Escolar Documentos
Profissional Documentos
Cultura Documentos
2012
CHAPTER-1 INTRODUCTION
Every risk involves the Loss of one or other kind. The function of insurance is to spread the loss over a large number of persons who are agreed to co-operate each other at the time of loss. The risk cannot is averted but loss occurring due to a certain risk can be distributed amongst the agreed persons. They are agreed to share the loss because the chances of loss, i.e. the Time, Amount, to a Person are not known. Anybody of them may suffer loss to a given risk so; the rest of the persons who are agreed will share the loss. The larger the number of such persons, the easier the process of distribution of Loss. They in fact share the loss by payment of premium, which is calculated on the probability of loss. In olden time, the contribution by the persons was made at the time of loss. The Insurance is also defined as a social device to accumulate funds to meet the uncertain losses arising through a certain risk to a person insured against a risk. Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual.
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DEFINITION
Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial Losses suffered by the insured as a result of the occurrence of unforeseen events. With the help of insurance, large number of people exposed to a similar risk makes contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. General definition: In the words of John Magee, Insurance is a Plan by which Large Number of People Associate Themselves and Transfer to the shoulders of all, risks that attach to individuals. Fundamental definition: In the words of D.S. Hansel, Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme. Contractual definition: In the words of Justice Tindal, Insurance is a contract in which a sum of money is paid to the assured as consideration of insurers incurring the risk of paying a large sum upon a given contingency.
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premium is reduced to, which will stimulate more business and more protection to the masses. Therefore the insurance assist financially to the health organization, fire brigade, educational institutions, and other organization, which are engaged in preventing the losses of the masses from death or damage. 5) Insurance Provides Capital: The insurance provides capital to the society. The accumulated funds are invested in productive channel. The dearth of capital of the society is minimized to a greater extent with the help of investment of insurance. The industry, the business and the individual are benefited by the investment and loans of the insurers. 6) Insurance Improves Efficiency: The insurance eliminates worries and miseries of the losses of death and destruction of property. The carefree person can devote his body and soul together for better achievement. It improves not only his efficiency, but the efficiencies of the masses are also advanced.
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Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire that is covered by their insurance policy in order to receive payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of Policyholders exaggerating otherwise legitimate claims. For example, when involved in a collision an insured person might claim more damage than was really done to his or her car. Soft fraud can also occur when, while obtaining a new insurance policy, an individual misreports previous or existing conditions in order to obtain a lower premium on their insurance policy.
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Consider:
Three states still dont have specific insurance fraud laws, thus discouraging many prosecutors from tackling tough fraud cases. Courts are getting tougher on convicted schemers, but too often jail sentences still are light, with courts often reserving space in overcrowded prisons for people convicted of more-violent crimes. Professional societies overseeing doctors and lawyers often are reluctant to discipline peers convicted of insurance fraud. Low Legal Priority: - Prosecutors often give top priority to combating drugs, violence and other high-profile crimes. Though prosecutors are tackling more fraud cases than in the early 1990s, too many prosecutors still believe insurance crimes often are too complex and technical to successfully prosecute. People Tolerate Fraud: - Too many consumers believe insurance fraud is justified. This environment of tolerance makes it much easier for con artists to operate safely. Research by the Coalition against Insurance Fraud reveals
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CHAPTER- 6
The following aspects should be kept in mind in order to protect you from insurance fraud: 1. Make sure not to sign any blank insurance claim form 2. Watch out if the price of insurance is too low 3. Verify the license of the insurance company by contacting the state insurance department 4. Do not disclose your insurance identification number to anyone. If someone steals your identification number they can easily involve you in the scam. 5. Be careful while driving in order to protect you from staged automobile accidents. 6. You may contact your states insurance fraud bureau, if you want to report any form of insurance fraud. Remember that insurance fraud can be eliminated only if every person takes the necessary steps to avoid it. 7. The most effective way to prevent insurance fraud is to increase awareness among people. People should realize that any fraud is illegal and highly punishable by law. A fraud is a fraud. 8. Many people have a notion that defrauding an insurance company is okay. This kind of attitude must change. -
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TECHNOLOGY
It is very easy to combat insurance fraud now days with the help of latest technology. Medical trace is an innovative technology that reveals hidden or unreported medical treatments by searching all hospitals and pharmacies where the subject has lived. This has become a popular investigation tool among the insurance companies to detect health insurance fraud which is the most prevalent type of insurance fraud.
