Study 2: Types of Fraud - Summary (Part 2) Flashcards
Outcomes of not managing fraud
When not addressed or managed effectively, insurance fraud will spread and eventually include coercive and corrupt acts. Repercussions will go well beyond financial loss
Coercion
Acts of coercion can involve any participant in the insurance industry, as a perpetrator or victim. The most common scenarios involve:
- suppliers on consumers; and
- claimants on insurer claims employees or claims representatives
Coercion occurs when a person is
- forced to do something;
- led to believe or accept as true or valid what is false or invalid;
- requested to sign or acknowledge a misleading or incomplete document;
- discouraged or restrained from disclosing information;
- disadvantaged by disability or a language barrier, due to misrepresentation, false impression, trickery, threats, or blackmail;
- made timid, fearful, or frightened due to aggressive or threatening behaviour; or
- the recipient of an utterance or threat of bodily harm or death.
Motives for coercive acts
- Motives for coercive acts are financial
- Accompanied by elements of aggression
- Fraud involving coercive acts should receive the greatest priorty and attention in any fraud management program
Meaning of corruption
Act of soliciting, offering, promising, giving, or receiving unearned favour, money, or any item of value in the course of business as a means to induce or influence
- a person’s judgment or conduct;
- a decision or outcome;
- business activity or revenue; or
- an unlawful act.
Corruption and what it represents in the insurance industry
Represents a loss or deterioration of integrity of its participants. These participants are motivated by greed and an expectation or hope of return
Corrupt acts are directly linked to insurance fraud on two fronts
- The return often represents opportunity for future fraudulent acts (ex. a treatment clinic which frequently submits exaggerated invoices to insurers bribes a lawyer in exchange for future referrals)
- The deterioration of integrity is the result of an existing environment of prolonged, ineffective fraud management (ex. adjusters receive cash over a long period of time in exchange for referring claimants to a specific contractor)
The most common corrupt acts linked to insurance fraud prevalence in insurance
- Insurer employee involvement in a bribe
- Insurer employee delivery of data or information in exchange for favour or money
- Supplier kickback to another supplier in exchange for business referrals
Assisting or counselling a fraudulent act
- Responsibility for fraud includes any person who assists or counsels another to engage in a fraudulent act
- ex. person A advises person B to commit fraud, person A is deemed to have committed fraud, even if person B did not ultimately commit the act
Conspiring to commit a fraudulent act
Responsibility for a fraudulent act includes situations where two or more parties conspire to commit fraud, regardless of whether or not it has commenced.
Fraudulent acts
- Always committed by a person or group of people, but responsibility can extend beyond the person to an entity or organization (i.e. a company can be held responsible for fraud committed by an employee
- Fraud depends on the jurisdiction to determine if it is a violation or crime (ex. in some places, certain fraudulent acts are not violations because they do not contravene a law, regulation, or policy condition)
Examples of fraudulent acts
- Submitting a fictitious or exaggerated claim—A person or entity provides false information with the intent to claim.
- Assisting a fictitious or exaggerated claim—A person or entity provides false information to assist another person making a fictitious or exaggerated insurance claim.
- Proposing a plan to deliberately cause a loss—To submit an insurance claim, a person proposes a plan for another person to deliberately cause a loss.
