News release

Report: Insurers need more consistency in combating life, disability scams


Some insurers, fraud bureaus have robust efforts, others lack resources & commitment

imageWASHINGTON, April 12, 2017 — Combating fake deaths, murdered spouses and phony work injuries appears inconsistent and often under-resourced, reveals a new report on life and disability scamming issued by the Coalition Against Insurance Fraud.

“Some insurers sponsor robust anti-fraud programs while others seem to lack commitment to detecting and investigating insurance crime ...” the report says. “There’s widespread concern that fraud bureaus and prosecutors lack the resources and expertise to successfully tackle life and disability cases.”

The survey is among the first to map crime trends in both lines — and detail how fraud fighters are responding. A Coalition task force surveyed insurers, fraud bureaus and prosecutors throughout both lines. More than 350 fraud cases also were reviewed.

Overall, fraud appears less of a problem or focus in life and disability when compared to auto, workers compensation and health, the report notes.

Organized rings and underwriting scams, however, especially concern life insurers. Gypsy rings, and Russian and Armenian groups were among the frequent ring fraudsters listed. Fraud by organized rings was labeled severe or moderate by 80 percent of life insurers surveyed. Thirty percent also labeled underwriting fraud severe.

Disability scams overall appear more moderate in scope and anti-fraud focus than in life insurance. Faking painful injuries and under-reporting income are the most-severe challenges for disability insurers. These schemes still ranked only moderate. Underwriting and dead-money scams came in well behind.

Life. Most life insurers seek policy rescission. Some 67 percent routinely present cases to fraud bureaus and prosecutors. They also follow up and build personal relationships.
Disability. Only 29 percent of disability investigations led to adverse decisions — compared to 50 percent for property-casualty cases. No disability insurers pursue policy rescission or civil litigation — or routinely send cases to fraud bureaus. The average SIU has six employees.

Insurers in both lines recommend:
  • Provide claims staff red flags regularly, especially before holidays;
  • Set clear criteria for submitting case referrals to fraud bureaus; and
  • Create collaborative teams that regularly meet to discuss fraud trends and refine strategy.

    The task force recommends:
  • Expand statutes of limitations in states where the limits are too short for investigating and prosecuting complex cases;
  • Create benchmarking studies to better understand key metrics and help insurers compare their operations with other insurers; and
  • Increase funding and authority allowing state fraud bureaus to take on more life and disability cases.

    “There’s much room for growth in reversing the money drain of life and disability crime,” said the Coalition’s executive director Dennis Jay. “Our challenge is to harden the system so more people will think twice before faking their drowning death or a disabling back injury.”

    Note: The full report can be downloaded here.

    CONTACT: Dennis Jay