Why this cartoon isn’t funny

In October more than $50 billion in adjustable-rate home mortgages in the U.S. will be reset. A lot of those borrowers will be in for a shock as they find they can no longer afford their homes. Most will quietly refinance or just find a way to cover the higher mortgage. Some will lose their homes in foreclosure, and still others will take the desperate option of attempting to transfer their financial problem to their insurance company.

Are insurers ready for the potential increase in home arsons? Are fire investigators on alert? Since sub-prime mortgages hit the news earlier this year, we’ve put this issue on our watchlist to determine whether there’s an uptick in people torching their homes. We haven’t seen much of an increase yet, but it bears watching.

Stealing health care from the poor

djWhat kind of person lies about his income so he can receive health benefits? That question came to mind as I read the story out of Texas about scores of people who pretended to be poor so they could qualify for social programs for the indigent. Most of these people appeared to be well off. Good Morning America ran a segment on this story yesterday for which I was interviewed.

Stealing health benefits is nothing new. We’ve been following a bunch of cases around the country like the Idaho man who pretended to be his girlfriend’s husband so he could get his surgery covered by her insurance company. He was sentenced to seven years in prison in March.

Two weeks ago a housing offical in Utah was indicted for illegally putting her ex-husband on her health plan. And in Tennessee, a state senator and insurance agent was accused of being enrolled in the state program for the poor for the last ten years.

Most state health programs for the poor don’t have enough resources to cover every eligible indigent person, meaning that people who steal health benefits are pushing truly needy people out of the system. I hope the judges keep this in mind come sentencing.

Bad claims and bad journalism: an unsavory mix

Home fireDo insurers routinely cheat policyholders in lowballing homeowner claims? They do if you believe the story out this morning by Bloomberg News.

The 6,000-word piece is filled with horror stories by unhappy claimants, quotes by industry critics and allegations by former insurance company adjusters. It covers everything from software systems to record industry profits to successful lawsuits against insurers.

The piece starts with the story of Julie Tunnell of San Diego, whose home was lost to wildfire in 2003, and her insurer offered $220,000 of the estimated $306,000 to rebuild. No word from the authors on what the limits of her policy were or whether the estimate might be inflated. But nonetheless, they write this blanket condemnation:

Tunnell joined thousands of people in the U.S. who already knew a secret about the insurance industry: When there’s a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise.

And then the article goes downhill from there.

No new ground is covered by the authors. It’s a greatest hits collection of all the negative stories going back many years.

There’s a lot of circumstantial evidence to indict insurers here, but this story lacks balance and context. “Routinely” is such a subjective word. Nowhere is there statistical evidence to back it up. Convince me my providing trending data from insurance department complaint files. How about a statistical sampling of satisfaction rates among claimants — along with an accurate count of claims that are deemed by regulators and the courts to be wrongly denied or lowballed.

The story also fails to cite the pressure on insurers — and their legal duty — to resist inflated and fraudulent claims. The authors seem to suggest that insurers should not investigate claims but just hand over whatever amount is demanded by claimants.

That’s not to say that unsavory claims practices don’t exist. Insurers should get whacked hard when they screw up. But let’s keep the misdeeds in perspective. If insurer surveys are still showing 90-plus percent of claimants are satisfied with the claims-handling process, then the problems likely are isolated.

But still, insurers need to get ahead of this issue. The statements in defense put forth have been weak.

The growing perception that insurers are cheating hurts the efforts by the anti-fraud community to reduce public tolerance of fraud. Legislators also tend to be much less sympathetic when they think there constituents are not being treated fairly.

Insurers have a fine line to tread: They should pay legitimate claims fully and quickly, aggressively detect and resist bad claims — and have the wisdom to carefully distinguish between the two.

SIU community loses a fighter

Ed LochEd Loch, SIU manager for Lincoln General, lost his battle with cancer this week. Most people in the SIU community became familiar with Ed when he was profiled in a cover article in the Spring issue of SIU Today. A career Marine officer, Ed turned to investigations work after his military career and found it a good fit for his talents and passion to help people. After just a couple of years in the business, he was hired to build the anti-fraud unit within Lincoln General in York, Pennsylvania. He was diagnosed with pancreatic cancer in April 2006 at the age of 49, and although he was very ill last September and already on disability, he attended the IASIU annual meeting and sat for the Certified Insurance Fraud Investigator (CIFI) exam, which he passed. A true pro to the end.

In March when he was interviewed for the magazine article, he said his goal was to live long enough to see his son graduate from high school. He accomplished that goal. He also celebrated 25 years of marriage at the end of May.

And when asked for his message to other SIUs, he implored his colleagues to get an annual physical exam after the age of 35. Always thinking of others, he wanted his colleagues to learn from his mistake. Great advice.

Ed will be buried with military honors at Arlington National Cemetery on August 15. He will be missed. Semper Fidelis, Ed.