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C39 Fraud Awareness > Chapter 2 - The Cost of Insurance Fraud > Flashcards

Chapter 2 - The Cost of Insurance Fraud Flashcards

1
Q

How can insurance fraud victimize different parties?

A
  • Economic loss to individuals and their families through direct physical parties
  • Direct economic loss to communities when resources such as fire departments, police and other public services are used
  • Indirect economic losses by enterprises that lose business because clients have suffered damage
  • Can cause death or physical injury to public at large and public employees (innocent victims, firefighters, police, families)
  • Indirect economic consequences eventually come to insurance consumers, higher premiums
  • Emotional and psychological effects of fraud on victims
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2
Q

How is the insurance business like any other business?

A

They must focus on good service and make a profit

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3
Q

Outline the four different consumer attitudes

A

Realists
- Low tolerance, realize it occurs. Do not advocate strong punishment. Some behaviour justified depending on circumstances.

Conformists
- Tolerant of insurance fraud because they believe many people do it. Advocates for moderate forms of punishment.

Moralists
- Least tolerance for insurance fraud. Willing to punish severely because they feel there is no excuse.

Critics
- Very high tolerance for fraud. Ready to blame the insurance industry because they do not conduct business fairly. Little to no punishment.

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4
Q

When communicating to these attitudes, what are some other things to consider?

A
  • Age, gender, level of education

- Cultural groups

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5
Q

Define opportunistic fraud

A

Also known as “soft” fraud is when an insured deliberately inflates a legitimate insurance claim. It is an unplanned act, and arises when the opportunity presents itself

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6
Q

Define premeditated or planned fraud

A

Also known as “hard” fraud involves the deliberate planning or inventing of claims of improper insurance benefits by an individual. It involves fabricating a claim for the purpose of defrauding the insurer

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7
Q

Define padded claims

A

Arise from an opportunity to submit an inflated claim when a legitimate loss has occurred. For example, your automobile has been broken into. The claim is for damages to the interior but you submit a claim for a broken tail light that occurred months before

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8
Q

Define mortgage fraud

A

Intentionally falsifying information on a mortgage loan application with the objective of receiving a larger amount than would have allowed if the application was honestly made. False information on an application can include claiming to make a higher income than actual real income to providing falsified proof of identification or a falsified appraisal of property

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9
Q

Define title fraud

A

A fraud that occurs when a criminal steals the identity of a homeowner and uses that false identity to steal the title of their home through false documentation filed at the land registry office. This could allow the criminal to sell the home or obtain mortgages to purchase other properties in the homeowner’s name

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10
Q

What is a common example of opportunistic fraud?

A

A legitimate accident or claim happens, but then they overstate the loss

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11
Q

What are common examples of premeditated fraud?

A

Staging an accident or committing arson

Service provider submits claim for something that did not happen

Duplicate insurance and claim twice

False appraisals

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12
Q

What is real estate fraud a combination of?

A

Mortgage fraud and title fraud

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13
Q

Who could be involved in insurance fraud typically?

A
  • Third party claimants
  • Insureds
  • Agent or broker personnel
  • Insurance company staff
  • Any other professional or insurance professional
  • Service providers
  • Anyone remotely involved in the insurance transaction
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14
Q

What did Carter v. Boehm (1766) expand on?

A

Good faith and the vulnerable position of the insurer

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15
Q

What is the difference between utmost good faith and good faith?

A

Some would argue nothing, however utmost good faith is a higher standard

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16
Q

What key tool is used to raise awareness about fraud?

A

Education

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17
Q

Which organizations combats insurance fraud?

A

Canadian Coalition Against Insurance Fraud

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18
Q

What are the two techniques to control insurance fraud?

A

Prevent and reduce

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19
Q

What are the strategies to restrict insurance fraud?

A
  • Promoting fraud awareness
  • Teamwork
  • Communication skills
  • Consumer hotline
  • Detection
  • Reward
  • Train
  • Verify information
  • Data banks
  • Evaluate service providers and experts
  • Analyze the scope and cost of repairs or treatments
  • Security systems and practices
  • Penalties for fraud
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20
Q

How might brokers, companies and other utilize promoting fraud awareness?

A

Broker

  • Send out newsletters wit renewals
  • Brochures in office for clients to read on recent fraud and effects

Companies

  • Advertising through marketing, radio, TV, online
  • Newsletters to brokers informing them of latest fraud and how it could have been prevented
  • Training on recent fraud happenings and how it could have been prevented

Other

  • Kiosk in mall showing the effects of fraud
  • Insurance institute doing research and analysis on fraud happenings and sharing information with companies and brokers
21
Q

How might brokers, companies and other utilize teamwork?

A

Broker
- Communicate with company, employees share info

Company
- Share info between departments, u/w, claims, SIU

Other
- Shared info on fraud occurrences w/ diff companies

22
Q

How might brokers, companies and other utilize communication skills?

A

Broker
- Training on good communication skills for CSRs, brokers

Company
- Training in communication skills for u/w and claims

Other
- Insurance institute offers seminars on communication skills

23
Q

How might brokers, companies and other utilize consumer hotlines?

A

Broker

  • Crime stoppers
  • Ensure clients aware
  • Websites/emails to report fraud

Company
- Make sure brokers are aware of the hotline

Other
- Awareness to public in kiosks in malls all about Crime Stoppers

24
Q

How might brokers, companies and other utilize detection?

A

Broker
- CSRs develop cheat sheets for new business

Company

  • U/W, claims aware of red flags
  • Training made available
  • Process to report suspicion to SIU
  • Set goals to be on alert for fraud

Other

  • All staff aware and trained for red flags
  • Update info on new red flags from analysis
25
Q

How might brokers, companies and other utilize reward?

