Much of dollars are stolen from the industry of insurance each year. The enormity of the fraud staggers one’s imagination. All of us are victims because we all pay the price in increased premiums. So it is important to find more about Insurance fraud. Let’s see.
A significant portion of these increases results directly from our friends and neighbours who inflate claims, to minimize the impact of deductibles, or intentionally report incidents incorrectly to overcome policy exclusions that would otherwise apply. Employees who are in accidents at home playing touch football with their children suddenly develop lower-back pain while entering or exiting a truck cab in order to collect workers’ compensation benefits. Claims for shortage, overage and damage continue to escalate as drivers or consignees enter into duplicitous schemes to intentionally miscount freight.
Staged automobile accidents connect with hundreds of rings of thieves who brazenly orchestrate a variety of accidents in which the victims collect millions of dollars in fraudulent claims. This is our money they are stealing. Yours and mine.
While insurance fraud is immensely attractive to organized crime, the opportunity for a quick, tax-free windfall has also sullied the medical and legal professions. I’m startled at the frequency of investigations that confirm physician frauds for office visits and treatments that never took place.
Why is it that seemingly honest people think they have a license to steal when an insurance claim presents itself? What causes this phenomenon? I’ve thought about this vanishing-integrity syndrome for some time, and sadly I’ve come to this conclusion:
Surely not all of the consumers who practice insurance fraud would never think of committing felonies such as burglary or murder. Could it be that consumers so engaged in insurance fraud do so because almost everyone’s experience with insurance companies results in frustration, delay, bad faith and evasive heavy-handed claims practice? Has the insurer’s promise to pay become a shallow, unfulfilled commitment that inevitably resulted in increased fraudulent activity by the policyholder? I think this may well be the case. Do the insurer’s ongoing delaying tactics in the payment of legitimate claims foster the hostile consumer attitudes that breed dishonesty?
The fraud problem of insurance fraud
Insurance fraud comes in all shapes and sizes. The negative impacts it has on individuals, communities, other policyholders, and of course insurance companies, are far-reaching and can even end in death. This is far from the often-cited “victimless” nature of the crime, an excuse used by fraudsters to justify their deviant behaviour.
There are lots of problems with this line of thinking, especially if everyone acted in this way. The big impact is increased premiums for other honest policyholders.
The best way to address the fraud problem is to prevent it from happening in the first place.
Below three tips provide insurance companies and other financial institutions with a place to start in their fraud deterrence strategy.
- Be tough on fraud
The financial company need to demonstrate a zero-tolerance policy for fraud. This is easier said than done. Insurance companies are in a difficult position. It is unrealistic and impossible to investigate every minor incident in order to weed out the fraud. There are not enough resources for this, and honest policyholders would grow impatient waiting for their settlements due to lengthy investigations for a simple claim. They may even grow so discontent that they feel inclined to start padding their own claims to compensate for the poor service and long waiting times.
As well as, it is important for insurance companies to be able to detect fraud scenarios and make an example of those that are caught in order to deter future fraudulent activities. If an insurance company enters as tough on fraud, there may not be very many honest, upstanding individuals willing to switch over to “the dark side”.
Two very recent examples in the news came from a private auto insurer in the United States.
01.) This insurance company filed a lawsuit against an auto body shop in Arizona, claiming the shop submitted invoices for repairs that didn’t happen, as well as other falsified documents.
02.) Recent incident shows how an investigator from the insurance company foiled a “stolen vehicle” plot after finding surveillance video of the vehicle owner being directly involved in the incident. A prime settlement of over $20,000 was stopped, and now the man faces insurance fraud and perjury charges. If I were a fraudster looking for a few extra dollars, I wouldn’t be looking in the direction of this insurer as they grow their reputation for being tough on fraud.
- Implement efficient underwriting and claims handling processes
You must be able to detect it in the first place. This requires well thought-out underwriting and claims management processes. It commences with identifying, understanding and assessing where the top internal and external vulnerabilities are within the company. Once there is a clear understanding of the potential “soft spots”.
Two prime challenges stand in the way of creating these efficient processes.
01.) Poor communication; everybody from top and mid-level managers to claims handlers, the finance department and sales representatives needs to be onboard with making the fight against fraud a priority.
02.) There is just too much data within underwriting and claims scenarios to manually process and make fast, informed and intelligent decisions without the support of IT.
- Consider optimizing these process using today’s available technology
Terrible processes will not develop simply by purchasing the most advanced IT solution and calling it digitalization. Therefore it is important to first have clear processes documented with assigned cross-functional responsibilities, then use today’s technology as a decision support system on a claim-by-claim basis. This decision support system can aggregate data, for example in a claims process, on individual policyholders.