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Questionable circumstances surrounding reported death; staged death/false identity. Suspicious/False Policy Application:
Suspicious or questionable actions by applicant or policyholder (insureds health misrepresented on application; suspicious timing of application in relation to insureds death); potential for monetary gain from life insurance policy. Include suspicious claims involving murder for profit and claims pertaining to viatical settlements.
HEALTH CARE INSURANCE According to Roger Feldman, Blue Cross Professor of Health Insurance at the University of Minnesota, one of the main reasons that medical fraud is such a prevalent practice is that nearly all of the parties involved find it favorable in some way. Many physicians see it as necessary to provide quality care for their patients. Many patients, although disapproving of the idea of fraud, are sometimes more willing to accept it when it affects their own medical care. Program administrators are often lenient on the issue of insurance fraud, as they want to maximize the services of their providers.
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The most common perpetrators of healthcare insurance fraud are health care providers. One reason for this, according to David Hyman, a Professor at the University Of Maryland School Of Law, is that the historically prevailing attitude in the medical profession is one of fidelity to patients. This incentive can lead to fraudulent practices such as billing insurers for treatments that are not covered by the patients insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, than that which was rendered. Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. Public healthcare programs such as Medicare and Medicaid are especially conducive to fraudulent activities, as they are often run on a fee-for-service structure. Physicians use several fraudulent techniques to achieve this end. These can include up-coding or upgrading, which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are not medically necessary; scheduling extra visits for patients; referring patients to another physician when no further treatment is actually necessary; and ganging, or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services. Slip &Fall: - Suspicious Slip of the Patient! Fall Claim arising out suspiciously. Inflated Billing: - Inflated billing by any medical facility, doctor, chiropractor, laboratory, etc. Disability: - Disability claim submitted against disability insurance policy while claimant on permanent or temporary disability and receiving continual benefits and/or vocational benefits and/or claimant reported working or performing activities exceeding alleged physical limitations. Food Contamination: - Foreign object found within food/drink products. Pharmacy: - Pharmacist or pharmacy inflates bills or falsifies billing; person illegally obtains medical prescriptions and submits prescriptions for habitual need. Dental: - Dentist or dental office inflates bills or falsifies billing codes.
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AUTOMOBILE INSURANCE The Insurance Research Council estimated that in 1996, 21 to 36 percent of autoinsurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, vice president of research for the Insurance Fraud Bureau of Massachusetts, lists several ways that auto-insurance fraud can occur. Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to injuries, or reporting higher costs for car repairs than those that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called rate evasion. For example, some drivers in Brooklyn drive with Pennsylvania license plates because registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Another form of automobile insurance fraud, known as fronting, involves registering someone other than the real primary driver of a car as the primary driver of the car. For example, parents might list themselves as the primary driver of their childrens vehicles to avoid young driver premiums. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent auto-insurance claims. Crash for cash scams may involve random unaware strangers, set to appear as the perpetrators of the orchestrated crashes. Such techniques are the classic rear-end shunt (the driver in front suddenly slams on the brakes, eventually with brake lights disabled), the decoy rear-end shunt (when following one car, another one pulls in front of it, causing it to break sharply, then the first car drives off) or the helpful wave shunt (the driver is waved in to a line of queuing traffic by the scammer who promptly crashes, then denies waving)
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Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Dornstein, author of accidentally, on Purpose: The Making of a Personal Injury Underworld in America. In this scheme, known as a swoop-and-squat, one or more drivers in swoop cars force an unsuspecting driver into position behind a squat car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other drivers insurance company. This claim often includes bills for medical treatments that were not necessary or not received. Faked Damages: - Damages to vehicle exaggerated, non-existent, pree xisting or vehicle damaged at a later point in time. Inflated Damages: - Damages inflated or exaggerated non-existent or pree xisting; excessive billing of vehicle body parts or repair work. Vehicle Theft: Vehicle or motor home theft. Vehicle Arson: - Vehicle or motor home arson. Auto Property/Vandalism: - Vehicle or motor home vandalism is including such items as car rims, stereo equipment and engine parts. Agent/Broker: - Policy backdated prior to loss date and/or theft of premium dollars intended for payment of coverage. Embezzlement: - Embezzlement of funds. Trailered Watercraft/Theft Damage: - Watercraft stolen or damaged while being transported on trailer. Trailered Watercraft Arson: - Arson of a watercraft while transported on trailer. Other Auto Property: - Any other auto-related circumstance not listed above involving the presentation of false documents as proof of insurance.
