INSURANCE FRAUD

NAME – SHRUTI PODDAR

ROLL N0- 42

TY-BBI

ACKNOWLEDGEMENT

I would like to thank our Professor Mr. Naveen Punjabi for giving me this wonderful topic to do my project on. It was a great learning experience.

2

INDEX

SR. NO PARTICULAR PG NO

1. Introduction 4

2. Types Of Insurance 5-7

3. Causes of Frauds 8-9

4. Types Of Frauds 10-14

5. Legislation 15-16

6. Case Studies 17-27

7. Conclusion 28

8. Bibliography 29-30

3

INTRODUCTION

The insurance business, by its very nature, is susceptible to fraud. Insurance is a risk distribution system that

requires the accumulation of liquid assets in the form of reserve funds that are, in turn, available to pay loss

claims. Insurance companies generate a large steady flow of cash through insurance premiums. Steady cash

flow is an important economic resource that is very attractive and easily diverted. Large accumulations of

liquid assets make insurance companies attractive for take over and loot schemes. Insurance companies are

under great pressure to maximize the return on investing the reserve funds, thus making them vulnerable to

high yielding investment schemes.

Insurance fraud occurs when any act is committed with the intent to fraudulently obtain some benefit or

advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and

to which someone is entitled. False insurance claims are insurance claims filed with the intent to defraud an

insurance provider.

Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise. Fraudulent

claims account for a significant portion of all claims received by insurers, and cost billions of dollars

annually. Types of insurance fraud are very diverse, and occur in all areas of insurance. Insurance crimes also

range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent

activities also affect the lives of innocent people, both directly through accidental or purposeful injury or

damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a very

significant problem, and governments and other organizations are making efforts to deter such activities.

4

Types Of Insurance

The business of insurance is mainly divided into two parts namely life and nonlife insuance also known as

general insurance. As the name suggest life insurance cover a life of an individual where as non life cover

various other important element that has monetary impact on a individuals life.

1- LIFE INSURANCE

Life insurance is a contract between an insured (insurance policy holder) and an insurer, where the insurer

promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured

person. Depending on the contract, other events such as terminal illness or critical illness may also trigger

payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses

(such as funeral expenses) are also sometimes included in the benefits.

The advantage for the policy owner is "peace of mind", in knowing that the death of the insured person will

not result in financial hardship for loved ones and lenders.

2- GENERAL INSURANCE

General insurance also known as nonlife insurance includes various other types of insurance in it like

AUTO INSURANCE

Vehicle insurance (also known as auto insurance, GAP insurance, car insurance, or motor insurance)

is insurance purchased for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide

financial protection against physical damage and/or bodily injury resulting from traffic collisions and

against liability that could also arise there from. The specific terms of vehicle insurance vary with

legal regulations in each region. To a lesser degree vehicle insurance may additionally offer financial

protection against theft of the vehicle and possibly damage to the vehicle, sustained from things other than

traffic collisions.

5

HEALTH INSURANCE

Health insurance is insurance against the risk of incurring medical expenses among individuals. By

estimating the overall risk of health care and health system expenses among a targeted group, an insurer can

develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is

available to pay for the health care benefits specified in the insurance agreement. The benefit is administered

by a central organization such as a government agency, private business, or not-for-profit entity.

AGRICULTURAL INSURANCE

Agriculture in India is highly susceptible to risks like droughts and floods. It is necessary to protect the

farmers from natural calamities and ensure their credit eligibility for the next season. For this purpose,

the Government of India introduced many agricultural schemes throughout the country.

PROPERTY

Property insurance provides protection against risks to property, such as fire, theft or weather damage. This

may include specialized forms of insurance such as fire insurance, flood insurance, earthquake

insurance, home insurance, inland marine insurance or boiler insurance. The term property insurance may,

like casualty insurance, be used as a broad category of various subtypes of insurance.

LIALIBILITY

We all have a legal duty to behave reasonably to others. If we injure someone or damage their property

through negligence, we are legally obliged to pay compensation. Liability insurance is there to insure

individuals and businesses against this risk.

