Study 2: Types of Fraud - Summary (Part 2)

Question 1

Outcomes of not managing fraud

Answer 1

When not addressed or managed effectively, insurance fraud will spread and eventually include coercive and corrupt acts. Repercussions will go well beyond financial loss

Question 2

Coercion

Answer 2

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

Question 3

Coercion occurs when a person is

Answer 3

• 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.

Question 4

Motives for coercive acts

Answer 4

• 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

Question 5

Meaning of corruption

Answer 5

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.

Question 6

Corruption and what it represents in the insurance industry

Answer 6

Represents a loss or deterioration of integrity of its participants. These participants are motivated by greed and an expectation or hope of return

Question 7

Corrupt acts are directly linked to insurance fraud on two fronts

Answer 7

1. 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)
2. 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)

Question 8

The most common corrupt acts linked to insurance fraud prevalence in insurance

Answer 8

• 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

Question 9

Assisting or counselling a fraudulent act

Answer 9

• 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

Question 10

Conspiring to commit a fraudulent act

Answer 10

Responsibility for a fraudulent act includes situations where two or more parties conspire to commit fraud, regardless of whether or not it has commenced.

Question 11

Fraudulent acts

Answer 11

• 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)

Question 12

Examples of fraudulent acts

Answer 12

• 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.