Insurance Fraud Awareness

Which one of the following statements is true?

Jeff, an applicant for auto insurance, lives in a city in Ohio. But he registered his auto in a rural area of Pennsylvania to receive a lower insurance rate. This is an example of interstate premium fraud.

Since the mid-1980's, the number of staged auto accidents is estimated to have increased by

50%

Which one of the following examples is premium fraud?

A man who is applying for auto insurance said he took a driver's education course so the insurance company would provide a discount.

Assume an underwriter works for an insurance company that is a member of ISO's AISG. The underwriter wants information about the property and liability insurance claim history of an applicant for insurance. What is the AISG database from which this information might be obtained?

A-PLUS

Which of the following situations does NOT contain material facts that were concealed or misrepresented and, therefore, would NOT be the basis for denying a claim?

An applicant for boat owners insurance inadvertently tole the insurance producer that the boat is five years old when, in fact, it is six years old.

In which of the following situations would workers' compensation benefits likely to be paid?

An employee of the Acme Delivery Company, while unloading packages off a company cart, slipped in a puddle of grease and broke an ankle.

Which of the following is NOT an example of internal insurance fraud?

An insured paid a medical bill, increased the amount by altering the figures on the statement and then submitted it to am insurer for payment.

Which of the following examples is NOT an act of insurance fraud?

An insured types information on a claim form and inadvertently makes a typographical error that turns a $500 loss into a $5000 loss.

Shirley Bates contends a thief entered through the front door of her apartment while she was sunbathing on the patio. She said a diamond pendant and a gold watch, both of which she had recently purchased, were no longer on her dresser where she left them. She did not provide proof of ownership of the items along with her claim form because, she said, she bought them from a street vendor on a recent trip to New York City. The claim fraud indicator is

Bates cannot provide receipts to prove ownership of expensive items recently purchased.

Which one of the following is NOT one of the four functions of claim investigation?

Disposition

Which one of the following is NOT one of the three elements of the arson circle?

Event

Which one of the following is NOT a basic element of claim handling?

Exploration

Which of the following statements about fake claims vs. padded or exaggerated claims is true?

Fake claims are based on losses that never occurred, while padded or exaggerated claims are based on actual claims.

Which of the following is NOT a primary objective of the Coalition Against Insurance Fraud?

Fraud investigation

Arnie Forrest is receiving workers' compensation benefits and has been off work for an extended period of time. When the claim investigator talked with Sally Eckels, Forrest's employer, she said Forrest wasn't really missed. He hadn't been doing a ver y good job as a maintenance worker and had called in sick on may occasions prior to his disability. She had warned him about his poor attendance and told him she would have to let him go if he didn't improve. What is the claim fraud indicator here?

He is facing possible firing from his job.

Claims data from the Index System, PILR and various NICB databases can be accessed through what central tool?

ISO Claim Search

Which one of the following is NOT a major goal of today's anti-fraud movement?

Identify those insurers who do not have SIU departments.

In which one of the following ways does insurance fraud NOT affect businesses?

It increases their profit margins.

Which one of the following statements about insurance fraud is NOT correct?

It is a victim less crime.

Which of the following is NOT a primary objective of state anti-fraud bureaus?

Legislative reform

A woman who is deeply in debt and can't pay her bills steps off a curb and pretends she is hit by a passing car. She makes an insurance claim against the driver, hoping to get money to pay her bills. What type of hazard is represented in this situation?

Moral hazard

An applicant for insurance has made five suspicious claims over the past three years. What type of hazard does this applicant represent?

Moral hazard

Alice Owens made a claim on her auto policy. Her teenage daughter was driving her mother's car and had a wreck. The claim investigation was underway when Owens phoned the claim investigator and asked when she could expect payment. She stressed that she is a single parent doing her best to raise her child, and that she desperately needed her car repaired immediately. She said her daughter was a trial to her and ran around with unsavory peers. What is the fraud indicator?

Owens attempts to arouse the claim investigator's sympathy and concern.

In all probability, an insurance company would consider which of the following vehicles as salvage?

Pickup truck that was extensively damaged in an auto accident and would not be economical to rebuild.

Which of the following is NOT a result of careful marketing and underwriting?

Premium rates are increased.

Who is usually the first to encounter a pre-planned insurance fraud scheme?

Producer

The law that makes it a federal offense to be directly or indirectly involved in a pattern of criminal activity is the federal

RICO Act

What should a claim handler do when a claimant reports he or she has hired an attorney to handle the claim?

