Fraud: why should I worry?
Good question! ... There are plenty of reasons you should worry about insurance fraud.
Insurance crooks are picking your pocket to line theirs. These thieves are committing insurance fraud — one of America's largest crimes.
Insurance fraud occurs every day, and in every state.
It’s the crime you pay for. People of all races, incomes and ages are victimized. Insurance schemes steal at least $80 billion a year, the Coalition Against Insurance Fraud estimates.
So why worry? Because fraud schemers aren’t worried about you — or your wellbeing. They just want your money. Even so, there are many ways we can all fight back, together.
|Fight back and win|
Boiled down to basics, insurance fraud happens when people steal insurance money to which they aren’t entitled.
Hard Fraud. Involves serious, often well-organized schemes to steal large sums of insurance money. A homeowner burns down his house for a big insurance payout. ... Or a staged-crash ring makes hundreds of claims for treating fake crash injuries. ... Or your doctor routinely seeks reimbursement for treatment not done, or procedures not needed.
Soft Fraud. Normally honest people tell "little white lies" — typically for a smaller, one-time claim. An uninsured car owner gets into a crash then lies that the crash happened after she bought new auto coverage. ... A homeowner inflates the value of his sound system taken during a burglary.
Usually a good-faith difference between an insurance company and consumer about a claim. Or ... your insurer declines your application or doesn’t renew your coverage.
- You can help resolve a good-faith difference: Contact your agent ... insurer’s complaint department ... or state insurance department.
But look beyond the high-dollar estimates. ... Honest, hard-working consumers pay a steep price. Lives, businesses, careers and families are damaged or even ruined by insurance crimes. Yes, fraud also is a crime of violence.
People’s money stolen. Trusting victims are bilked out of thousands of dollars. Shady contractors, for example, might steal your insurance payout then disappear without doing the roof repairs.
Schemes kill & injure. Insurance schemes such as home arsons or invasive surgery can maim and kill innocent consumers. People also are murdered for life-insurance money.
Premiums stay high. Automobile and homeowner insurance prices stay high because insurance companies must pass the large costs of insurance schemes to policyholders like you.
Consumer goods cost more. Prices of goods at your department or grocery store keep rising when businesses pass higher costs of their health and commercial insurance onto customers.
Honest businesses lose out. Businesses lose millions in income annually because fraud increases their costs of employee health coverage and business insurance.
Insurance fraud comes in every shape and size you can imagine. Here are some recent scams, live, from the streets ...
Automobile (staged crash). A staged-crash ring tried to steal $279 million worth of auto-insurance money with thousands of false claims for treating fake whiplash injuries in the New York City area. Mikhail Zemlyansky ran the mostly Russian-American ring. He hired recruiters to bring in real and fake crash victims. He bribed doctors to sign off on bogus injury treatments, fabricated medical records, and had crooked lawyers threaten to sue auto insurers unless they paid up. Zemlyansky awaits sentencing.
Automobile (fake theft). Derrick Smith said someone stole and damaged his 2002 BMW M3. A $1,700 watch and $1,000 earrings were in the car. The Essex County, N.J. man soon told police he found the car. It was extensively damaged and the property was stolen, he said. He sought $13,629 from National Liability and Fire. The state Office of Insurance Fraud Prosecutor investigated. Smith struck a parked car in Newark days before the reported theft. He was uninsured, bought a policy, then lied that the “theft” happened after the policy purchase. Smith received three years in state prison.
Arson. Mark Leonard tried to burn down his Indianapolis home for $300,000 worth of insurance money. The house exploded, destroying several dozen nearby homes and damaging many others. Next-door neighbor Jennifer Longworth died instantly when the blast leveled her home. Jennifer’s husband Dion died an agonizing death while trapped in the burning basement. Firefighters tried to rescue Dion, but flames enveloped him before they could break through a small opening. Leonard received life in prison without parole.
Insider (insurer). Four cohorts tried to convince insurance regulators to let them buy an Oklahoma insurer using the insurer’s own assets as collateral for the $30-million loan. The ring handed Oklahoma regulators signed counterfeit financials on the loan collateral for the purchase of Providence P&C. The documents made it seem a bank would finance the purchase. Wilbur Anthony Huff masterminded the takeover. The Kentucky man and his cohorts then bankrupted the insurer by stealing assets. Huff received 12 years in federal prison. He also must repay $108 million for the Providence looting and other crimes.