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PROPERTY INSURANCE
Fraudulent activities against property insurance providers consist of the destruction of property in order to receive insurance payments for it. Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed, or to destroy and subsequently receive payment for goods that could not otherwise be sold. According to Alfred Manes, the majority of property insurance crimes involve arson. One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. According to the United States Fire Administration, in the United States there were approximately 31,000 fires caused by arson in 2006, resulting in losses of $755 million Theft Residential: Suspicious residential theft. Theft Commercial: Suspicious commercial business theft. Theft Commercial Carrier: Insured reports baggage/cargo lost by
commercial carrier (airline, bus, train, and vessel). Watercraft/Aircraft Theft: Theft or damage to watercraft/aircraft while not on a trailer. Watercraft/Aircraft Arson: Arson of watercraft/aircraft while not on a trailer. Vandalism: Vandalism or malicious mischief to the interior or exterior of business or residence. Property Theft from Vehicle: Suspicious theft of personal property while stored in a vehicle or motor home (commonly claimed under a horneovners insurance policy). Agent/Broker: Policy backdated prior to loss date and/or theft of premium dollars intended for payment of coverage. Mold Related: Mold related. Other Property Damage: Property damage not included in other definitions.
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details. This database would be very similar to the Medical Information Bureau (MIB) database often used by the life insurance companies. Such rules are very basic, easy to understand and implement. Since there are a plethora of possible combinations for verifying various information, availability of the relevant data is very important. Predictive analytics based decision tree models are another technology that an underwriter can depend on to make precise and consistent decision about the prospects. These models are easily understood and are based on a complex set of business rules that produce a fraud score. This technology incorporates compiled information from multiple sources rather than relying on a simple red-flag system to provide an insight on future customer behaviour. These models are created from predefined data elements where the outcomes are known. Any new information can therefore be run using this model to view the probable outcome of the decision being taken.
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Lets look at a professionally organized automobile insurance scam involving many con artists. You get up, dress for work and drive through your town to your workplace. Someone is following you, but you dont recognize it. At one time the car following will over take you and next hit the brakes making a rear-end collision. You wont even know whats going on and in panic maybe even forget the facts and events that happened before the car crash. The driver which you ran on to will immediately approach you, ask you what is wrong and if you need any help. is everything okay, do you need a doctor? If you want I can call my own. No? Lets examine the situation then. We should call a towing service and car body repair shop; I have one stored in my cell phone. We also should make proper legal arrangements; I will call my lawyer for us. Perfect! You think to yourself, hmm thats the best accident Ive ever been too! What you dont know is that the Car Shop hired the driver to run onto you on purpose. The doctor and lawyer also were awaiting the call, being part of the game. In the end you or your insurance will pay the doctor, lawyer, towing fee, storage fee, car repair... If you are in a car accident, read the fine print on every paper you will sign. Dont accept offers for services from anyone involved in the collision.
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Lets look at an example of fake insurance claims for travels. Even though nowadays travelling package at airports is highly automatized and computerized, there still are many reports on packages getting lost. Lugging baggage at airports is usually insured for a cost much less than the one paid if the package gets lost. Organized criminals therefore can and loose these to get money from an insurance company. More often at jobs like this there will be an insider person cooperating with the person who is about to lose their package. Same goes for insured papers and documents. During their transportation they somehow get lost during the way. Fake Paper Claims
This is pretty simple. The con artist is trying to fool the insurance by making them believe an event that in reality never happened but only exists on the paper. Fake or Bogus Insurances
You are starting up a small business. As usual you have a low budget on start, but if you want to operate you have to get some insurance for your business or at least health care insurance for yourself and the employees. You ask around, look in newspapers, all across the internet to find a perfect deal. All of a sudden you find a special deal at a very low rate. You call the agent and sign the papers, happy you found this agent. Two months later one of your employees gets sick and you send him to your local hospital, but somehow he is denied to receive basic health care. You figure out you have signed a false insurance and gave the money to a thief.
