Short Answer Flashcards
Define Insurance Fraud
• Any act or omission with a view to illegally obtaining an insurance benefit
different categories of policy conditions relating to fraud (My Mom Told Ron F*** Not Eating)
- Misrepresentation
- Material change
- Termination
- Requirements after loss
- Fraud
- Notice to police
- Entry, Control, Abandonment/salvage
Waiver Example
: there is a fire in an apartment. The insured has renter’s insurance and provides information necessary to settle claim to recoup his loss. Once the claim is settled, the insured cannot pursue further action against the insurance company for settlement
Estoppels Example
A landlord might inform a tenant that rent has been reduced, for example if there was construction or a lapse in utility services. If the tenant relies on this advise, the landlord could be stopped from collecting the full rent
• Non-waiver agreement Example
a client drove while not having a driver’s license. The adjuster should stop interviewing the client right away when he finds out that information and ask client to sign a non-waiver agreement. The adjuster explains verbally to the client that not having a license is a breach of policy condition and puts coverage in jeopardy. If the client refuses to sign the non-waiver agreement, then the adjuster immediately stop investigating the claim further and gives the insured a reservation of rights letter to the client stating all of the above- that the client refused to sign a non-waiver agreement and why the adjuster does not believe there will be coverage
reservation of rights letter Example
By sending reservation of rights letter to the insured, the adjuster would be protecting the insurance company and would have avoided estoppels. The letter would also state that the investigation may conclude that the insurer reserves the right to deny coverage to the insured or to anyone claiming coverage under the policy
is an insurer’s notification to an insured that coverage for a claim may not apply
reservation of rights letter
is an agreement signed by the policy holder after a loss, agreeing that the investigation and determined of the amount of damage by the insurance company shall not be constructed as an admission of liability
• Non-waiver agreement
is a bar created when someone by his action, or lack of it, indicates that he will not exercise a right he has. He tops himself from exercising his right later.
estoppels
is the intentional and voluntary relinquishment of a known right. A waiver under a policy is required to be clearly expressed and in writing
• Waiver
is being responsible for providing the principal with all information that materially affects the principal’s interests; all of the information that is relevant to the affairs entrusted to the agent
Fiduciary duty
• Burden of proof
The standard by which a claim must be proven to prevail. The burden of proof is typically borne by one party or another
• Standard of proof
The test to establish whether a party has succeeded in proving a fact in issue. Standard of proof in civil matters is generally “on balance of probabilities” or a “preponderance of the evidence”, meaning that if it is likely that the fact is true, then the standard has been met.
The test to establish whether a party has succeeded in proving a fact in issue. Standard of proof in civil matters is generally “on balance of probabilities” or a “preponderance of the evidence”, meaning that if it is likely that the fact is true, then the standard has been met.
• Standard of proof
The standard by which a claim must be proven to prevail. The burden of proof is typically borne by one party or another
• Burden of proof:
different types of evidence
Direct Evidence Circumstantial Evidence Sworn Statements Expert Evidence Testimony given under oath Documents Experiments Real Evidence Spoliation
Proves the fact in issue without the need to infer or make presumptions
• Direct Evidence
Direct Evidence
Proves the fact in issue without the need to infer or make presumptions
• Circumstantial Evidence-
is based on making inferences form connected facts
is based on making inferences form connected facts
• Circumstantial Evidence-
• Sworn Statements
from witnesses or the insured are the most common form of evidence. There are some instances when unsigned ( unsworn) statements will be accepted by the courts
from witnesses or the insured are the most common form of evidence. There are some instances when unsigned ( unsworn) statements will be accepted by the courts
• Sworn Statements
• Expert Evidence
- on scientific, technical or professional matters given by qualified persons who can speak authoritatively on a particular subject. Experts may also qualify to give opinion evidence based on the special knowledge or skill they possess.