6

MARINE

Marine policies cover the property or 'interest' insured against perils of the sea such as bad weather,

stranding, collision, fire and seizure, while aviation insurance covers damage on the ground or in the air, and

liabilities for cargo and passengers.

FIRE

A fire insurance is a contract under which the insurer in return for a consideration (premium) agrees to

indemnify the insured for the financial loss which the latter may suffer due to destruction of or damage to

property or goods, caused by fire, during a specified period. The contract specifies the maximum amount ,

agreed to by the parties at the time of the contract, which the insured can claim in case of loss. This amount is

not , however , the measure of the loss. The loss can be ascertained only after the fire has occurred. The

insurer is liable to make good the actual amount of loss not exceeding the maximum amount fixed under the

policy.

FIDELITY INSURANCE

under it, the insurer undertakes to compensate the insured i.e. the employers against the losses suffered by

him due to the employees. The losses may be due to fraud,dishonesty,misappropriation of funds,goods or

damages to property caused by the employees. In order to avail the protection under it,the employer is

required to provide all material facts about their employees to the insurer and also, notify all changes in the

condition of their service. For example, fidelity insurance by New India Assurance Company Limited. Under

this policy, the insurance company agrees to indemnify the insured (employer) against a direct pecuniary loss

sustained by reason of any act of fraud/dishonesty committed by employee.

7

CAUSES OF FRAUDS IN INSURANCE:

The “chief motive in all insurance crimes is financial profit.” Insurance contracts provide both the insured

and the insurer with opportunities for exploitation.

According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered on greed and

holes in the fraud fight. Often, those who commit insurance fraud view it as a low-risk, lucrative enterprise.

Drug dealers who have entered insurance fraud think it’s safer and more profitable than working street

corners. Compared to other crimes, court sentences for insurance fraud can be lenient, so scammers may try

to take advantage of the system. Though insurers try to fight fraud, some will pay suspicious claims, since

settling such claims is often cheaper than legal action.

Some reasons of insurance frauds are

1: Monetary Necessity

"How can I afford insurance?  I am just a single mother.  Between rent, food and raising three kids, how can I

be expected to play by the rules?"

It won't take much more to push this felon over the edge.  She's struggling to live hand-to-mouth.  She's

desperate, and would consider any opportunity even if it were on the wrong side of the law.

 

2: Anger

The anger-directed insurance fraud felon is the kind of person who thinks the world is out to get them.

Loud and overbearing, they commonly speak their minds about how others stunt their success.  Their

employer, the government and big corporations are the ones they see as the enemy.

"Not anymore," they say.  "I'm gonna show them what happens when they mess with me."

 

8

3: Victim Mentality

"So, I'm taking two extra weeks workers' comp? So what? They won't miss it.  Besides, I'm just a little old

lady.  It's hard enough on a fixed income; I deserve this time."

Nothing's ever her fault.  It's "the system".  Somehow, it's out to get her.  She has a lifetime of slights built up

in her mind and feels she is completely justified in taking advantage of the system any way she can.

4: Greed

"Insurance companies are swimming in money.  Who would miss a measly hundred grand?  Yet, for me, it

would change my life.  I mean it's not like robbing a bank or anything.  I'm just talking about setting things

up so they roll in my favor for once."

This felon is well-respected and has a good life.  He is even a leader.  But, all he can think of is short-cuts to

more money.  He doesn't see himself as a criminal, but he's driven to find an edge.  And, he's willing to risk

everything in the process.

 

9

TYPES OF INSURANCE FRAUD:

This section will introduce you to some of the most common types of fraud involving the insurance industry.