Refrain from discussing the claim with the claimant any further until receiving permission to do so from the claimant's attorney.

When the claim handler phoned Ilene Brinks, the insured, to obtain additional information about her claim, Brinks complied but kept stressing it was important to her to get the claim settled before she went on her upcoming vacation. Later that same day, she phoned the claim handler and offered to take a lesser amount as settlement. What is the fraud indicator?

She wants a quick settlement and is willing to take a reduced amount of settlement.

Alvin Young has owned a bar and restaurant for five years. Young reported it was damaged by a fire that started when grease caught fire in the kitchen. All the tables and chairs in the restaurant area were damaged by fire. The loss report Young submitted showed the following amounts of damaged contents: 35 tables, $5,000; 140 chairs, $3,500; 15 hanging lights, $500; assorted linens, $1000. What was the fraud indicator?

The amounts claimed are all in round numbers.

Floyd Flanders bought a car with engine problems 'as is' from a used car dealer. He repaired and painted it. It looked good. But, two months later, it broke down, and he had to repair it again. Three weeks later, it broke down again, so he gave in and took it to a professional mechanic. A month later, something else went wrong with it. Two days after that, he reported someone had stolen his car. What is the fraud indicator?

The car has a history of needing repairs.

A claim investigator was not able to complete the investigation of Belinda Nugett's three-week-old claim because an important witness was out of town. Nugett phoned the claim investigator and was very upset when she was told it would be a few more days before a decision could be made. Nugett said she was going to call the state insurance commissioner if her claim wasn't settled soon. What is the fraud indicator?

The claimant is too anxious for a quick settlement because she has threatened to complain to the state insurance department.

Which one of the following statements about most insurance claims is NOT correct?

The concern at least some element of fraud.

Al Klunker bought a nine-year old car and insured it with the ABC Insurance Company in Michigan. Nine months later, he made a claim under the Comprehensive coverage of his auto policy. He denied having other auto insurance, but when the claim handler checked, the insurance company's computer records showed cars with the same VIN were insured under identical polices but with other names and at agencies in two other states. What is the claim fraud indicator?

The insured has undisclosed duplicate coverage.

Al Waylon was out of town when his house burned down. A neighbor saw the smoke and called the fire department. The house and most of Waylon's personal property were destroyed. A fire fighter was injured while attempting to put out the fire. What is the fraud indicator?

The insured left town before the fire.

Selma Krackowski claims a burglar broke into her store while it was closed during the Thanksgiving holiday and stole approximately $10,000 worth of merchandise. There is a factor here that could cause the claim handler to look a bit closer at the case. However, this factor, perhaps more than others, requires the existence of additional indicators, because it has been a common factor in both genuine burglaries and fraud cases. What is that factor or fraud indicator?

The loss occurred during a holiday.

Janice Followell said she was not injured when she tripped on a loose floor tile and fell in the insured's antique shop. She reported that when she fell, she was carrying an antique porcelain clock she had purchased for $10,000 from an acquaintance. She was planning to offer it for sale on consignment through the shop. When she fell, she said the clock broke into several pieces, Followell stated she is employed as a waitress and earns approximately $14,000 per year. What is the fraud indicator?

The value of the damaged clock is large in relation to Followells's income.

Which of the following statements about padded or exaggerated claims is NOT correct?

They are known as "hard fraud"

What is the purpose of the Federal Certification Label that must be attached to the driver's door of vehicles>

To confirm that the vehicle meets U.S. safety and EPA standards

Harry Boyle is in a quandary. His daughter needs expensive dental work and braces on her teeth. His teenage son wants a car, and his mother-in-law want to move in with her daughter. Which one of the following underlying motives would be LEAST likely to prompt Boyle to commit insurance fraud?

To keep his wife from nagging him.

Why do fraud perpetrator usually prefer certain times over others, such as nighttime over daytime, in which to perform their claims?

To minimize the risk of being caught in the act.

What is the basic purpose of the Fair Credit Reporting Act?

To protect consumers' rights to privacy and confidentiality of their records.

Who within an insurance company has the job of evaluating and accepting or rejecting insurance applications?

Underwriters

Studies show that

an estimated 25% of the population in the U.S. thinks it's okay for the average citizen to commit insurance fraud as long as it is not arson fraud.

Fraud indicators

are warnings of possible insurance fraud.