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The vast majority of insurance agents and companies are ethical, honest and trustworthy. But crooked agents and bogus insurers do exist, and they can fleece you. The Scams Fight Back The Scams Here are several scams you should watch for... Stealing your premiums: An agent pockets your insurance premiums instead of sending it to the insurer. Crooked agents may steal your premiums to support their business, feed a gambling or drug habit, or buy luxury goods such as cars or jewellery. Sometimes insiders at an insurance company loot the insurer, causing it to go bankrupt. Selling phony insurance: An agent or company sells you fake coverage from a phony insurance company. Or the agent sells you bogus coverage using a legitimate companys name or a name thats similar to a legitimate insurer. You might receive an official-looking policy or proof of insurance thats worthless. You could lose thousands of dollars if you suffer a loss and dont have a real policy to pay your claim. Selling coverage you dont want or need: Maybe the coverage is real, but its expensive, unnecessary, and your current policy may already cover that risk. Three examples are as follows: Churning: - Dishonest agents might convince people to use the builtu p value of their current whole life policy to buy a better policy even though their present life coverage is perfectly suitable. The agent gets a nice commission, but you must start building up cash value all over again. Sliding: - An agent or insurer slips you extra coverage you didnt ask for but do pay for. This can easily add $100, $200 or more to your premium. The agent
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cheerfully says its simply part of a package, or doesnt tell you about the coverage at all. Motor club memberships, accidental death coverage and guaranteed renewable life insurance are three policies that crooked agents sometimes sell to unwitting policyholders. Twisting: - An agent may urge you to change policies prematurely by twisting the truth about the downside. If you have an illness, injury or other medical condition, for example, will that affordable new health policy refuse to cover it because its a pre-existing condition? Worthless Investments: You may be urged to invest in insurance-like instruments. One is verticals, which are investments in life policies taken out on sick or terminally ill people. Verticals can be a legitimate investment, but some can also be phony or misleading. Another scam is promissory notes, in which agents promise quick, high and certain returns for investing in promissory notes supposedly backed by insurance. Often the promissory notes dont exist theyre just a sham to steal your money.
Fight Back
Take these common-sense steps before you buy... Make sure the agent and company are licensed in your state. Be especially careful if you dont recognize the companys name. Contact your state insurance department, which issues licenses.
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Call your Better Business Bureau or local consumer assistance agency to see if the agent has complaints filed against them. Check to see how many complaints have been filed against an insurance company in your state.
Back off if the agent offers coverage whose price is 30-50 percent lowers than competitors. Shop around to find out the normal price range.
Always pay your premiums by check or money order. In most cases, make it payable to the insurance company, not the agent or agency.
Be sure to get a receipt. Photocopy your check or money order for your records. Think twice if the agent insists you pay in cash, or tries to sell coverage in unusual situations such as in a restaurant or bar.
Be suspicious if your agent bills you for premium installments after your first payment. Normally your insurance company or premium finance company handles the billing.
Buy coverage only after all documents are completely filled out, you fully understand what coverage is included, and what the cost for each coverage is. Make sure your agent clearly explains all.
Go slow if the agent or company rep seems evasive or cant answer your questions, or tries to sell you coverage without bothering your family with the details.
Never sign a blank insurance form or give your agent power of attorney to sign an insurance application or buy coverage for you.
Get a copy of every form you sign. If you finance your premiums, make sure your agent gives you paperwork that describes exactly how much you pay for each installment, and what that payment covers.
Watch out if the sales pitch highlights the surrender and use of cash values in older life coverage to buy new higher-valued policies.
Contact the company if you havent received a policy within 60 days after sending in your application.
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Get a second opinion if an agent tries to sell you new and more expensive coverage even though you still have a current policy in effect. Talk to your financial advisor or another agent. Ask the selling agent direct questions, and get the answers in writing: Why do you need this coverage? What are the benefits? Exactly whats covered? How much will it cost?
Know what your current policy does and doesnt cover. Ask your agent or insurer for a detailed explanation in plain language. Ask pointed questions if you have any doubts about whats in your policy.
Make sure your insurance company is healthy and can pay claims especially if its an unfamiliar name. Call your state insurance department to make sure its licensed in your state.
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generally consist of experienced claims adjusters with special training in investigating fraudulent claims. These investigators look for certain symptoms associated with fraudulent claims, or otherwise look for evidence of falsification of some kind. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough.
