5 Key Elements to Spotting Fraud
Insurance fraud is estimated to cost the industry 40 to 80 billion dollars annually. Sound astronomical? That’s because it is. The amount is roughly the same as the U.S. federal government’s budget for food stamp programs for an entire year.
Because of the dollars involved, a significant amount of time and resources are spent in an effort to both reduce and combat insurance fraud. An internet search will reveal countless “red flags’, checks lists and warning signs for fraud as well as vendors promising to assist. The flaw with indicators or vendors is that some of the very real fraud indicators can also be either the proximate or secondary cause of the loss.
In my experience as Claims Manager here at Assurance, I’ve found the following five key elements are crucial in spotting and reducing fraud:
This encompasses not only what is required for employees, but also managers and any partners you work with. All parties should be trained on the investigation process for accidents resulting in injury to themselves and accidents involving injury or property damage to third parties. Ensuring that employees know the chain of command when an accident occurs, as well as what needs to be addressed immediately on site, leads into a good investigation.
So frequently I see an investigation stop after the initial details of the loss are obtained and the loss is sent to the carrier. In my opinion, this is only the beginning. The insured and the claims team need to work together to ensure they have secured all of the available evidence (any surveillance videos, witnesses and their statements) as well as continue the ongoing investigation. Independent adjusters, investigators, medical canvas’, index reports and witnesses can all be key pieces of the puzzle that may not be available, or there may not have been enough information to involve at the onset.
Most times, the adjuster handling the loss will make the initial contact and proceed to manage the claim moving forward. Ongoing communication between the claims team and the insured is critical to spotting fraud. For example, in Illinois a fraud case developed in relation to a Workers’ Compensation matter in which a claimant’s wife recently started a landscape business. The rumor amongst some of the co-workers was the employee was working for a landscaping company. The insured relayed this information to the adjuster, whose investigation supported these rumors, resulting in a criminal fraud conviction.
Those individuals you work with both on the claims and business side can be a crucial piece to uncovering fraud. These relationships can provide insight as to what to look for, industry trends and possible insight into the claimants (whether 1st or 3rd party) you are dealing with.
This final element speaks for itself. Always look for an explanation when something doesn’t make sense. If something doesn’t feel right, it probably isn’t.
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