1- Agent/Broker Fraud

a- Cash, Loan, and Dividend Checks

A company employee without the knowledge of an insured or contract holder requests cash, a loan, or a

dividend check, and deposits the cheque into either his bank account or a fictitious account. The employee, in

order to minimize his chances of being detected committing a fraudulent act, might change the company

policyholder’s address of record to either his address or a fictitious address. Once the check is issued, the

address is then changed back to the previous address.

b- Settlement Checks

A company employee can misdirect settlement checks, such as for a matured endowment settlement, to the

branch office, their home, or a fictitious address. The employee can easily create a check defalcation by

changing the address of record prior to the settlement check issue date, thus misdirecting the check in

question.

c- Premium Fraud

The agent collects the premium, but doesn’t remit the check to the insurance company. The insured has no

coverage.

d- Fictitious Payees

An agent or a clerk can change the beneficiary of record to a fictitious person and subsequently submit the

necessary papers to authorize the issuance of a check.

e- Fictitious Death Claims

An agent or employee obtains a fictitious death certificate and requests that a death claim check be issued.

The agent receives the check and cashes it.

10

2- Underwriting Irregularities

f- Equity Funding

Equity funding is the process of using existing premium/policy values to finance new businesses. So long as

the insured is aware of what is being done by the agent and fully understands the long range method of

payment on the new contract, there is no apparent underwriting irregularity.

Equity funding techniques, also known as piggybacking, usually do not produce quality business.

Furthermore, the company increases the amount of life insurance on the books but receives little or no new

funds while incurring increased sales and administrative expenses associated with the issue of that new

business.

g- Misrepresentation

Misrepresentation might occur if a sales representative makes a false statement with the intent to deceive the

prospective insured in order to knowingly obtain an unlawful gain.

h- False Information

A company employee might submit the some false information to obtain unlawful financial gain:

Improper medical information to obtain a better insurable rate for the prospective policy holder

Improper date of birth to obtain a cheaper premium on the new policy

Improper home address to obtain a cheaper premium for home or automobile insurance

Improper driving history prior to purchasing automobile insurance to reduce the annual premium or

obtain insurance where normally the individual would have to apply through the risk pool

i- Fictitious Policies

A salesman, in order to keep his position, submits fictitious policies to improve his writing record. Or, prior

to an individual leaving the company, he writes fictitious policies called tombstone cases to improve his

commission pool so that his compensation will be greater. Tombstone means an agent literally takes names

from tombstones in a cemetery and writes new policies.

11

3- Vehicle Insurance Schemes

j- Ditching

Ditching, also known as owner give-up, is getting rid of a vehicle to cash in on an insurance policy or to

settle an outstanding loan. The vehicle is normally expensive and purchased with a small down payment. The

vehicle is reported stolen, although in some cases, the owner just abandons the vehicle, hoping that it will be

stolen, stripped for parts, or taken to a pound and destroyed. The scheme sometimes involves homeowner’s

insurance for the property that was “stolen” in the vehicle.

k- Past Posting

Past posting is a scheme in which a person becomes involved in an automobile accident, but doesn’t have

insurance. The person gets insurance, waits a little bit of time, reports the vehicle as being in an accident, and

then collects for the damages.

l- Vehicle Repair

This scheme involves the billing of new parts on a vehicle when used parts were actually replaced in the

vehicle. Sometimes this involves collusion between the adjuster and the body repair shop.

m- Vehicle Smuggling

This is a scheme that involves the purchase of a new vehicle with maximum financing. A counterfeit

certificate of the vehicle’s title is made showing that it is free and clear. The vehicle is insured to the

maximum, with minimum deductible theft coverage. It is then shipped to a foreign port and reported stolen.

The car is sold at its new location and insurance is also collected for the “theft.”

n- Inflated Damages

The business environment and competition for work in the automobile repair industry have caused the

development of a scheme in which some establishments inflate estimated costs to cover deductibles. The

insured is advised by the repair shop that the shop will accept whatever the company authorizes.

o- Rental Car Fraud

12

A person doesn’t need to own a vehicle to commit automobile fraud. There are several schemes that can be

perpetrated using rental cars. The most prevalent involve property damage, bodily injury, and export fraud.

