdowns in Lawrence and elsewhere are having the desired effect on premiums. Auto insurance rates have fallen by about 21 percent during the past three years. And local insurers, who make sound profits, are saying they are likely to ask the commissioner to reduce rates again in 2008.

Keeping law enforcement pressure on drivers who create phony claims is the best cost-containment action that Massachusetts can take.

So, in essense, there’s no need to change since anti-fraud efforts are helping to hold premiums in line. Not sure that’s sound reasoning, but I hope insurers don’t blame anti-fraud efforts if their attempts to change the regulatory scheme in Massachuetts gets scuttled.

Fraud and grocery check-out lines

Posted on July 6, 2007 by Dennis Jay

groceries In writing in the Arizona Republic this week, Ron Williams, executive director of the Arizona Insurance Information Association, used a great analogy to explain how we all pay for insurance scams:

You are standing in a checkout line at the supermarket with four people. The first person in line is asked to pay $30 for his groceries. But instead, he picks up his groceries, does not pay, and walks out the door. The cashier then turns to you and the other two people in line and says, “That will be $10 from each of you to pay for the groceries he stole.”

Nice and simple.

Ron goes on to give his prescription on what consumers should do to help control fraud: “We can yell, “Stop, thief,” at the top of our lungs whenever someone is trying to cheat and steal from insurance companies. We should notify local and state authorities . . . When we are vigilant about and educated to the ways of insurance fraud, we can stand together to stop the scam artists stealing from the people paying the bill – you and me”

Well said. Hope he won’t mind if I borrow it for my next speech.

Explosions in U.K. tied to elaborate ‘give-up’ scam???

Posted on July 4, 2007 by Dennis Jay

From this morning’s Daily Mash (warning: the following contains profanity):

CONTROLLED EXPLOSIONS LINKED TO INSURANCE SCAM

DOZENS of cars blown-up across the UK in the wake of the failed terror attacks are part of an elaborate insurance scam, the Daily Mash has learned.

car Car owners, unable to sell their old vehicles, are paying up to £50 to have them destroyed in controlled explosions. The owners then claim the write-off value of the car from their insurance companies who agree to pay-out because the car has been blown-up.

Wayne Hayes, an insurance expert, said: “Why pay £20 to have it stolen by some bobble-head drug addict who’ll then make an arse of it? “Pay a little bit more and the car will be totally fucked-up by professionals with absolutely impeccable credentials.

“Insurance companies are hardly likely to start poking their noses in at a time like this. It would be unpatriotic.”

One unamed explosives official said: “With rising interest rates, the odd cash-in-hand job is very welcome. “If blowing up a Saab 900 means a nice pair of shoes for my Angela, then I’m happy to oblige.

“And as insurance companies are all complete shits, it’s a victimless crime.”

Texas governor vetoes anti-fraud bill, but why?

Posted on July 2, 2007 by Dennis Jay

Gov. Rick Perry
Something seems strange here in the governor’s veto message of an anti-runner bill that would have banned solicitation in person or by phone 31 days after an auto accident.:

House Bill No. 1519 does not include attorneys in the new section (d-1) it creates for the offense of barratry and solicitation of professional employment. The new section prohibits in person or telephone contact before 31 days have passed since an accident; however attorneys are included in the current law in section (d), which covers improper written communications. The criminal acts covered by the statute should contain identical provisions for all covered professions.The bill gets killed because prohibitions against attorneys are not the same as restriction on others?

If this is the real reason for the veto — and at least one observer doubts it is — why didn’t the governor raise these concerns as the bill was being debated?

Paul Burka, an editor with Texas Monthly, wrote this following the governor’s veto:

HB 1519 — T. Smith/Carona. What is this, a bill about typewriters? No, it’s about ambulance chasers. It prohibits chiropractors, other licensed health professionals, and licensed private investigators from engaging in barratry, which is illegal solicitation of employment with regard to litigation–here, a personal injury suffered in an accident or disaster. Solicitation is prohibited for thirty days. The governor’s veto message reads, “The new section prohibits in person or telephone contact before 31 days have passed since an accident; however attorneys are included in the current law … which covers improper written communications. The criminal acts covered by the statute should contain identical provisions for all covered professions.” Huh? Surely Perry’s staff knows that current law prohibits lawyers from soliciting business period. This reason is so weak that I’m sure Perry killed the bill for other reasons. Some possibilities: (1) The chiros wanted it killed. (2) The trial lawyers wanted it signed. (3) Perry wanted to keep the ambulance chasers around so he could continue to whip up on trial lawyers.

The Lone Star state has been a real disappointment in moving forward on anti-fraud legislation in recent years.

Headlines we like to see

Posted on July 1, 2007 by Dennis Jay

The article in Sunday’s Eagle Tribune goes on to say drivers in Lawrence, Mass. will save an average of $400 on their car insurance this year, thanks for aggressive anti-fraud tactics employed by insurers, the fraud bureau, prosecutors and local police. Several other cities are seeing declines between $100 and $181.

Auto claims are down in 10 other cities across the state where fraud task forces have been launched based on the Lawrence model. This is a great example of positive change when people get together to focus on a specific problem.

Unfortunately in Lawrence, funding for the police department’s anti-fraud unit may be cut. But I have a feeling that the good publicity generated by this article — plus the savings city residents are enjoying — will convince the city to continue funding.

Is fraud by insurance agents on the rise or holding steady?

Posted on July 1, 2007 by Dennis Jay

There is solid piece in the National Underwriter this week that profiles agent fraud, why so many cases go undetected and whether this fraud is increasing. Michael Goddard, investigations chief for California insurance department, cites the use of technology by agents in creating forms and other documents that look legitimate. Goddard says his office opened 899 cases of agent fraud in the last year statistics were available, and that in 2007 his office is expanding to handle the load.

. . .recently, it seems that agents are creating false applications for persons who have not agreed to enter into a contractual relationship with the company, he said, adding this is probably driven by an increased use of technology. A bad agent can get personal information rather easily, submit an application and then collect a year’s worth of commission. “They think they can pay back the commission, but inevitably they cannot and the scheme collapses.

Cory Cox, head of the Arkansas fraud bureau, says his agent fraud caseload remains steady, but agents are finding new ways to defraud beyond pocketing clients’ premiums:

The article points out that insurance regulators have attempted and failed to craft model regulations through the NAIC to counter some of the agent scams. We suspect that at least one agent group is using its clout to keep the proposed regulations bottled up. It’s hard to understand why a professional association would help to protect rogue agents.