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convicted
inducted
Insurance
Hall
Shame by the Coalition against Insurance Fraud. An $80-billion-a-year crime, insurance fraud has grown more violent and invasive in recent years. Reflecting that trend, this years Hall of Shame compiles the years most brazen insurance scams. Timothy Nicholls: Three children died when Nicholls torched his Colorado
Springs, Cob, home to steal insurance money so he could escape mounting debt. He owed a motorcycle gang that had supplied him with methamphetamines, and his businesses were struggling. Jay-Jay, Sophia and three-year-old Sierra died of smoke inhalation. Nicholls received life in prison. Ronald Evano: The self-proclaimed gypsy swallowed broken glass to shake down insurers and business by lying that he found the shards in food and drink held consumed. Evano said he wanted the insurance money to provide dowries for his sons. But he wont be dancing at weddings for a while. He is serving 63 months in prison and must cough up more than $340,000 in restitution. Christopher Michael Robertson: The Florida gay man torched his Lakeland mobile home in part for insurance money, but made the scheme look like a hate crime. Robertson spray-painted Idie fagi across the front steps of the home he shared with his partner, and then made a bogus claim for possessions he had placed in storage. Many people rallied to support Robertson in the face of seeming bigotry. He is serving 18 months in state prison. Candice Lambert: The special education teacher faked cancer to collect disability money from a school system in suburban Albany, N.Y., and then moved to New Hampshire to try the scheme a second time. The ruse was exposed when the
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teacher is seemingly valiant struggle made the local newspaper. A New York court sentenced her to one to three years in prison. Robert D. Wachter: Three Missouri nursing homes run by Robert D. Wachter were hellholes. Residents were denied water, food and sanitation while he billed Medicare and Medicaid for many of the same services. Some residents died from neglect. Wachter received 18 months in federal prison and lines of $750,000.
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company ICR.
will
not
place
the
claim
information
on
the
All customers who have claims on the ICR have the right to access the information held about them at any time, and seek changes that information warranted.
In terms of security of information, only participating insurers are able to access the ICR, and security passwords are allocated by companies so that only authorized personnel have access to the ICR. The ICR is able to tell who are accessing the register and what types of enquiries are being made, via electronic footprints.
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Premiums can vary significantly from insurer to insurer so it pays to shop around. To make comparison shopping a little easier, the Insurance Department publishes Consumer guides for auto, homeowners, long-term care and HMO/health insurance that provide sample premiums for insurers that offer these coverages in New York State. In addition, the Insurance Departments Web site is also the home of an Interactive Guide to HMOs, which allows consumers to find information about HMOs operating within their home county. Know Your Agent or Broker:
Consumers can often be victimized by unscrupulous agents or brokers and discover only after they file a claim that they are without coverage for their home or their car. If an uninsured home is damaged by fire, the owner is solely responsible for restoring it and paying back any mortgage holders. If a driver is involved in an accident while driving an uninsured vehicle, any personal assets are subject to forfeiture if that driver is sued for damages. Deal only with licensed agents and brokers. Agents and brokers must carry proof of licensure. Ask to see it. Or call the Insurance Departments.
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Never pay for a premium in cash. Pay by check or a money order made out to the insurance company directly or to the agencynot to the individual agent or broker. In addition, always request a receipt. Wheres the Policy?
You should receive a copy of any type of insurance policy complete with endorsements and declarations specifically outlining your coverage and its limitations within a reasonable period after your purchase. If you do not receive it, question your agent or broker. If there is no satisfactory explanation for the delay, contact the New York Insurance Department immediately. You may not have the insurance coverage you paid for. Are You Being Billed for Services You Have Not Received?
If you have received medical or dental treatment that is covered by an HMO or an insurance company, you will receive an Explanation of Benefits statement listing the services for which benefits have been paid. Review it carefully to ensure that your health care provider has not bumped up your claim (i.e., overstated services provided in order to receive a higher payment), or charged for services you did not receive. Contact your insurer immediately if you feel there are discrepancies. Fraudulent claims payments translate into higher insurance premiums for all of us. What If youre Involved in an Automobile Accident?
Call the police to the scene and make sure that the details of the accident are documented and the identities of the occupants of the other vehicle are verified. Be suspicious if the driver of the other vehicle insists there is no need to call the police. That drivers insurance card may be fraudulent and his car uninsured. Auto Insurance Fraud is a multi-billion-dollar problem nationwide. Watch out for these common scams: The staged accident - A vehicle filled with people will stop suddenly in front of you, setting you up as the cause of a rear-end collision. The victims will then file costly
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multiple medical and damage claims using doctors and lawyers who are part of the scam. Inflated claims - If you are in an automobile accident, be sure you know the extent of the damages to your own car and the other vehicle and carefully review claims.
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Professional investigative services including background checks and surveillance can reveal fraudulent claims and allow insurance companies to prevent these losses. By performing surveillance exclusively with current and former NYPD detectives, Financial Detectives utilizes the most effective techniques and modern technology to help determine the validity of the claim. Our investigative experience also includes testifying in various criminal and civil prosecutions. Therefore, we will provide the facts of the case and if needed, the expert testimony to back it up.