4- Property Schemes

Property schemes usually involve the filing of insurance claims for property that never existed or for inflated

loss amounts.

p- Inflated Inventory

Property that is lost through fire is claimed on an insurance form. However, property that doesn’t exist also

finds its way onto an inventory of the property claimed. Property claimed might have been previously sold or

never owned by the claimant.

q- Phony or Inflated Thefts

A home or car that has been burglarized is the basis for filing a claim for recoveries of monies lost. However,

as with items “destroyed” by fire above, the items never existed or were previously sold.

r- Paper Boats

A claim is filed for a boat that sank, but the boat never actually existed. It is not difficult to register a boat

based on a bill of sale. After a period of time, a loss is claimed for the sinking of the boat. It is difficult to

prove that the boat didn’t exist or was sunk intentionally.

5- Life Insurance Schemes

s- Fraudulent Death Claims

To obtain reimbursement for life insurance, a death certificate is required. However, phony death certificates

are not that difficult to obtain. The person might be very much alive and missing or the person might be dead,

and the death is past posted. With small settlements, death claims aren’t closely scrutinized and are paid

relatively easily.

t- Murder for Profit

13

This scheme involves the killing (or arranging for the killing) of a person in order to collect insurance. The

death might be made to look like it was an accident or a random killing.

u- Liability Schemes

In a liability scheme the claimant has claimed an injury that did not occur. The slip and fall scam is the most

common, and involves a person claiming to fall as the result of negligence on behalf of the insured.

6- Workers’ Compensation Fraud

Workers’ compensation laws require employers or their insurance plans to reimburse employees (or on their

behalf) for injuries that occurred on the job regardless of who is at fault and without delay of legal

proceedings to determine fault. The injury may be physical, such as a broken limb, or mental, such as stress.

v- Common Schemes

Schemes are generally broken into four categories: premium fraud, agent fraud, claimant fraud, and

organized fraud schemes.

w- Premium fraud

This entails misrepresenting information to the insurer by employers to lower the cost of workers’

compensation premiums.

x- Agent Fraud

Agents issue certificates of coverage indicating the customer is insured, but never forward the premium to the

insurance company. An agent may alter the application for coverage completed by the employer in order to

be able to offer a lower premium to his client.

y- Claimant Fraud

Misrepresenting the circumstances of any injury or fabricating an injury.

14

LEGISLATION:

National and local governments, especially in the last half of the twentieth century, have recognized

insurance fraud as a serious crime, and have made efforts to punish and prevent this practice. Some major

developments are listed below:

1- India

List Of Legislation In India

The Insurance sector in India is regulated by the following Acts:

The Insurance Act, 1938

The Life Insurance Corporation Act, 1956

Marine Insurance Act, 1963

General Insurance Business (Nationalization) Act, 1972

Insurance Regulatory and Development Authority (IRDA) Act, 1999

2- United States

Insurance Fraud is specifically classified as a crime in all states, though a minority of states only

criminalize certain types (i.e. Oregon only outlaws Worker Compensation and Property Claim fraud). 19

states require mandatory insurer fraud plans. This requires companies to form programs to combat fraud

and in some cases to develop investigation units to detect fraud. 41 states have fraud bureaus. These are

law enforcement agencies where “investigators review fraud reports and begin the prosecution process.”

Section 1347 of Title 18 of the United States Code states that whoever attempts or carries out a “scheme

or artifice” to “defraud a health care benefit program” will be “fined under this title or imprisoned not

more than 10 years, or both.” If this scheme results in bodily injury, the violator may be imprisoned up to

20 years, and if the scheme results in death the violator may be imprisoned for life.

15

3- Canada

The Insurance Crime Prevention Bureau was founded in 1973 to help fight insurance fraud. This

organization collects information on insurance fraud, and also carries out investigations. Approximately

one third of these investigations result in criminal conviction, one third result in denial of the claim, and

one third result in payment of the claim. British Columbia’s Traffic Safety Statutes Amendment Act of

1997 states that any person who submits a motor vehicle insurance claim that contains false or

misleading information may on the first offence be fined C$25,000, imprisoned for two years, or both.

On the second offense, that person may be fined C$50,000, imprisoned for two years, or both.