- on scientific, technical or professional matters given by qualified persons who can speak authoritatively on a particular subject. Experts may also qualify to give opinion evidence based on the special knowledge or skill they possess.
• Expert Evidence
• Testimony given under oath
by witnesses at trial is a common method to bring evidence before the judge. The Latin term viva voce is used to identify this type of evidence
by witnesses at trial is a common method to bring evidence before the judge. The Latin term viva voce is used to identify this type of evidence
• Testimony given under oath
- such as written contracts, deeds, share certificates and other similar items may be eligible to be presented as evidence
• Documents
• Documents
- such as written contracts, deeds, share certificates and other similar items may be eligible to be presented as evidence
are sometimes conducted in court by experts. The judge decides whether or not to allow such an event in the courtroom
• Experiments
• Experiments
are sometimes conducted in court by experts. The judge decides whether or not to allow such an event in the courtroom
such as a physical object can be brought before the court. This may include photographs, videotapes, audiotapes, or any article. Electronic records have generally been accepted by courts. To introduce electronic evidence, the integrity of the electronic document must be shown. The record-keeping must be shown to be reliable.
• Real Evidence
• Real Evidence
such as a physical object can be brought before the court. This may include photographs, videotapes, audiotapes, or any article. Electronic records have generally been accepted by courts. To introduce electronic evidence, the integrity of the electronic document must be shown. The record-keeping must be shown to be reliable.
• Spoliation
of evidence refers to its destruction before the case comes to trial
of evidence refers to its destruction before the case comes to trial
• Spoliation
how insurance fraud affects our society
• Insurance fraud has traditionally been a “hidden” crime. It has been estimated that 10 to 15 percent of insurance claims in Canada are fraudulent. Insurers have paid more than a billion dollars a year to fraudulent claims. This does not include other possible fraudulent insurance transactions that cannot be quantified. For example, what is the cost to insurers of improper risk rating because proper underwriting information has been withheld from insurers? True costs can never be precisely determined; however, it is generally accepted that this cost is significant.
Explain how consumers generally view insurance fraud (Man Ron Can Cook)
- Moralists- have the least tolerance for insurance fraud. They are willing to punish perpetrators severely because they feel there is no excuse for this type of behaviour.
- Realists- have a low tolerance for fraud but realize it occurs. They do not advocate strong punishment. They may feel some behaviour’s are justified depending on the circumstances.
- Conformists- are tolerant of insurance fraud because they believe many people do it. They are advocates for moderate forms of punishment.
- Critics- on the other hand, have a very high tolerance for fraud. They are ready to blame the insurance industry for the problem because they believe insurers do not conduct business fairly. They want little or no punishment for perpetrators.
- have the least tolerance for insurance fraud. They are willing to punish perpetrators severely because they feel there is no excuse for this type of behaviour
• Moralists
• Moralists
- have the least tolerance for insurance fraud. They are willing to punish perpetrators severely because they feel there is no excuse for this type of behaviour
have a low tolerance for fraud but realize it occurs. They do not advocate strong punishment. They may feel some behaviour’s are justified depending on the circumstances.
• Realists
• Realists
have a low tolerance for fraud but realize it occurs. They do not advocate strong punishment. They may feel some behaviour’s are justified depending on the circumstances.
are tolerant of insurance fraud because they believe many people do it. They are advocates for moderate forms of punishment.
• Conformists
• Conformists
are tolerant of insurance fraud because they believe many people do it. They are advocates for moderate forms of punishment.
on the other hand, have a very high tolerance for fraud. They are ready to blame the insurance industry for the problem because they believe insurers do not conduct business fairly. They want little or no punishment for perpetrators.
• Critics
• Critics
on the other hand, have a very high tolerance for fraud. They are ready to blame the insurance industry for the problem because they believe insurers do not conduct business fairly. They want little or no punishment for perpetrators.
