Finding Fraudsters

Insurance fraud has become a nationwide problem, and experts say it’s a problem that has the potential to get worse as people look for ways to cut down on their expenses as the economy tightens.

“The special agents at NICB have been seeing some effect from the current economic situation on insurance fraud,” said Mike McKee, senior special agent for the National Insurance Crime Bureau.

And with anywhere from $80 billion to $200 billion lost to fraud each year, affecting all lines of the insurance business — property, casualty, health, life and disability — it’s no wonder that states are concerned with combatting it.

When people are in economic straits, they try to unload valuable assets. This applies to insurance too, as state insurance department fraud units have noticed jewelry and cars “go missing” in recent months.

“Desperate consumers also are torching homes — seeking an insurance bailout from foreclosure or general financial distress,” McKee provided as an example.

Questionable claims and thefts are not restricted to personal assets either. In the commercial insurance area, McKee said insurance fraud is on the rise in theft of cargo from inland marine type trucking companies, electronics are being stolen off of the trucks, and semi-precious metals such as copper are being ripped out of walls.

With insurance agents and brokers on the front lines of insurance transactions, they can alert investigators to potential problems early in the process. Fraud experts suggest agents and brokers verify consumers’ identities when they are purchasing insurance, inspect the condition of vehicles before they are insured, and keep a watchful eye on people who they’ve placed coverage for that may be having economic problems if all of a sudden they place a claim.

“What seems too good to be true often is,” said National Association of Insurance Commissioners CEO Dr. Therese M. (Terri) Vaughan.

Keeping an eye out for potential wrongdoings applies to insurance agency employees as well. Because insurance agency personnel have access to clients’ confidential financial information, it’s important for insurance agencies to scrutinize their employees prior to employment, recommended Ted Clark, anti-fraud division director for the Kansas Department of Insurance. Background checks should extend not just to senior management, but across all lines of employees down to janitors and office assistants.

“Those agents who are living on the moral margins have much more motive to try to rescue their sagging finances by milking unsuspecting clients,” said Jim Quiggle, communications director for the Coalition Against Insurance Fraud.

Fraud investigators are quick to point out that the incidence of insurance agents themselves committing fraud is rather small, compared to the total types of fraud. “But unfortunately those unscrupulous agents that do [commit fraud] give everyone who is an agent or broker a bad name,” Goldblatt said. “It’s serious if for no other reason than it really puts the spotlight on how trusting the system is. If you can’t trust your agent, who can you trust?”

To read more about insurance fraud trends, see pages 18-21 of this issue.