Study 3: Authority, Provisions, and Enforcement - Summary (Part 2) Flashcards
For enforcement to be considered and initiated, two elements must be present
- The investigation is complete and has reached a conclusion of fraud, presumed fraud, coercion, or corruption.
- The enforcement action will comply with a law, regulation, or other rule.
The two elements of enforcement
- Investigation: conducted by an enforcement body working with the insurer’s investigators. Can consist of a review, partial or supplementary investigation, or a full investigation
- Prosecution: commencement of legal proceedings by enforcement body
Enforcement of insurance fraud can be initiated in two ways
- A complaint is created by the insurer after concluding its investigation
- Enforcement action is taken by a law enforcement agency, insurance regulator, or professional regulatory body upon discovering potential insurance fraud, coercion, or corruption from a source other than a complaint by an insurer.
Insurers have up to four enforcement options to consider
- Law enforcement agencies
- Insurance regulators
- Professional regulatory bodies
- Civil proceedings
Law enforcement agencies (examples)
- National Cybercrime Coordination Unit (NC3): works to reduce threat, impact, and victims of cybercrime
- Canadian Anti-Fraud Centre: collects information on fraud and identity theft. Provides info on current and past scams.
- Insurance Bureau of Canada (IBC) and Canadian National Insurance Crime Services (CANATICS) provide anti fraud services to the insurance industry
Insurance regulators
- Government departments or organizations which ensure rules and regulations for insurance industry are followed
- Accountable for supervising activities in markets, overseeing financial health of industry, etc.
- Include investigative powers in relation to unfair or deceptive acts
Professional regulatory bodies
For insurance fraud, a professional regulatory body can be an enforcement option because it is mandated to:
- develop and enforce conduct rules to protect the public by ensuring that services from members of the profession are provided ethically;
- provide a mechanism for the public, including insurers, to complain about the practices and conduct of a member of the profession;
- provide a process to investigate and, if necessary, discipline any member of a profession who fails to meet professional standards of practice; and
- create rules to remove a member from the profession.
Civil proceedings (four circumstances where civil proceedings can be initiated as an enforcement option, after an investigation has concluded)
- Jurisdictions where not all fraud, coercion, and corruption acts are violations enforceable by law, leaving civil proceedings as the only option.
- Jurisdictions where a law or regulation prescribes civil proceedings to be the method for an insurer to take enforceable action.
- An enforcement complaint is made but the enforcement body will not investigate and/or prosecute.
- An insurer concludes a case to be presumed fraud and civil proceedings will result in the disclosure of missing or obstructed information
Five important principles relating to the decision by an insurance business to initiate an enforcement complaint
- Personal safety
- Threat of deliberate loss
- Prosecution of a concluded case with deterrent value
- Public interest in reporting unenforceable complaint cases
- Additional evidence to bring a case to conclusion
Personal safety
- If insurer believes a consumer is the subject or victim of a coercive act, the allegation must always be reported to the appropriate enforcement body
- Unreported and unchecked intimidation or violence can grow into something more serious
- Incidents involving physical intimidation, threats of violence, or assault during an insurance transaction must be reported to the police
Threat of deliberate loss
An insurer that learns of a plan or conspiracy to deliberately cause a loss should notify the company’s special investigations unit (SIU) to investigate the insured or organization and provide details of its investigation without delay.
Prosecution of a concluded case with deterrent value
If an insurer completes an investigation and believes that a case has violated the law, or meets the standards of proof for fraud, the insurer should always forward the case as a complaint to the appropriate enforcement body.
Public interest in reporting unenforceable complaint cases
An insurer should report in writing every case where there has been a conclusion of fraud, coercion, or corruption (including presumed fraud) to the appropriate law enforcement body, regardless of whether the case will ever be investigated or prosecuted
Additional evidence to bring a case to conclusion
Insurer’s investigation may not be able to make a conclusion due to lacking authority or entitlement to gather required evidence. Reporting the case to law enforcement can enable the pursuit of evidence.
Violation (definition and characteristics)
A breach of a law, regulation or rule supported by legislation. Characteristics include the following:
- The law, regulation, or rule exists to protect the public or serve the public interest.
- It includes a consequence or penalty.
- The person or entity is formally accused or alleged to be responsible for the act and is entitled to an adjudicated trial, hearing, or tribunal.
- A finding against the person or entity is typically a matter of public record.
Types of violations and contraventions (image)
To effectively manage fraud, coercion, and corruption, every insurer must know the violations and contraventions enforceable in their jurisdiction