Discuss strategies to restrict fraud ( Pam Toad Can Consume Donuts Raw, Toad Verified Dat. Erin Awaited Seeing Photos)
- Promoting Fraud Awareness
- Teamwork
- Communication Skills
- Consumer Hotline
- Detection
- Reward
- Train
- Verify Information
- Data Banks
- Evaluate Service Providers and Experts
- Analyze Scope and cost of repairs and treatments
- Security Systems and Practices
- Penalties for Fraud must be appropriate
broker’s responsibility in detecting fraud
- Public outreach
- Pre-screening and qualifying potential applicants
- Preventing fraud arising from broker operations
- Complying with applicable legislation, codes of conduct and codes of ethics
Identify characteristics in potential clients that should trigger further investigation of a risk to be insured
- Discuss an applicant’s requirements in detail
- Gain some knowledge of the applicants background
- Explain why certain information is required
- Explain that misinformation or omission may jeopardize the insurance coverage
- Evaluate physical hazards
- Build rapport effectively
- Where they live, validate address
- Why don’t they have a phone, why are they unable to get a phone?
- Who is the principal operator?
Identify what information on property risks is important and how it can be used to limit insurance fraud
- Location/territory
- Do they only have a PO Box?
- How many address changes in the past few years?
- Does applicant not have a phone number?
- Credit consent, potentially?
- Inspections
Discuss the key aspects of investigations of suspicious claims
- Get a fully detailed history of the vehicle and loss details examined
- Check authenticity or the ownership to ensure this is not a fraud claim
- Attitude
- Interrogation
- Witnesses
- Get correct evidence
Discuss theft claims and theft related indicators
• After arson claims, theft claims are the most costly source of insurance fraud.
• Theft claims are most easily arranged and with less risk to the perpetrator
• A theft claim the object is gone, where as in a fire claim just badly damaged.
• Proof submitted for items gone in the vehicle:
o Value of items
o Existence of items
o Ownership of items
o Damage claims- it could motivate insured to damage the property to submit claim
o Estimates of Damage- make sure the value is legit
Identify indicators of accident benefits fraud associated with injury claims
- Returning to work sounds unappealing, could encourage insurance fraud to prevent going back to work
- Generous accident benefits, claims taking a long time to close.
- Even minor claims takes months
- Pre-existing conditions
- Pain issues
- Excessive disability
- Emotional disability
- Emotional response dominates
- Medical issues
- Other issues
What are the two key elements of fraud identified in case law by the criminal courts?
• Dishonesty & Deprivation in R. V. Olan, Hudson and Hartnett (1978) 2 SCR 1175
List 10 specific fraudulent activities mentioned in the Criminal Code? ( All Bob Could Find From Faith & Faye Is Mad Makings)
- Arson
- Bribery
- Criminal breach of trust
- Fabricating evidence
- Forgery, or making a false document (including computer records)
- Fraudulent concealment
- Fraudulently destroying or falsifying documents of title
- Impersonation
- Making false statement by affidavit
- Misappropriating money
What are two basic categories of policy conditions?
• Those developed by insurers that are an integral part of the policy contract wordings
• Legislated Conditions ( Statutory conditions) that are:
i. Expressly designed for certain types of policies; and
ii. Generally applicable to policies other than those dealt with specifically
What factor would influence an adjuster’s decision to void or cancel a policy? ( My Mom Told Ron F*** Not Eating)
- To void a policy the misrepresentation must be material- it must affect how an insurer would have judged the risk
- Material change refers to changes that would influence a reasonable and prudent insurer to decide whether to stay on risk or influence the terms on which the risk is retained.
- Termination to effectively cancel a policy, the precise terms of cancellation must be applied- adjusters should see to it that the proper steps are taken. The adjuster might have to take quick action to cancel or void the policy
- Requirements after loss the insurer has a right to ask for detailed information as outlined in legislation
- Fraud in the common law provinces any fraud may jeopardize the insured’s entire claim
- Entry, Control, Abandonment or salvage the insurer has a right to enter damaged premises immediately after the loss to examine the property. The insured must take all reasonable steps to protect the property from further damage
- Notice to police the insured is required to promptly give notice to the police of any loss caused by a criminal act
The destruction of evidence. The alteration of a policy by a party other than the insurer or the insured without consent.