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February 2009 The Insurance Information Institute estimates that fraud accounts for 10 percent of the property/casua1y insurance industrys incurred losses and loss adjustment expenses. Fraud may be committed at different points in the insurance transaction by different parties: applicants for insurance, policyholders, third-party claimants and professionals who provide services to claimants. Common frauds include padding, or inflating actual claims; misrepresenting facts on an insurance application; submitting claims for injuries or damage that never occurred; and staging accidents that have not occurred. Prompted by the incidence of insurance fraud, 41 states and the District of Columbia have set up fraud bureaus (some bureaus have limited powers, and some states have more than one bureau to address fraud in different lines of insurance). These agencies have reported increases in referrals (tips about suspected fraud), cases opened, Convictions and Court-ordered restitution.
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between $4.8 billion and $6.8 billion to closed auto injury claim payments in 2007, according to the Insurance Research Council (IRC)s November 2008 study, Fraud and Build-up in Auto Insurance Claims: 2008 Edition. Excess payments rose from an estimated $4.3 billion in 2002 to an estimated $5.8 billion in 2007. Excess payments under the five main private passenger auto injury coverages
(bodily injury (BI), personal injury protection (PIP), medical payments, and uninsured and underinsured motorist coverages) ranged from 13 percent to 18 percent of total payments in 2007, according to the IRC study. Fraud increased from 9 percent of BI claims closed with payment in 2002 to 11 percent in 2007. Fraud increased slightly for PIP claims, from 5 percent in 2002 to 6 percent in 2007. The IRC study found that claim build-up, the inflation of an otherwise legitimate
claim, rose from 18 percent of BI claims closed with payment in 2002 to 20 percent by 2007. For PIP claims, build-up increased from 12 percent in 2002 to 14 percent in 2007. The study found that fraud and build-up in auto injury claims varied widely by state
and by type of liability coverage. For example, among the 12 no-fault states, Florida had the highest rates of fraud and build-up in both BI and PIP claims while North Dakota had the lowest for BI and Kansas had the lowest for PIP. The IRC study examined more than 42,000 auto injury claims closed with payment
for 22 insurers representing 58 percent of the private passenger auto insurance market. Since the study involved only claims closed with payment it most likely underestimates the incidence of fraud and build-up in all claims filed. Auto Insurance Fraud Owner Give-Ups: The National Insurance Crime Bureau
(NICB) released a study in October 2008 detailing owner give-ups, defined as vehicles that were reported stolen by their owners when the Owner is infact making a false theft report. Using data submitted by its member companies from 2004 through March 2008, the NICB found that the top five cities for owner give-ups were Houston, Texas; Las Vegas, NV;
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Phoenix, AZ; Los Angeles, CA; and Chicago, IL. By state the top five were California Texas, Georgia, Florida and Arizona. The vehicles most subject to Owner give-ups were the Dodge Ram, followed by the Ford F-150. In addition, the NICB tracked Owner give-ups Compared with gas prices from January 2004 through December 2007 and found that give-ups increased as gas prices rose. Indications that Owner give-up fraud may be on the rise include a report from New
York States fraud bureau that found that give-ups rose by about a third in 2008, reports from Florida police that give-ups are increasing in Miami and a report from Wisconsin that the state has seen an uptick in inquiries about suspicious vehicle thefts. These findings were detailed in a September 2008 Coalition against Insurance Fraud Survey. Auto Insurance Fraud: National Motor Vehicle Title Information System: In
January 2009 the Department of Justice issued plans to implement the National Motor Vehicle Title Information System (NMVTIS), a database that requires junk and salvage yard operators and insurance companies to file monthly reports on vehicles that were declared total losses. Insurers must state for every vehicle declared a total loss the name and contact information of the insurer; the vehicle identification number; the date the insurer declared the vehicle a total loss; the original vehicle Owner; and the vehicle owner at the time the report was filed. The database was designed to help end title washing, where unscrupulous dealers re-license a car in a state with lenient rules concerning total losses and salvage vehicles. The database is required under the Anti Car Theft Act of 1992. Insurers will report the information to a third party, such as ISO, which will transmit it the operator of the system, the American Association of Motor Vehicle Administrators. Consumer Attitudes Toward insurance Fraud: Four out of five Americans think
that a variety of insurance crimes are unethical, and one out of five think it is acceptable to defraud insurance companies under certain condition, according to the Coalition Against Insurance Fraud (CAIF). The organization released the findings in a study, The Four Faces of Insurance Fraud, in late 2008 as an update to its 1997 study. It found that the public is consistently more tolerant of specific insurance frauds today than it was 10 years ago. For example, 82 percent of respondents think it is unethical to misrepresent facts on an insurance application in order to lower their premiums, down from 91 percent in 1997. Eighty-five percent think filing a claim for damage that occurred before the damage was covered is wrong, compared with 91 percent ten years ago; 84 percent think inflating a
