There's a lot of money in the coffers of cash rich insurance companies. With this kind of money, fraudulent claims are sure to follow. Sometimes these schemes will be attempted by professional fraud artists. Other times, they'll be attempted by financially distressed novices who are looking for a quick money fix. In either case, insurance fraud can be good business for the perpetrators unless derailed by savvy investigators.
Understanding insurance fraud indicators is vital. Fraud indicators should never be used as the legal basis for denying a claim that should only be done based on the law, the evidence, and the facts. Rather, the real value of fraud indicators is to identify suspected fraudulent claims so that investigative resources can be targeted on the most deserving cases.
PRIOR CLAIMS HISTORY:
Does the claimant have an extensive history of making prior insurance claims? One common pattern is a history of claims with increasingly greater value. It's as if the perpetrator is inching out into deeper and deeper water to see how far he or she can go, one claim at a time. Commonly, the very first claim will have been legitimate. Unfortunately, this legitimate claim can serve as an ice breaker to educate the perpetrator on how to milk the system.
Is there evidence of financial trouble such as unemployment, divorce, a failing business, or a looming foreclosure? Financial distress can certainly be a motive for insurance fraud, as well as other crimes. However, in and of itself, financial distress proves nothing as to the legitimacy of the actual claim under scrutiny.
Has the claim been made on a new policy who's ink has barely dried? This is a glaring indicator that will always grab the attention of insurance company claims managers and will very likely result in an investigation being opened.
HAND DELIVERY OF DOCUMENTS:
Has the claimant told you he'll just stop by to drop off documents relevant to the claim? This may be an attempt to circumvent potential mail fraud charges. As a matter of procedure, an investigator should always save not only all correspondence received from the claimant, but also the envelope it was received in. Without the envelope and canceled postage, there will not be the proof necessary to later pursue mail fraud charges.
FAMILIARITY WITH THE CLAIMS PROCESS:
The claims process should be bewildering to any outsider. It's the slow and ugly child of a hundred years of insurance industry bureaucracy. If the claimant is knowledgeable of the insurance process and terms, you can bet he's had his hand in the insurance cookie jar before.
Prior to the loss, the insured calls his insurance company to inquiry about increasing coverage limits, or to verify the current status of coverage. Although the insured may believe that this call is to an anonymous insurance company call center, in fact, insurance companies often log these calls. However, if the insured contacted his independent agent, this information may not be known by the insurance company. Contacting and interviewing the independent agent may be warranted. However, be forewarned that this contact may be reported back to the insured by the agent whose loyalty may be to his customer, rather than to the insurance company.
INSURANCE BUSINESS BACKGROUND:
This is a fraud indicator that is the dirty little secret of the insurance industry. Insurance brokers, agents, and claims adjusters sometimes go bad. They have an insider's knowledge of the business and may use it to attempt to defraud the very system they are part of. Other times, they themselves will not be the key player, but rather will be the significant other such as a boyfriend or girlfriend of the person making the fraudulent claim. They will sit in the background, silently directing the claimant through the process. Although insurance companies will not admit that this is a problem, I can tell you that it is being increasingly addressed by technological and other means.
An employee has been notified that he will be laid off or fired. Between the date of notice and scheduled termination date, the employee feigns an injury and opens a workers compensation claim. Further indicators in this particular scenario are that the employee will have no witnesses to the alleged incident and his physical injury will be subjective. A subjective injury is one where an independent medical examination cannot verify the injury. An example of a subjective injury would be a soft tissue injury. An example of an objective injury would be a broken leg. Obviously, there's no way to fake a broken leg either its shows up in an x-ray or it doesn't.
AUTOMOBILE MECHANICAL FAILURE:
In stolen car cases and vehicular arson cases, the mechanical condition of the car prior to its disappearance or destruction should be investigated to determine if there has been an extreme mechanical failure, such as an engine block which was destroyed due to lack of oil, or a wrecked transmission which requires a costly rebuild. When the car owner cannot afford the repairs, he will attempt to collect insurance on the vehicle through staging its theft, or setting the vehicle on fire. Identifying and interviewing the vehicle's regular mechanic is a step that which can produce important information and will usually not be expected by the insured.
UNDOCUMENTED PERSONAL/BUSINESS PROPERTY:
The insured is unable to produce credible documentation to substantiate the ownership of personal or business property. The insured's ownership of art, furs, jewelry or other valuables is explained as gifts or cash purchases from persons or businesses who can no longer be contacted to verify the insured's story.
THE SWOOP AND SQUAT:
This is a popular auto accident scheme where a claimant
will suddenly slow in traffic without warning, causing the following
vehicle to rear end him. Fraud indicators in this scenario include
the claimant's vehicle being an older, poor condition vehicle
and the victim vehicle being one which would obviously be insured
such as a late model luxury car or a commercial truck. A
second indicator is that the claimant vehicle will be packed with
passengers each eager to pursue a claim. These claimants
are typically low income immigrants who have been illegally recruited
by the "cappers" of local law firms.
Robert Scott is a Los Angeles-based private investigator
and author of "The Investigator's Little Black Book 3".
Visit his website at http://www.crimetime.com. This article was
originally published in P.I. Magazine.