What is spoliation of evidence?
Must be created and shared in accordance with privacy laws. Only appropriate entities should access to information. Care should be taken to ensure that only useful and accurate information is gathered. Analyzing claims data may uncover illegal fraud ring activity. One of the cherished freedoms of our society is the right to privacy and as an industry we should conduct ourselves to ensure the right is respected. Confidential information should not be divulged unlawfully. The reputation or professional practices of colleagues, employers, insured’s, and claimants must not be maliciously injured. Control should be exercised to ensure that fairness rules.
Why are data banks important
6 useful point to remember about the interview process?
- Plan
- Listen
- Remain calm
- Ask one question at a time
- Evaluate body language
- Ask for an explanation
What do adjusters need to consider when preparing for court?
- Make and keep detailed notes, consult with anyone who has worked on the claim
- Review notes and important points prior to your court date
- Make a conscious effort to speak slowly and clearly
- Listen carefully to each question. Take time responding
- If you are not sure what is being asked, then ask for the question to be repeated or re-worded
- Answer the question being asked. Keep answers short. Do not volunteer any extra information
five preventive strategies effective against charges of bad faith
- Treat insured’s fairly and with dignity
- Conduct a thorough investigation before taking action
- Consider any alternative measures to handle the claim
- Investigate in a professional manner until the case is closed
- Reassess positions as new evidence becomes available
• Punitive Damages
Damages in excess of those required to compensate the plaintiff for the wrong done imposed in order to punish the defendant because of the particularly wanton or willful nature of his or her wrongdoing
Also called exemplary damages
In Labelle v. Guardian insurance co. Of Canada, insured was awarded $10,000 in punitive damages
Investigating the house fire, the insurer refused to follow the advice of its own adjuster in assessing the damages caused to an insured’s home
Insurer also refused to advance anything toward reconstruction, then argued that insured had not acted promptly in securing alternative funding
Court concluded that the defendant deliberately manipulated the situation to starve the plaintiff into submission
• Aggravated Damages
Damages designed to compensate the plaintiff for suffering intangible damages such as humiliation and distress as a result of the defendant’s actions
Are not awarded in addition to general damages, but as part of general damages
In Warrington v. Great west life assurance co. The court of appeal upheld an award of $10,000 for aggravated damages for mental distress in an action to reinstate disability insurance benefits, but rejected a claim for punitive damages.
Court held that the subject matter of a disability insurance contract is to provide peace of mind and freedom from distress
Insurer absolutely refused the claim in the face of overwhelming medical and other reports that consistently reported the plaintiff to be disabled
Insurer failed in his duty to act in good faith
Name three main categories of fraud and provide an example of each
- Opportunistic Fraud- For example: a policyholder may claim for the repair of damage not caused by the accident, which is the subject of the claim or may overstate the true value of some aspect of the claim.