A

Broker

  • Ensure that insureds are aware of claims free discount
  • Rewarding system throughout broker staff for being on alert and following red flag processes

Company

  • Claims free discounts for insureds
  • Rewarding u/w and claims
  • Code of conduct to ensure suspicion is reported

Other
- Lower percent of fraud; everyone wins

26
Q

How might brokers, companies and other utilize training?

A

Broker

  • Education key to fighting fraud
  • Ensure staff knows the red flags

Company

  • SIU train different depts
  • Can communicate their experience with previous fraud happening and how it could have been avoided

Other
- Fraud certification specialists could offer training courses

27
Q

How might brokers, companies and other utilize information verifying?

A

Broker
- Ensure info is correct at all times

Company

  • U/W, claims, adjusters ensure accuracy at all times
  • Convey accurate info to SIU as needed

Other
- Ensure complete accuracy when analyzing claims for fraud and analysis

28
Q

How might brokers, companies and other utilize data banks?

A

Broker AND Company
- Ensure all privacy rules are adhered to when entering info

Other
- Work on improved technology to better detect fraud

29
Q

How might brokers, companies and other utilize evaluating service providers and experts?

A

Broker
N/A

Company

  • Building contractors, auto mechanics, lawyers, doctors, rehab clinics, etc
  • Ensure labour charges are in order
  • Ensure rehab clinics are accredited and check regularly on claims for irregularities and report to SIU

Other
- Work on improved analysis to be able to detect fraud

30
Q

How might brokers, companies and other utilize analyzing the scope and cost of repairs/treatments?

A

Broker
N/A

Company
- Constantly analyze the claims coming in to catch irregularities in rehab costs, etc to SIU

Other
- General analysis in insurance industry to obtain the overall info for the companies

31
Q

How might brokers, companies and other utilize security systems and practices?

A

Broker

  • Security within the brokerage
  • Employee code of conduct so no breach of info allowing fraudsters to get in

Company

  • Discounts for vehicles and house security
  • The better the security, the better the discount

Other
- Those associations working with the insurance industry work on research to improve security on homes, cars and identity

32
Q

How might brokers, companies and other utilize penalties for fraud?

A

Company

  • Insurers can take civil action against fraudsters to recover
  • Each case must be considered individually and consumers now favour stiffer penalties against those committing fraud and driving up premiums
33
Q

How does the realist approach insurance fraud?

A
  • Low tolerance
  • Realize it occurs
  • Do not advocate strong punishment
  • Some behaviour can be justified
34
Q

How does the conformist approach insurance fraud?

A
  • Tolerant of insurance fraud because many people do it

- Advocates for moderate forms of punishment

35
Q

How does the moralist approach insurance fraud?

A
  • Least tolerance for insurance fraud

- Willing to punish severely / there is no excuse

36
Q

How does the critic approach insurance fraud?

A
  • Very high tolerance for fraud
  • Insurance companies have it coming
  • Little to no punishment
37
Q

What are some initiatives and organizations against insurance fraud?

A
  • Insurance Bureau of Canada (IBC)
  • IBC Investigative Services Division (ISD)
  • Canadian Automobile Theft Bureau (CATB)
  • Insurance Institute of Canada (IIC)
  • Association of Certified Fraud Examiners (ACFE)
  • Canadian Association of Fire Investigators (CAFI)
  • International Association of Auto Theft Investigators (IAATI)
38
Q

What role does IBC play in insurance fraud?

A

Insurance Bureau of Canada

  • 80 year history of investigative services for home, car and business insurers
39
Q

What role does ISD play in insurance fraud?

A

IBC Investigative Services Division
(formerly ICPB - Insurance Crime Prevention Bureau)

Insurance crime investigation and information services to detect and prevent insurance crime

Data bank is maintained to help insurers

40
Q

What role does CATB play in insurance fraud?

A

Canadian Automobile Theft Bureau

Detects vehicle fraud

Data banks for loss information and VIN validation

41
Q

What role does IIC play in insurance fraud?

A

Insurance Institute of Canada

Training and education programs

42
Q

What role does ACFE play in insurance fraud?

A

Association of Certified Fraud Examiners

International organizations w/ more than 70,000 members in 25 countries

Education and certifications

43
Q

What role does CAFI play in insurance fraud?

A

Canadian Association of Fire Investigators

Membership includes police, fire, legal, engineers and insurance personnel

Promotes teamwork

44
Q

What role does IAATI play in insurance fraud?

A

International Association of Auto Theft Investigators

Improves communication and coordination among auto theft investigators

Training and resources in technical developments, trends, intelligence information and investigative assistance

45
Q

What is an SIU?

A

Special Investigation Unit

46
Q

What are the benefits of an in-house SIU?

A
  • Dedicated to a single insurer w/ links to other insurers and law enforcement
  • Permits workloads to be more easily controlled
  • Continuous access to internal expertise and insurance related experience
  • Operates in the context of its company’s philosophy
  • Adds a special layer of expertise in criminal law and evidence
47
Q

What are the main roles of an SIU?

A
  • Provide company w/ timely and accurate investigations
  • Necessary investigative expertise to create consistency
  • Assist in training of claims personnel
  • Assist in training of u/w personnel
  • Proper reporting procedures are in place
  • Establish and maintain working relationships w/ resources (law enforcement, brokers, insurance industry, government, etc.)
  • Provide fraud intelligence, develop tools and procedures
48
Q

What are the 5 main responsibilities the SIU has in the insurance industry?

A

1) Education
2) Protect assets
3) Emphasize enforcement and prosecution
4) Internal or external focus
5) Liasing

C39 Fraud Awareness (10 decks)

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