Study 6: Managing Fraud Risk After Policy Issuance - Summary Flashcards
Five types of common automobile fraud exposures
- Inflated tow, store, and dent
- The blank form
- Staged collisions
- Rate evasion
- Hot and phantom vehicles
Inflated Tow, Store, and Dent
(Auto fraud exposure)
- Dishonest towing companies and auto repair shops intentionally overbill insurers, which drives up insurance premium costs.
- Chasers - tow trucks that sit on highways waiting for accidents to happen
The blank form
(Auto fraud exposure)
Dishonest health-care clinic staff ask claimants to sign blank accident benefits forms and then bill insurers for services that are not provided. Alternatively, the clinics may forge the signatures of medical practitioners on forms to bill insurers for services never rendered.
Indicators of falsified claim fraud by service providers include the following
- Patterns for services that are outside the provincial or territorial standards
- Services that are never proven to have been provided to the claimant
- Services that are billed repeatedly
- Services that are billed outside normal business operating hours (for example, on a Sunday)
- Treatments that are not administered by licensed therapists
- Therapists who provided the services but are no longer employed by the clinic
- Misrepresentation of the need for services
Individuals may be entitled to the following benefits if injured in an auto accident
- Income replacement—Replaces job income during recovery
- Caregiver—Provides compensation if an individual is required to leave work to care for an injured member of the household
- Non-earner—Provides compensation if an individual is completely unable to carry on a normal life and does not qualify for an income replacement or caregiver benefit
- Medical—Pays for medical expenses incurred from the injury
- Rehabilitation—Pays for costs incurred during rehabilitation
- Attendant care—Pays some of the costs of an aide or attendant
- Compensation for other expenses—May pay for the cost of family visits during treatment or recovery, some housekeeping and home maintenance, the repair or replacement of some items lost or damaged in the accident, and lost educational expense
Staged collisions
(Auto fraud exposure)
- In staged collisions, drivers intentionally cause accidents with unsuspecting drivers and make it look as though the innocent drivers are at fault.
- Arranged by a recruiter who is paid a fee by participants
- Typically staged at night, behind buildings, or in other areas with no witnesses. Vehicle is often older or a rental.
- Phony claimants are referred to medical or rehabilitation centers for treatment they don’t receive, and claim for accident benefits
Staged accidents with innocent third parties
- More common than collusion between drivers since insurers are more aggressive with suspicious claims
- Accidents with innocent parties appear to be genuine - clearly no collusion and risk of injury is more severe
Three types of individually staged collisions
The swoop and squat—A vehicle (the “swoop”) speeds up and cuts off another vehicle (the “squat”), forcing its driver to slam on the brakes. The innocent driver of the squat vehicle appears to be at fault for failing to keep a proper distance.
The drive down—A fraudster waves an innocent driver moving out of a parking spot to go ahead and then accelerates to create a collision.
Bullet left/right turn—As a vehicle stops to make a turn, a driver heading the other way slows down and waves to indicate the vehicle can go ahead. As the vehicle goes through, the driver accelerates and crashes into the vehicle.
Liability fraud claims
- In liability fraud, the person defrauding the insurer is not a party to the contract - makes dealing with fraud more challenging
- Can arise from automobile bodily injury, slip-and-fall accidents, or product and premises liability claims
- Fraudulent third party may exaggerate real injuries, or arrange experts who are part of the fraud to attest to injuries they may not have
Rate evasion
(Auto fraud exposure)
An individual misleads an insurer by providing misinformation, such as a false address or make or model of the vehicle, at the time of binding or through the course of the policy. The individual carefully chooses this false information because of its reduced risk profile, which decreases the amount he or she will pay for auto insurance.
Hot and phantom vehicles
(Auto fraud exposure)
- Stolen, unrepairable, and often dangerous vehicles are given a false vehicle identification number (VIN) and then sold to unsuspecting consumers.
- Luxury vehicles sometimes stolen, shipped overseas, and resold at a marked up price
- Phantom vehicles are also a source of another kind of fraud: VIN numbers from non-existent vehicles can be re-registered, and then the new owner can report the vehicle stolen and submit a theft claim
Most common types of fraud related to property policy claims
- Falsified claim fraud (inflated claims)
- Supplier fraud (restoration fraud)
- Arson (used to be most common but now on decline)
Inflating claims
(Property insurance fraud)
- Occurs when someone submits a claim on their property policy for more than the actual value of the loss or damage
- Value of items overstated when submitting lists of lost property
- Claimants also lie about the date, location, or cause of loss
- Evidence can be fabricated (i.e. repair bills, receipts, appraisals)
Restoration fraud
(Property insurance fraud)
- Vendors may overbill for work, assuming insurers will pay the full amount without question
- Important for adjuster to clearly set scope of repairs and determine quality of materials to reduce this type of fraud
- Must also ensure the repairs being done are from the insured peril, not some other cause
Questions to ask to ensure the restoration company is not defrauding the insurer
- Did the contractor underprice the job at the estimate stage, perhaps to secure the job?
- Was there a change in the scope of damage?
- Was there damage that was not initially seen?
- Should the hidden damage have been anticipated?
- Did some items not respond to cleaning or repairs, resulting in the need for replacements?