- Premeditated fraud- for example: would be a service provider submitting a claim for damage or treatment that did not occur and or was not provided
- Padded claims- for example they are crimes of opportunity
five basic functions of selling insurance
- Get to know the client
- Determining insurance needs
- Giving advice in insurance protection
- Obtaining instruction from the client
- Providing quotes on insurance policies to the client
three strategies that can be applied when front-line personnel are dealing with new customers to prevent and control fraud
- Adopt business practices to develop effective work processes and develop effective work processes and develop and maintain technical competencies. For insurers, underwrite insurance policies to discourage fraudulent activity
- Develop and maintain professional standards of conduct to serve the public. Improve interpersonal skills
- Identify factors that characterize those who are intent on committing fraud. Use checklists to identify red flags that indicate questionable risks. As we already know, red flags are facts or circumstances about a risk or claim that prompt closer investigation
List the automobile flags
- Applicant’s income is not compatible with value of vehicle
- Applicant has not owned a vehicle for any significant period of time
- Age of applicant suggests prior ownership of vehicle or property
- No previous insurance carrier or proof of prior coverage
- Full coverage’s requested for an older vehicle
- No Lien on expensive vehicle
- An older vehicle is reported to have no existing damage
How is social media used to investigate claims
- Social media has become one of the newest tools in the fight against insurance fraud
- Social media sites are internet sites where individuals can share and discuss information
- Even fraudsters share information online
- As a result, adjusters are able to spy on their claimant without detection
- Since these sites use pictures, dated information, and posts from the claimant, the adjuster can know what is going on and as such use the information to prove fraud
Insurance coverage indicators of fraud:
- Coverage was arranged shortly before the loss ( 1 or 2 months prior )
- Coverage was increased or added shortly before the loss
- Property is heavily over-insured
- The loss occurred shortly before the policy expired or cancellation was to become effective
- The property was owned for quite some time before coverage was arranged and then soon after a loss occurred
- Many documents and records were destroyed in the fire but the insurance policy was left intact
- Duplicate or multiple policies were arranged through different agents or brokers
- Facts were misrepresented in the application
- Information provided to underwriters was misleading
- The insured has an extensive claim record
- The insured called the broker shortly before the loss to check coverage
Personal indicators of fraud:
a. The insured is recently separated or divorced and disputes have arisen over property
b. The insured has onerous alimony or child support obligations
c. The insured has recently encountered an employment problem: Strike, layoff, or business closing
d. The insured has a gambling problem
e. The bank has threatened to foreclose on the property
f. The insured has oppressive debt load
g. There are clues to suggest that the insured is involved in some other criminal activity, such as extortion or drugs; a connection established between the insured and any criminal activity may foreshadow insurance fraud
What types of professionals may be involved in a liability insurance fraud?
- Lawyers- some lawyers work in fraud rings and are willing to take the risk as they believe they will receive a part of the settlement
- Medical professionals- Investigators look at doctors and medical reports they provide critically. It is necessary to see if there is a pattern.
general profile of a fraudster
- Unemployed
- Lives with parents/partner, working usually as a skilled or unskilled labourer; has moved about on jobs, no ambition to work for success
- Likes the nice things in life that others have, is jealous of the success and trappings of the successful
- Close person is receiving government assistance or insurance benefits, possibly new to Canada or associates with unsavory characters
characteristics of fraudsters are most likely to be identified by loss adjusters
- Has dependence issues
- May be violent or temperamental; cunning
- Other owned vehicles are insured by other carriers; works in the trades, possibly auto service; does not want to share contact or work info
- Has better-than-average intelligence on insurance, and insurance jargon may slip out
- Pleads new to city location and will contact you as not connected to phones yet; early non-disclosure surfaces will glib explanations
- In a hurry to get documents; address provided in small town even though phone display or broker location in GTA
Somatoform Pain Disorder ( aka myofasical pain syndrome or fibro myositis)
- Refers to a preoccupation with pain in the absence of adequate physical findings to account for pain or its intensity
- Symptoms is either inconsistent with anatomical structure or cannot be accounted for by organic pathology
- Pathological factors may be linked to the cause of the pain
- Pain may permit a person to avoid an activity
