Insurance Fraud: It Costs Us All

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March Is Fraud Prevention Month

While insurance fraud has been a problem in society for centuries, many people still don’t realize its direct costs to society. Auto insurance fraud has been well-documented recently, especially staged accidents in which fake victims, tow truck operators, body shops and physiotherapists collude to file fake claims that can bilk the insurance industry out of millions of dollars. You may think these fraudulent claims don’t affect you, but one only needs to look at the rise in auto insurance premiums to realize its negative effects.

Insurance Fraud Affects More Than Your Auto Insurance Premiums

Auto insurance, however, is not the only area where fraud is both prevalent, and sometimes rampant. Arson has long been a problem for insurance companies, people setting their homes, businesses and vehicles on fire purposely to collect insurance money. Slips and fall claims, while usually legitimate, are common examples of insurance fraud: some lawyers know that insurers will rarely fight a $50,000 lawsuit as they could spend more on legal fees just trying to defend their clients, whether the claim is fraudulent or not.

Insurance fraud is also not limited to property and casualty insurance companies, as medical insurance fraud is also a major problem. A medical clinic owner in California paid over 5,000 healthy people to consent to have surgeries performed on them so he could bill insurers more than $96 million. There is also the case involving a group home for Alzheimer’s patients where the home’s practitioners played the movie Forrest Gump over and over, while billing the government for “group therapy”. And, the value of certain painkillers on the street can be 10 times the actual value, ripe conditions for fraud.

Preventing Insurance Fraud

While fraud continues to be a problem in the insurance industry, methods of catching and preventing fraud is improving. Here are just a few of the suspicious loss indicators insurance agents look out for:

  • A claimant who is totally calm and unflustered after submitting a large claim
  • A claimant who submits handwritten receipts, with no letterhead
  • A claimant who adds or increases coverage before submitting a claim
  • A fire-damage claim for a home or auto where the fire started immediately after a family argument, or shortly after family members left the home or car

Private investigators stake out insurance claimants at times for just such reasons. They also use more subtle tactics to uncover fraud, such as researching claimants’ backgrounds and perusing criminal records. Investigators may also consult with the insurer’s legal counsel and serve as expert witnesses in court. While some private investigators are hired by insurance companies on a freelance basis, insurers also hire their own investigators.

Many insurers have Special Investigation Units (SIUs). Employees who work in SIUs generally have backgrounds as detectives, police officers, and medical personnel. They’re capable of performing an array of tests and checks to catch anyone trying to commit fraud, including conducting burn pattern analysis and computer simulations on cars and homes damaged by fire to determine if the fire was intentionally set or accidental, for example. They may also conduct financial reviews on claimants, including auto or homeowners claims from those who are behind on car or mortgage payments. Insurers are also using social media to check up on suspicious claims, especially in disability cases.

One of the easiest ways for insurers to catch crooks is via a basic cross-check. All this involves is looking for simple patterns in the cheques they’re sending out to pay claims. If the same person is receiving numerous cheques, or several big claims to the same address even if the name on the cheque is different, that’s a warning sign.

If you suspect fraud, report it. You can tell your insurance broker, Crime Stoppers (at 1-877-222 TIPS), or you can even submit an anonymous tip online at the Insurance Bureau of Canada because insurance fraud costs us all.

 

James Mior

James Mior

COMMERCIAL LINES MANAGER - James has managed the Commercial Lines department at KTX Insurance Brokers since February 2014, including Commercial Property/Liability, Commercial Auto/Fleet, and Commercial Customer Service. James obtained his RIBO licence in 2002, and has spent his entire career in Commercial Lines. Along with managing the commercial team, he also writes new business with standard Canadian insurers, as well as managing agents and Lloyd’s of London. He developed and still manages a successful I.T. insurance program, and has successfully placed coverage for thousands of clients in retail, general contracting, real estate, professional services, and errors & omissions for consultants. Unlike traditional brick-and-mortar brokerages, James leverages the technology of Kanetix to provide instant online insurance quotes for many business owners.

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