4- United Kingdom

A major portion of the Financial Services Act of 1986 was intended to help prevent fraud. The Serious Fraud

Office, set up in 1987 under the Criminal Justice Act, was established to “improve the investigation and

prosecution of serious and complex fraud.” The Fraud Act 2006 specifically defines fraud as a crime. This

act defines fraud as being committed when a person “makes a false representation,” “fails to disclose to

another person information which he is under a legal duty to disclose,” or abuses a position in which he or

she is “expected to safeguard, or not to act against, the financial interests of another person.” This act also

defines the penalties for fraud as imprisonment up to ten years, a fine, or both.

16

CASE STUDY

MARINE INSURANCE FRAUD

There’s a conspiracy theory that the Titanic didn’t actually sink

The Titanic is one of the most famous events of the 20th century as the entire world watched the unsinkable

ship collapse to the bottom of the ocean. Thousands of studies have been done on the event, and perhaps

none is more controversial than that presented by Robin Gardiner in his book, “Titanic: The Ship That Never

Sank?” Gardiner’s conspiracy theory stated that the ship that sank was not the Titanic, but rather its sister

ship, the Olympic.

He wrote that the Olympic was disguised as the Titanic and purposely sunk as an insurance scam! Gardiner

cited that several months before the Titanic sunk, the Olympic was involved in a collision with a Royal Navy

Warship and received extensive damage. The blame was placed on the Olympic and insurers refused to pay

any money, losing the company copious amounts of money.

To regain the money that was owed, insurers disguised the damaged ship as the Titanic, sent it out to sea, and

purposefully flooded it. According to him there never was an iceberg and it was all intentional. The real

Titanic was then dressed up as the Olympic because it was fully functional and sailed for the next 25 years.

Nearly everyone raised objections to Gardiner’s theory, yet it nonetheless gained much attention.

 

17

18

LIFE INSURANCE FRAUD

John Darwin disappearance case

The John Darwin disappearance case was an investigation into the faked death of the British former teacher

and prison officer John Darwin, who turned up alive in December 2007, five years after he was believed to

have died in a canoeing accident.

John Darwin was arrested and charged with fraudulently obtaining a passport, and claiming money by

deception. His wife—who was also arrested and charged, having claimed the money on his life assurance—

alleged he had been secretly living in their house and the house next door, which allowed him to get

the assurance money illegally for his own personal gain, and that the couple had planned to set up a hotel for

canoeing holidays in Panama. On 23 July 2008 John and Anne Darwin were each sentenced to over six years

imprisonment.

Disappearance

John Darwin was seen paddling out to sea in his canoe on 21 March 2002, at Seaton Carew, in

Hartlepool. Later the same day, he was reported as "missing" after failing to report to work. A large-scale sea

search took place, during which 62 square miles (160 km2) of coastline were searched. There was no sign of

Darwin, though a double-ended paddle was retrieved from the sea near North Gare, Seaton Carew, the

following day. Later on 22 March 2002, the wreckage of John Darwin's canoe was found. The North Seawas

unusually calm and rescuers had been puzzled that Darwin could have got into trouble in such conditions.

Missing years

During the years that Darwin was presumed dead, he lived for some time in a bedsit next door to the family

home; he then moved back in with his wife Anne in February 2003. A death certificate was issued the

following month, stating that John Darwin "probably encountered difficulties, as a result of which he

died". This allowed his wife to claim on his life insurance; it is alleged that £25,000 was paid out from Unat

Direct Insurance Management Limited (part of the AIG insurance group)as well as a much larger amount

which paid off the £130,000 mortgage. Sometime that year, a tenant of the block of bedsit flats that the

Darwins owned, Lee Wadrop, recognised Darwin and asked him "Aren't you supposed to be dead?" to which

Darwin replied "Don't tell anyone about this". Wadrop later said that he had not told the police because he

"did not want to get involved".

19

Horse murders

The horse murders scandal refers to cases of insurance fraud in the United States in which expensive horses,

many of them show jumpers, were insured against death, accident, or disease, and then killed to collect the

insurance money. It is not known how many horses were killed in this manner between the mid-1970s and

the mid-1990s, when a Federal Bureau of Investigation(FBI) investigation brought the horse killings to light,

but the number is thought to be well over 50, and may have been as high as 100. In addition, in 1977, the

heiress Helen Brach disappeared and was presumed by law enforcement agents to have been murdered by the

perpetrators of these crimes, because she threatened to report their criminal activity to authorities; continuing

investigations into Brach's death began to uncover the insurance fraud in the 1990s.