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claim to cover a deductible is unethical, compared with 91 percent in 1997; and 84 percent consider misrepresenting an incident in order to be paid for an uncovered loss unethical, down from 92 percent 10 years ago. The CAIF study also found that more Americans believe insurance fraud to be
widespread. Four out of five people say inflating claims to cover deductibles is prevalent, and the same ratio think lying to be paid for an uncovered claim and to lower their premiums are commonplace. Seven out of 10 people think falsifying receipts or estimates and submitting a claim for damage that happened before buying insurance are prevalent. Fraud Following Hurricanes: The hurricanes of 2005, especially Hurricane
Katrina, resulted in cases of insurance fraud where homeowners or renters made claims for expensive home appliances that were never purchased and where homeowners inflated claims for items actually destroyed. Some of the fires that broke out in buildings in New Orleans and other affected communities after Hurricane Katrina are suspected cases of arson, committed by flood victims who did not have flood coverage, and thousands of flood-damaged cars were cleaned up and resold without disclosing their flood status. (See Background, Auto Insurance Fraud.)
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CHAPTER- 19
INSURANCE FRAUD RING INVESTIGATION
BACKGROUND Insurance fraud rings usually comprises several key players, and may include dozens of willing participants. Obviously, the primary purpose of the ring is to commit fraud by staging certain types of accidents, e.g., slip and falls, hit and run accidents, swoop and squat accidents, i.e., where one member of the ring swoops in front of the second participant, causing the second participant to suddenly break and, thereupon, get rearended by an unsuspecting mark. Typically, insurance fraud rings will target numerous insurers and may operate in various states. Therefore, a ring that has been in operation for several years may be responsible for hundreds of losses, and may include scores of participants and insurers. It should be evident at this point that, in order to crack a fraud ring, intercompany cooperation is often a vital component, and, that in order to understand and make the connection between the rings participants and the various claims, an organizational chart is often necessary. Organizational charts used in the investigation of fraud rings often include the names innocent, suspect, as well as, confirmed perpetrators As evidenced by a case out of Oregon, the sharing of such information, while desirable, may carry some risks.
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CONCLUSION The Courts assertion in Sanders that the organizational chart was capable of bearing a defamatory meaning emphasizes the extreme care that must be taken by insurers in preparing and labelling an organization chart with the roles of the innocent, suspected, and confirmed participants in the fraud ring, and emphasizes the care that is required and the good faith that must be displayed when sharing an organizational chart or other information with fellow insurers.
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Complaint up Held:
The firm accepted that the theft from the van was genuine. Mr. H had been foolish to obtain a forged receipt but he was not dishonestly trying to obtain something to which he was not entitled. The loss adjusters had, in fact, been rather overzealous in insisting on strict proof of purchase for all the items stolen. We applied the rationale of The Mercandian Continent case which concerned the principle of utmost good faith. Ultimately, the case held that insurers should only be able to avoid a policy for fraud where the insurers ultimate liability was affected, or when the fraud was so serious it enabled the insurer to repudiate the policy for fundamental breach of contract.
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Following this rationale, we concluded that the fair and reasonable solution was for the insurer to reinstate the policy and pay the claim. In any event, it was unlikely that the firms ultimate liability would be affected by the fraud, as Mr. Hs work tools were specifically excluded from the home policy. Home policies often exclude cover for contents or possessions that are for business rather than personal use. We also pointed out to the firm that even if Mr. H had been guilty of fraud, it would only have been entitled to forfeit the policy from the date of the current claim, leaving the earlier burglary claim intact. It was not entitled to recover previous payments for valid claims. Policyholder supplies misleading and fraudulent documents in the course of making a valid claim insurers able to forfeit policy from the date of the claim Miss J made a claim under her general household policy for escape of water damage. As the damage was reasonably limited, the firm simply asked her to send in repair estimates. She provided three. The firm discovered that all three estimates purporting to come from different contractors were fraudulently produced by one contractor who had carried out extensive works for Miss J in the past. The firm considered Miss J to be guilty of fraud. It cancelled her policy and refused to deal with the claim. Miss J then bought her complaint to us. Complaint Rejected:
Miss J had already admitted supplying false information to the firm, and in an attempt to resolve the matter, had produced further genuine estimates from independent contractors. However, these merely served to show the extent to which the prices quoted in the fraudulent estimates had been exaggerated. Once again, we applied the principles of The Mercandian Continent. If the fraud had not been discovered, the firm would have ended up paying more in compensation than was properly required of it, and more than Miss J was legally entitled to. To this end, the fraud affected the firms ultimate liability and was a fundamental breach of contract.
