AIC 30 Chapter 6
The insurer will conduct these activities to identify fraudulent claims
- Detect claims fraud through traditional fraud indicators and through mining social media data - Apply network analysis by examining links and suspicious connections - Apply cluster analysis to discover claims characteristics that might include fraud
Who plays a part in nationwide efforts to detect and deter fraud, as well as prosecute and punish those who commit it?
- Insurers - State and federal governments - Insurance industry organizations
What happens when fraudulent claims are not paid?
- Other insureds pay a lower premium - The insurer can better maintain its solvency
Examples of Exaggerated/Padded Claims:
- Overstated value of property - Overstated severity of injury - Overtreatment for injuries - Unnecessary Treatment for injuries
Cluster analysis
A model that determines previously unknown groupings of data
Internet of Things (IoT)
A network of objects that transmit data to and from each other without human interaction
Intentional Losses
Can be distinguished from exaggerated and false claims. An exaggerated claim is based on an actual loss, but the value of the loss in inflated
Data Mining
The analysis of large amounts of data to find new relationships and patterns that will assist in developing business solutions
Centroid
The center of a cluster
Insurance Fraud
The costliest white-collar crimes in the U.S., second to tax evasion
Two protections commonly found in the law for claim representatives
1.) Extended time limit within which the insured can investigation the claim and accept or deny liability. 2.) Protection to allow the insured not to disclose suspicion of fraud to the insured.
Motives for insurance fraud
1.) Individual financial gain or profit 2.) Sense of entitlement 3.) Participation in organized crime
Insurance Fraud
-Unwarranted financial gain -Often described as a victim less crime because it involves deception rather than violence and the victim is a company instead of an individual Any deliberate deception committed against an insurer or an insurance producer for the purpose of unwarranted financial gain.
Two costliest white-collar crimes in the United States
1.) Insurance Fraud 2.) Tax Evasion
Advantages of a pre-inspection program
1.) Reduce theft claims for non-existent vehicles 2.) Reduce damage incurred prior to the policy coverage being claimed as new damage 3.) Reduce inaccurate reporting of vehicle's garaging or driver
Fraud Indicators
1.) Vague or conflicting information 2.) known attorney or medical provider present 3.) database indicates multiple similar losses 4.) loss occurs soon after policy's inception 5.) uncooperative insured or claimant 6.) no police report exists for theft 7.) claimant threatens to hire an attorney unless settled quickly 8.) attorney letter received immediately after accident 9.) all parties have similar injuries and the same doctor 10.) only address for the claimant is a post office box or motel.
Questions a claims representative can ask when fraud is suspected
1.) What are reasonable or expected actions/responses of the affected party? 2.) Is part of that expected response missing? 3.) Has something been added to the reasonable response? 4.) Is there physical evidence to support the loss? 5.) Is the loss physically possible? 6.) Are records available from a 3rd party that can confirm or refute the claim? 7.) Is there a reliable witness? 8.) Is the fraud indicator based on conjecture or assumption? 9.) Is there a rational explanation for the fraud indicator?
False Representation Statute
A civil law used to protect the public (including insurers) from aggravated monetary loss when proving fraudulent intent is difficult
the government, the insurance industry, and the public
A claim representative's detection of fraud fits into a broader framework of efforts on the part of the following:
Concealment
An intentional failure to disclose a material fact.
Coalition Against Insurance Fraud (CAIF)
A diverse group that includes consumers, insurers, legislators, and regulators. It advocates measures to detect, prosecute, and deter fraud
Misrepresentation
A false statement of a material fact on which a party relies.
Unsupervised learning
A type of model creation, derived from the field of machine learning, that does not have a defined target variable.
SIUs use technology to help detect fraud. How?
Accumulate information about insurance fraud. - Additionally telematics and the Internet of Things offer insurers increasing amounts of data, some of which can be used to prevent fraud
Hard Fraud
Actions that are undertaken deliberately to defraud. - Hard fraud includes schemes to defraud insurers by filing false claims for losses that have not occurred or by intentionally creating losses.
Staged Accident
An accident deliberately caused by a person who intends to feign injury and collect on the ensuing claim.