The scandal has been called "one of the biggest, most gruesome stories in sports"as well as "the biggest

scandal in the history of equestrian sports."

Thirty-six people were indicted and tried for insurance fraud, mail and wire fraud, obstruction of

justice, extortion, racketeering, and animal cruelty in connection with the horse murders; 35 were convicted.

Of the 23 people indicted in Chicago in July 1994, 20 pleaded guilty.

The disappearance and murder of Helen Brach was never fully solved, although one man, Richard Bailey, is

serving life in prison for soliciting her murder. Over the 20-year period during which the horse murders took

place, several different motivations led horse owners and trainers, often affluent and well-respected people,

to become involved in what ultimately became a widespread conspiracy.

In some cases, the owner of a promising, or even prize-winning, horse was temporarily strapped for cash and

decided to insure and then kill the animal; this was the situation in the 1982 murder of the show

jumper Henry the Hawk Sometimes people bought over-valued horses. Rather than take a loss on a poor

investment, these owners chose to finance their next horse purchase by defrauding the insurance company

that had insured the unwanted horse.

Another aspect to the scandal went beyond insurance fraud and involved racketeering. This scheme, a form

of confidence game, consisted of bilking wealthy widows of their money by encouraging them to invest in

horses. The animals were usually over-valued or under-performing, and the conspirators killed the animals in

order to prevent the owners from uncovering how much they had overspent.

20

FIRE INSURANCE FRAUD

John Magno

John Magno  is a businessman from Toronto, Canada, who is incarcerated after being convicted

of arson and insurance fraud.

Magno was the president of Woodbine Building Supply at Danforth Avenue and Woodbine Avenue, a

business he co-owned with his two brothers Frank and Carlo and founded by their father, an

immigrant. However, in recent years the business suffered as a Home Depot opened nearby. Magno also

frequently had disputes with the nearby residents and the store had been fined $11,800 for storing materials

in what was classified as a parking area.

Woodbine Building Supply was destroyed on Christmas Eve in 2001, in what was one of the biggest fires in

Toronto's history. Toronto Fire Services required more than 170 firefighters and 40 vehicles were required to

bring the six-alarm blaze under control. The building was fewer than 50 metres from residences in the

neighbourhood and more than 50 families had to evacuate their homes on Christmas morning. Residents

were temporarily housed in TTC buses, being allowed to return to their homes around 7 a.m. on Christmas

morning. Sam Paskalis was severely burned and disfigured, remaining in a coma for several months. Two

weeks after the fire, investigators sifting through the rubble found the charred corpse of Anthony "Tony"

Jarcevic.

Investigators quickly suspected arson, and suggested that Paskalis and Jarcevic were caught in the

conflagration due to their inexperience, when they prematurely ignited gasoline and other flammable

substances. The siblings were in the process of growing their business to a new location on Sunrise Avenue,

even closer to a Home Depot, having established an outlet there, while the old Woodbine Building Supply

was to be demolished and a new condominium development would be built. The Magno brothers had always

maintained proper insurance. The perpetrators chose Christmas Eve to start the blaze because they believed

there would be fewer witnesses since Italians and Greeks in that area were likely in church for midnight

mass.

Paskalis admitted his involvement in the alleged scheme, which saw the Crown drop the second-degree

murder charges. He received a seven-year sentence for manslaughter. Paskalis had a history of being a con

man, and one of his schemes involved people applying for a loan through a fake company and paying the

insurance fees up front but never getting the loan.

21

HEALTH INSURANCE FRAUD

Hospital Corporation of America

 HCA is an American for-profit operator of health care facilities, the largest in the world. It is based

inNashville, Tennessee and currently manages 162 hospitals and 113 freestanding surgery centers in the

United States and United Kingdom.