An applicant for insurance intentionally withheld a material fact from the insurance company. This applicant has committed the dishonest act of

concealment

An applicant for a liability policy made four claims three years ago under a previous liability policy with another insurer, but deliberately answered "no" to the question "Have you had any insurance claims in the past five years?" This is an example of

contract fraud

The objective of a title washing scheme is to

eliminate the designation "junk" or 'salvage vehicle' from a legitimate vehicle title.

The "fraud tax" is so-called because

everyone has to pay extra for goods, services, taxes, and insurance to make up for losses that result from insurance fraud.

People who have committed insurance fraud have been primarily motivated by a desire for

financial gain

The text points out that according to a study of insurance fraud, it is almost as widespread a crime as

income tax evasion.

The purpose of state immunity laws is to protect

insurance companies from liability when they disclose information to authorities.

The first action a claim investigator must take when insurance fraud is suspected is to notify the

insurance company

The used car Tom McKinnick bought had a dent in the passenger door. Tom had the car only a few weeks when he was involved in a minor auto accident that was the other driver's fault. When Tom talked to the claim handler for the other driver's insurance company about the extent of the damages to his car, he included the preexisting damage. In doing that, Tom committed insurance fraud by

making a false statement of fact.

Joyce Smithers, an insured who was collecting disability benefits for back injuries she suffered in an accident, was fit to return to work after three months but pretended she was still suffering severe back pain so she could continue to stay home and received disability benefits. For insurance purposes, Smithers is a

malingerer

A fraud operation in which a physician repeatedly performs expensive and unnecessary medical exams, tests, and treatment programs is known as a

medical mill

A characteristic of the insured that will increase the frequency or severity of a loss or cause the insured to purposely create a loss in order to collect from the insurance company is known as

moral hazard

Assume while investigating a claim, you learn the claimant has been frequently seen with persons of questionable character. This situation represents the general fraud

moral hazard indicator associates.

Leo Brenner claims his store was burglarized, and inventory he'd stored in a back room was taken. As the claim handler on this, assume you learn Brenner;s business has been steadily declining, and he's been having trouble paying his creditors. This situation represents the general fraud

moral hazard indicator financial condition.

Assume while investigating a claim, you learn the insured previously made two other claims for losses that were very suspicious; however, no solid proof of fraud existed in either case. This situation represents the general fraud

moral hazard indicator known as moral character.

A family carelessly piles newspapers neat their lit fireplace and leaves the house to go out to dinner. They are not worried about it, however, because they have homeowners insurance. This is an example of a

morale hazard

Samantha Higgins has her home and personal property insured under a homeowners policy. Several items, including a fur coat, jewelry, a violin, an antique armoire, and a silver tea set, were appraised and scheduled under an endorsement to the policy. Fire damaged her home while she was at work. Higgins contends a short in some wiring was the cause. She made a claim for loss of three pieces of furniture, a fur coat, armoire, violin, and tea set. The fraud indicator is

mostly appraised and scheduled items were lost in the fire.

A term used by insurance professionals to describe an auto accident that never happened but for which a property damage claim has been made is

paper accident

The insured is aware, but ignores the fact that a manufacturing defect is causing the gas tank on the insured's car to seep gasoline. This is an example of a

physical hazard

Dawn Seldon reported her car was stolen from a parking lot. The police recovered it two days later, but missing from it were its expensive chrome wheels and tires, chrome luggage rack, CD player. and two suitcases and a camera Seldon said were in the back seat. There were no signs the car was broken into, which suggests she left it unlocked. This situation represents the general fraud morale hazard indicator

poor safekeeping

A claim professional who is hired by insureds to handle their insurance claims is known as a/an

public adjuster

State highway and traffic regulations ar known as the

rules of the road.

People who are hired by unscrupulous doctors or lawyers to recruit other for kickback or fee-splitting schemes are commonly known as

runners

Fraud perpetrators purchased a salvaged auto. Next, they stole an undamaged auto of the same type, model year and color. They removed its VIN plate and replaced it with the VIN plate the salvaged auto. They also ground the VIN off the other areas of the stolen auto and restamped those areas with the salvaged auto's VIN. They destroyed the salvages auto and the stolen vehicles VIN plate. The they insured the stolen vehicle and, later, reported it as stolen. This scheme is commonly known as

salvage switch

A claim professional who is employed directly by an insurance company as a full-time, salaried employee and who works at the insurance company home office is known as a/an

staff claim handler.