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Policyholder purposefully gives wrong details of stolen items insurers able to forfeit policy from the date of the claim Mr. G made a claim for goods stolen from his home during a burglary. Among the many items he claimed for were some Star Wars DVDs. This alerted the firms loss adjusters to the possibility of fraud, since at the time of the burglary the films in question had not been released on DVD. The firm rejected the claim and forfeited Mr. Gs policy from the date of his claim. Mr. G complained to us, arguing that he must have mistakenly claimed for pirated copies of the DVDs, and that this mistake did not warrant forfeiture of the policy. Complaint Rejected:
We were satisfied that this was a clear attempt to defraud the firm. There was evidence that showed beyond reasonable doubt more than the usual civil requirement of balance of probabilities that Mr. G was claiming for something that he could never have owned. This higher standard of proof indicated that Mr. G would still be guilty of fraud, even if the pirated DVDs did exist, since he had attempted to claim for legitimate copies. The value of the DVDs was relatively small compared with the overall size of the claim, but we did not feel this was a case of innocent and minimal exaggeration. Mr. G had dishonestly claimed for something he was not entitled to. This went to the very root of the insurance contract, and was a breach of the policyholders duty to act in utmost good faith when submitting a claim.
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CONCLUSION
Measuring insurance fraud will never be easy, and likely will remain controversial. Reaching consensus on definitions and methods will be hard. Especially when people focus narrowly on their own operations instead of keeping the big picture in mind. But such consensus is essential if effective measurement programs are to help spotlight the damage caused by this crime, and ultimately convincing the public and decisionmakers how much insurance fraud affects the U.S. economy and lives of Americans everywhere. A unified, all-industry approach to measurement is needed if we expect to prove that the fraud-fighting community is serious about managing this responsibility diligently, and that, indeed, insurance fraud is a severe social and economic problem in the United States.
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CHAPTER- 22 Summary
Insurance, a very well known concept today and many people could relate to in more than one ways. This is the influence of the changing times that have changed the concept of insurance in the minds of the young and the old. People have changed their attitude towards insurance and accepted its new look from being an entry of luxury to an investment and a necessity. The number of people taking insurance has increased considerably in the past few decades due to the entry of private players in the market. One knows that every coin has two sides. Similarly, insurance also has two faces. One of which is investments and getting regular returns from financial institutions for oneself and for loved ones. The other, awfully, is of which people deceive insurance companies for their undue advantage and cause intimidation to many others. Though, there have been many laws and agencies all over the world to impede such criminal activity, it is not a full proof solution to all insurance frauds. In a world today where every person seeks their right to information and demands the same, it is very difficult to scam them. One must know all the loop-holes of their business to scheme someone. This could be the act of someone who is carrying on criminal bustle on the vigour of his acute knowledge about their business. Lack of knowledge and not knowing ones basic rights on behalf of the prey could land them in scrambled scam bisque. There have been many institutions and agencies formed all over the world to detect fraud and penalize the one conscientious for such mishaps. There is Division of Insurance Fraud, International Association of Insurance Fraud Agencies (Iaifa), etc. through the enduring and conscious endeavour of these institutions insurance fraud tempo has declined by an enormous amount. Several have studied preceding and enduring market conditions to identify with the diverse frauds that take place and the reasons behind committing these frauds.
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One cannot diminish frauds, schemes, swindles, scams but can positively be alert of them so as not to be a victim of it themselves. Tumbling fraudulent situations is a unremitting and collective effort of countless. One must be sensitive and offer their helping as much as they can. One can either grumble about how things are all going wide of the mark and swallow the consequences. Or put their foot down and make an attempt to change the immoral to the right. The wrong will change and everyone will see the bright light of truth and right with the revolution of knowledge, awareness, an attitude for change amongst the humanity.
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Bibliography
www.naic.org
www.google.com
www.yahoo.com
www.wikipedia.com
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