Insider (agent). Insurance agent Monica Smart was anything but. The Topeka, Kans. producer stole tens of thousands of dollars in client premiums by altering their payment schedules. She changed schedules from annual and semi-annual to monthly. Smart then submitted only the amounts due for monthly charges to United Insurance. She diverted the difference to her own use, and changed clients’ mailing addresses in the insurer’s records so the clients wouldn’t receive the billing statements. Smart asked for a year of home confinement to care for her epileptic daughter. The federal judge was unmoved. Smart must repay $160,000, plus spend two years and three months in federal prison.
Contractor. Trolling for disaster victims, Jack and John Thayer showed up at people’s damaged houses the night of fires and storms, offering to fix their places. The Bristol Township, Pa. father-son duo took in $771,165 in down payments yet never finished the work. Many victims were elderly. Bill Vogt’s home was damaged after a fallen tree destroyed his roof and walls on the second floor. Ryan Thayer offered to remove the tree and fix the house. Vogt paid $25,000 down. They abandoned the project and never even delivered roofing materials. Jack and John each received up to 20 years in prison and must repay the victims.
Workers compensation (fake injury). Picnics and workers-compensation fraud don’t mix. Registered nurse Golnaz Gholipour said she hurt her back when she woke up from a nightmare. The San Diego woman collected more than $300,000 over seven years. Gholipour said her mother had to help her bathe and dress, she needed a walker all the time, was depressed and normally stayed home because her medicines made her groggy. But Gholipour was caught shopping, dining, and moving around with no walker or any sign of discomfort. She also was seen moving potted plants on her balcony, shopping and walking several hundred yards to attend a picnic. She only appeared hurt and needing a walker for doctor appointments or legal meetings. The San Diego DA earned Gholipour six years in jail.
Workers compensation (premium theft). Arizona once was a lucrative state for Ricardo Casillas. The Salinas, Calif. man ran a trucking firm. He lied to his insurer that his California employees were based in Arizona, where workers-comp premiums are lower. Casillas also lied that his “Arizona” workers only drove short hauls instate. That coverage option isn’t available in California. His drivers spent 90 percent of their driving time in California. Later he illegally dropped workers-comp coverage altogether for two years. Casillas then bought coverage from the California state workers-comp insurer. He lied that he had three California employees when he actually had 15-20 employees. Casillas received nearly a year in jail and owes hundreds of thousands of dollars in fines and restitution.
Slip & fall. Ted Hamilton was shopping inside a Save-A-Lot grocery store. Store video shows the Little Rock, Ark.-area man scraping ice from inside a store freezer and placing it on the floor by the freezer. He then pretended to slip and fall. An ambulance took Hamilton to a nearby hospital, where he lied that he slipped on water on the store’s floor. Hamilton hired an attorney and filed an injury claim with the store’s insurer. The store was negligent in leaving water on the floor, he claimed. But the store’s security video torpedoed Hamilton’s claim. The court handed him six years in jail.
Health insurance (false claims). Dr. Farid Fata pumped 550 patients with toxic levels of chemotherapy drugs — even though many patients didn’t have cancer. The Detroit-area cancer specialists billed insurers $225 million. One cancer-free patient received 155 chemo treatments in just two years. He gave 56 doses of a chemo drug to another — more than four times the recommended dosage. Fata was dosed with 45 years in federal prison.
Health insurance (fake insurer). Real Benefits Association stole $85 million in health premiums from more than 25,000 victims. David Clark set up RBA as a fake labor organization marketing phantom group health coverage. Thousands of people bought the so-called policies around the U.S., often thanks to pressure tactics. The Morristown, N.J. was a leader of a large conspiracy that left victims around the U.S. with medical bills after he refused to pay legitimate claims. Clark used some of the stolen money to fund personal debit- and credit-card purchases, and college tuition. He faces up to 20 years in federal prison when sentenced.
Murder. Pamela Phillips had her husband developer Gary Triano blown up in his car for $2 million worth of life insurance. Their wealthy lifestyle in Tuscan, Ariz. halted when Triano went broke. He lost his Indian bingo halls and slot-machine parlors when the real-estate market declined and others took control of his properties. Phillips divorced Triano then hired her boyfriend to blow up his car. Triano died as he drove from his country-club parking lot after golfing. Phillips received life in prison.
You can protect against scammers: Stay alert, ask questions, and back out if an insurance deal seems suspicious.
Also check out the Coalition’s consumer alerts for specific scams. Here are some general tips ...
- Never sign blank insurance claim forms.
- Demand detailed bills for home repair and medical services. Check closely for accuracy.
- Be wary of buying insurance from door-to-door or telephone sales people.
- Be suspicious if the insurance premium seems too low to be true.
- Contact your state insurance department to ensure the agent and company are licensed.