- To diagnose, patient must have been preoccupied with pain for at least six months or not have any organic pathology, pathophysiological mechanism that accounts for the pain
- There may actually be related organic pathology, but the complaint of pain or resulting social or occupational impairment is grossly in excess of what would be expected from the physical findings
Psychogenic pain syndrome
- Caused by emotional problems, but patients express the pain they feel by complaining about some physical symptom
- Some people attach a stigma to complaints about psychological difficulty such as marital difficulties, severe disagreement or personality conflict with a superior or substance abuse
- Illness behaviour becomes a sick role that is inappropriate or excessive thus blocking recovery and active life
- By all objective standards the person is physiologically normal
- These people probably believe that they are sick
Factitious illness
- A self-induced injury generally thought of as employing more psychopathology that malingering, perhaps because the secondary gain is less obvious or absent
- New medical studies are producing new diagnoses with regularity
- Another fairly recent one describes an environment that encourages dependency, illness behaviours and inappropriate disability
Symptom Magnification Syndrome
- A self- destructive behaviour pattern consisting of self-reports and displays of inappropriate disability
- The behaviour is produced consciously or unconsciously to control one’s life circumstances
- It is reinforced by familial, cultural, vocational and financial facilitators
• Punitive Damages
Damages in excess of those required to compensate the plaintiff for the wrong done imposed in order to punish the defendant because of the particularly wanton or willful nature of his or her wrongdoing
Also called exemplary damages
In Labelle v. Guardian insurance co. Of Canada, insured was awarded $10,000 in punitive damages
Investigating the house fire, the insurer refused to follow the advice of its own adjuster in assessing the damages caused to an insured’s home
Insurer also refused to advance anything toward reconstruction, then argued that insured had not acted promptly in securing alternative funding
Court concluded that the defendant deliberately manipulated the situation to starve the plaintiff into submission
• Aggravated Damages
Damages designed to compensate the plaintiff for suffering intangible damages such as humiliation and distress as a result of the defendant’s actions
Are not awarded in addition to general damages, but as part of general damages
In Warrington v. Great west life assurance co. The court of appeal upheld an award of $10,000 for aggravated damages for mental distress in an action to reinstate disability insurance benefits, but rejected a claim for punitive damages.
Court held that the subject matter of a disability insurance contract is to provide peace of mind and freedom from distress
Insurer absolutely refused the claim in the face of overwhelming medical and other reports that consistently reported the plaintiff to be disabled
Insurer failed in his duty to act in good faith
Damages designed to compensate the plaintiff for suffering intangible damages such as humiliation and distress, as a result of the defendant’s actions.
- Aggravated damages:
Damages in excess of those required to compensate the plaintiff for the wrong done, which are imposed in order to punish the defendant because of the particularly wanton or willful nature of his or her wrongdoing. Also called “exemplary damages”.
- Punitive damages:
- Forensic expert:
Someone connected to a court of law and can be hired by an insurer or an insured to appear in court as a witness. The Expert Combines knowledge of legal cases to the principles of a profession. The expert can help to prove or contradict the cause of a claim.
• Utmost good faith
• Utmost good faith originated from the concept of good faith. It has been argued that the duty of good faith is not any different from the duty of utmost good faith. Case law on the subject has evolved in several different directions. Utmost good faith carries with it a higher, stricter duty to act in good faith. The disclosure issue has set utmost good faith apart from good faith.
• Good faith
• Good faith dealings promise not to take unfair advantage of another. It is a position that implies that the technicalities of law and lack of full information that may tend to render a business transaction biased or that result in unfair advantage will not occur. Good faith is used to describe fairness, fair conduct, reasonableness and decent behaviour. Being faithful to one’s duty or obligation
• Bad faith
Design to deceive or mislead another. Conscious wrongdoing. Constructive fraud. Or absence of good faith and therefore an absence of utmost good faith
Good faith
Most ordinary contracts are good faith contracts. Insurance contracts are agreements made in the utmost good faith. This implies a standard of honesty greater than that usually required in most ordinary commercial contracts.)
strategies can be used to prevent bad faith lawsuits
- Treat insured’s fairly and with dignity
- Conduct a thorough investigation before taking action
- Consider any alternative measures to handle the claim
- Investigate in a professional manner until the case is closed
- Re-assess positions as new evidence becomes available