Removing major components from a vehicle without cutting any hoses or wires or damaging any clamps or other parts of the vehicle is commonly known as

surgical stripping

Darrell Manwyler reported he was injured in an auto accident caused by an insured. He gave the claim handler the name, address and phone number of his employer. He said he lives with his grandparents and provided their address, adding they have no telephone. Later, the claim handler verified the company Manwyler said he works for is legitimate, but when the claim handler tried to phone the company on several occasions, either no one answered or there was a busy signal. The fraud indicator is

the claimant has no telephone

All of the following are reasons for conducting a timely and prompt claim investigation, as brought out in the text, EXCEPT

the claimant may be inconvenienced

Some insurance fraud schemes have involved concurrent insurance, which means

the fraud perpetrator collected from two or more policies that provided the same coverage's and covered the same loss.

Mildred Appleby phoned the producer who sold her a homeowners policy and asked whether the policy would provide coverage for her collection of rare postage stamps if her house should catch on fire or if it were burglarized. The producer assured her that her collection was protected by a scheduled personal property endorsement she had purchased when she acquired the collection two years previously. Two weeks later, Appleby reported someone had stolen her stamp collection. The fraud indicator is

the insured asked the producer a hypothetical question shortly before the loss occurred.

In June, an insured who has a homeowners policy with your company purchased an auto policy for the same producer. In July, the insured made a physical damage claim on the auto policy. The fraud indicator is

the loss occurred during the first policy year.

Conrad Hallis asked his insurance producer to increase the liability limits on his auto policy. Three weeks later, Hallis reported that while on his way home from work the previous evening, he was involved in an auto accident and his car struck the rear of another car. He assumed liability for the accident. The major fraud indicator is

the loss occurred shortly after the policy limits were increased by the insured.

An individual who was injured in an accident caused by an insured made a claim against the insured. This type of claim is known as a/an

third-party claim.

An insurance company agreed to issue a crime policy in return for an applicant's agreement to employ a watchperson on the premises at night. This is an example of a

warranty

Which one of the following is NOT a characteristic of a good applicant for insurance?

Pays the premium in cash

A fraud perpetrator obtained a salvages vehicle with its drive train, chassis and gears in fairly good condition. Then the perpetrator replaced the body on the salvaged vehicle with the body from a stolen car of the same make and model and switched VIN plates. This type of fraud operation is commonly known as

Body swing

Which of the following is NOT an example of a subjective injury?

Broken leg

Which one of the following is NOT an objective of someone who commits arson fraud?

Burn a business structure, but never a residence

Which one of the following is NOT a common source of accidental vehicle fires?

Carpeted floor

The AISG data bank that supplies information about employees' previous work-related injuries is the

Index system

Which one of the following does NOT apply to the fraud scheme known as 'swoop and squat'?

The scheme involves two vehicles traveling in different directions.

Which of the following statements about insureds or other claimants who hire attorney'svery early in the 'life' of their claim is NOT correct?

They are always involved in fraud schemes.

Laws that impose criminal penalties on chop shop operations are state

Vehicle shop shop, Stolen and Altered Property Acts.

The law that makes it a felony to make transmissions of writings, signs, signals, pictures or sounds by wire to perpetrate a fraud us the federal

Wire fraud statute

All of the following are favorite locations for staged auto accidents EXCEPT

a busy downtown street

Which one of the following usually does NOT occur when an insurance company's rate of fraudulent claims rise?

capacity is increased in certain lines.

An illegal operation where salvaged vehicles are repaired or altered before being sold, or the usable parts from stolen vehicles are removed and sold, is known as a

chop shop

The purpose of a Department of Motor Vehicles salvage title with a salvage brand on it is to show the vehicle was previously

declared a total loss by an insurer.

An incendiary fire is one that is

deliberately set

The act of getting rid of a vehicle to obtain money from an insurer by making a false insurance claim is commonly referred to as

ditching

State vehicle owner fraud acts

make it a felony to knowingly make a false claim for theft, destruction or damage to a vehicle or to illegally obtain false ownership of a vehicle by making false statements.

A doctor inflated injured employees' medical bills and billed both the employees' group health insurance companies and their employers' workers insurance insurers. This type of fraud act is commonly known as

medical build-up

The rented building in which George Holtz has his business was extensively damaged by fire. Assume during the claim investigation, you learn the building was in a deteriorating condition. Among the problems Holtz had been neglecting were exposed wires and faulty smoke detectors. The general fraud morale indicator that is represented in this situation is

poor maintenance

State Alteration of Vehicle Identifying Numbers statutes make it a crime to

possess an auto with an altered VIN.

Professional arsonists often use delayed ignition devices so

they can be far away from the scene when the fire ignites.