- Keep your Medicare ID number secret; insurance crooks can steal it and make scams against your coverage.
- After a vehicle crash ...
— Take photos of the vehicles, damage and passengers if you’re in a crash. You want to protect against fake injury and collision claims.
— After a crash, ignore strangers who try and convince you to see a specific medical clinic, doctor or attorney. They could be part of a fraud ring.
- Contact your state insurance department or the National Insurance Crime Bureau (1-800-835-6422) if you suspect a scam.
Here are several ways fraud fighters are taking action ...
Anti-fraud units. Most insurance companies actively fight fraud with Special Investigation Units (SIUs). The investigators typically have strong law-enforcement or insurer claims backgrounds. Insurers also train all employees to watch for scams.
Sue swindlers. Some insurers aggressively sue swindlers in civil court. These insurers seek to bankrupt the swindlers and send a strong message that cheating that insurer isn't worth the risk. Staged-crash and medical rings are frequent targets of civil actions.
Sponsor national effort. Insurance companies sponsor national groups that are making a big difference.
- Property-casualty insurers sponsor the National Insurance Crime Bureau, which investigates suspected schemes and refers the suspects for prosecution. NICB also runs a national consumer fraud hotline.
- Health insurers formed the National Health Care Anti-Fraud Association, which provides training and data for investigating scams.
Fraud bureaus. Fraud bureaus operate in 41 states and the District of Columbia. These agencies investigate suspected schemes and refer them for potential prosecution.
Tougher fraud laws. Fraud is a specific crime in all but two states (Virginia and Oregon) plus the District of Columbia. States also have passed dozens of other fraud laws in recent years, but large gaps still remain. Fraud also must lobby more effectively to pass needed fraud laws. Especially, fraud fighters must better educate state lawmakers about the high costs of this crime.
Medicare cracking down. The federal healthcare program for seniors has launched strike-force operations in hotspot urban areas such as South Florida. New technology is helping to detect more scams — before claims even are paid. Stronger rules make it easier to boot fraudsters from the Medicare system, and keep them out.
Whistleblower lawsuits. Consumers can sue healthcare fraudsters in civil court under federal law. Usually the consumers are insiders who know firsthand about their healthcare employer’s scam. Whistleblowers receive part of any recoveries, which can reach millions of dollars.
America's fraud fight still needs much improving despite great progress in recent years. Here are several gaps that fraud fighters are working to close:
Health system an easy target. Swindlers can skillfully exploit automated billing systems with large volumes of well-disguised claims. Low reimbursements and pressure to control costs also encourage many medical providers to cheat.
Low-risk crime. Insurance cheaters view insurance fraud as a low-risk, high-reward gambit. Even drug dealers have entered insurance fraud. They think fraud is safer and more profitable than working street corners.
Insurers sometimes back off. Most insurance companies actively fight fraud. But some insurers still pay certain suspicious claims, believing it's cheaper than fighting in court. Zero tolerance is the ideal.
Low legal priority. Prosecutors often give top priority to combating drugs, violence and other high-profile crimes. Though prosecutors have tried more fraud cases in recent years, many still believe some insurance crimes are too complex or not serious enough to pursue.
Climate of tolerance. Most people are honest. Yet too many consumers mistakenly think insurance fraud is a victimless crime. So they easily justify defrauding insurers or not reporting other people's scams.
Weak public outreach. Building people’s healthy intolerance of fraud is a key to turning the corner on this crime. Yet most education efforts are poorly funded and may have limited impact. Stronger efforts are needed.
Despite the encouraging progress, insurance fraud will remain one of America's largest and costliest crimes for years to come. Here are several trends to watch for:
Large fraud rings. Organized fraud rings are spreading. They know insurer payment systems well, and can loot insurers with large volumes of claims in short periods of time. Staged-crash and health-fraud rings are especially active and spreading.
Aging Boomers. Millions of Baby Boomers are retiring and needing more healthcare. Seniors will remain major targets of insurance swindles. Schemes involving medical-identity theft, Medicare, Medicaid and other insurance programs likely will continue spreading.
Medical identity theft. This established scheme appears to be spreading. Growing cyber hacking of health-provider databases increases the threat of medical ID theft. Thieves steal the victim’s health-insurance information and other identifiers to make false treatment claims. Large criminal rings traffic in stolen medical identities.
Immigrants vulnerable. America's large and growing immigrant groups are frequent targets. Con artists prey on immigrants' trust, lack of English skills and ignorance of how insurance works. Most immigrants are honest, but many are recruited into fraud schemes. Staged crashes and health scams, especially, promise quick cash payments for little effort.