Civil and Criminal Penalties
Anti-fraud efforts increasingly involve civil or administrative action to punish people who make fraudulent insurance claims
False Claim
Arise when an insured pursues a claim for property damages or injury that did not actually occur. Can also include misrepresentation, concealment or distortion of a material fact.
U.S. Mail Fraud Statute
Defines fraud as a scheme that uses the United States mail to obtain money or property by means of false or fraudulent representations
Soft Fraud (Opportunity Fraud)
Fraud that occurs when a legitimate claim is exaggerated. The perpetrators use the opportunity of a legitimate claim to obtain unwarranted personal gain.
International Association of Special Investigation Units (IASIU)
IASIU offers professional development regarding fraud for special investigators, who typically are employed by insurers, self-insurers, or third-party claim administrators. It organizes an annual education conference and administers the Certified Insurance Fraud Investigator (CIFI) certification.
Material Fact
In Insurance, a fact that would affect the insurer's decision to provide or maintain insurance or to settle a claim.
Data mining
Include network analysis and clustering -- are enabling insurers to more effectively identify patterns in the fraudulent claims activity
"Padding"
Inflating the amount of an otherwise legitimate claim by a small amount. Some "pad" to recovery their deductible amount or even their premium amount. The 2003 Insurance Research Council (IRC) survey found many were tolerant of these forms of fraud.
Edges
Lines
Immunity Laws
Most statutes grant immunity if an insurer reports information but it turns out there is no fraud, malice, or criminal intent
In terms of insurance, intentional losses are..
Not accidental or fortuitous
Motor vehicle Theft Law Enforcement Act of 1984
Passed to reduce the incidence of motor vehicle thefts and facilitate are tracking and recovery of stolen motor vehicle and parts of stolen vehicles
Pre Inspection Laws
Pre-inspection programs are effective in reducing theft claims for nonexistent or phantom vehicles Can deter inaccurate reporting of drivers and vehicle garaging locations
Thieves can adapt
Predictive modeling programs are often more accurate than other fraud detection methods, as they use diverse sources. However, what is one drawback with this software?
Use of computers in fraud prevention
Programs analyze vast amounts of data across different lines of insurance to identify claim patterns and other similarities that may indicate fraud. Insurance Services Office (ISO) offers electronic antifraud databases that enable access to claims related or public records that can be used to gather evidence of fraud.
National Insurance Crime Bureau (NICB)
Provides access to a database that assists in determining whether a vehicle has been reported stolen, but not recovered or has been reported as a salvage - Also provides the public with a hotline and possibly a reward for reporting suspected insurance fraud
Factors related to the insurer that may create an opportunity for fraud
Reduction in on-site inspections; Telephone adjusting; Hesitation to take on the costs of denying suspected fraudulent claims and defending the denial; accepting fraud as the cost of doing business
Anti-Fraud Efforts - State Government
Requiring insurers to form SIUs, develop anti-fraud plans, and place fraud warnings on all applications and claim forms
Elements that constitute a fraud
Someone intentionally makes an untrue representation regarding a material fact. The untrue statement is knowingly made with the intent to deceive. The victim relies and acts on the untrue representation causing them to suffer some detriment.
1.) Returning for treatment after an injury has healed. 2.) Describing a stolen auto as having greater value than it actually did.
The 2003 Insurance Research Council (IRC) survey on the public's attitude toward insurance fraud found respondents less tolerant toward these two areas of insurance fraud.
Network Analysis
The study of the nodes (verticles) and edges (lines) in a network
Telematics
The use of technological devices in vehicles with wireless communication and GPS tracking
Anti Car Theft Act of 1992
This act built on the Motor Vehicle Theft Law Enforcement Act in several ways Including increasing the number of vehicle lines covered by the acts and making dealing with stolen marked parts a federal crime
Public attitude towards Insurance Fraud
Vary with age, gender, and other factors -Public awareness can reduce tolerance of fraud, which in turn helps insurers detect and deter it
The possibility the claim is legitimate
What must claims representatives balance with their suspicion of fraud in their investigation of a suspicious claim?
K-means
an algorithm in which "k" indicates the number of clusters and "means" represents the clusters' centroids
False Claims
arise when an insured pursues a claim for property damage or injury that has not actually occurred.
Nodes
vertices