On March 19, 1997, investigators from the FBI, the Internal Revenue Service and the Department of Health

and Human Services served search warrants at Columbia/HCA facilities in El Paso and on dozens of doctors

with suspected ties to the company. Following the raids, the Columbia/HCA board of directors forced Rick

Scott to resign as chairman and CEO.

 He was paid a settlement of $9.88 million and left with 10 million shares of stock worth over $350 million,

mostly from his initial investment. In 1999, Columbia/HCA changed its name back to HCA, Inc. HCA also

admitted fraudulently billing Medicare and other health programs by inflating the seriousness of diagnoses

and to giving doctors partnerships in company hospitals as a kickback for the doctors referring patients to

HCA.

They filed false cost reports, fraudulently billing Medicare for home health care workers, and paid kickbacks

in the sale of home health agencies and to doctors to refer patients. In addition, they gave doctors "loans"

never intended to be repaid, free rent, free office furniture, and free drugs from hospital pharmacies.

22

  Isabel Parker’s slip-and-fall schemes  

Prosecutors say 71-year-old Isabel Parker was no retiree. Her slip-and-fall insurance schemes were like a job

- and she kept very busy.They say the Deptford woman filed a total of 49 bogus personal-injury claims in

Philadelphia, Delaware County and New Jersey and collected $500,115 between 1993 and 2000.

Parker - who authorities said yesterday had been charged in connection with 20 bogus claims in Philadelphia

and Delaware Counties - would fake falls and injuries in supermarkets, department stores, liquor shops, and

other stores, according to a detective's affidavit. Then, using multiple phony names, Social Security numbers,

and addresses, Parker settled her claims over the telephone with insurance companies - for payouts ranging

from $455 to $27,640, according to the detective's sworn statement. She pleaded guilty last summer to 29

counts of insurance fraud and theft in New Jersey, and is currently serving her four-year sentence under

house arrest at her Jefferson Boulevard home.

"This problem is not just one of taking money from the insurance companies," Philadelphia District Attorney

Lynne M. Abraham said yesterday. "When people put up phony claims . . . this costs us, the ratepayers, a big

chunk out of our pocket. That's why our rates go up. "Delaware County District Attorney G. Michael Green

said: "In this part of the state, I think it's common knowledge that the rates for property and casualty

insurance are higher than they are elsewhere in the commonwealth" in part because of fraudulent claims.

"We're going to prosecute anyone who's involved in insurance fraud . . . because it has a direct impact on the

pocketbook of every household," Green said. Abraham and Green said Parker faced additional charges in

connection with eight allegedly fraudulent claims in Philadelphia and 12 more in Delaware County - together

worth a total of $231,414.

It was an alert Nationwide Insurance Co. claims representative who first suspected fraud, after a woman

calling herself Delores Hahn wanted a quick $22,500 settlement for a Nov. 30, 1999, fall at Bell Beverage in

South Philadelphia, according to the detective's affidavit. The Nationwide employee became suspicious

because the woman was available only by cellular phone and had no permanent address. In addition, no one

saw the woman fall over a neat pile of folded cardboard boxes, as she had claimed before requesting the

store's insurance information.

23

In checking a database of active insurance claims, the employee found an extensive list of claims with the

same addresses the woman provided. "The suspicion was raised about Ms. Parker and this claim, and that

began to peel back several layers," Abraham said. "It took a lot of time to do this, because she used so many

aliases and combinations of names."

Sometimes, Parker used her sisters' names for claims, Abraham said.

Nationwide referred the case to the Philadelphia District Attorney's Office. Using records subpoenaed from

Parker's banks, detectives were then able to trace back dozens of settlement checks.

Now, Parker faces multiple counts of insurance fraud, theft, forgery, and receiving stolen property in

Philadelphia and Delaware County.

Abraham added that the complex investigation continued. "We're not convinced yet that we know all of

them," Abraham said. "She had no known employment that we are aware of - she was employed in the

business, we allege, of committing insurance fraud."

24

Workers' Compensation Insurance Fraud.

Fraudster Trades Prada for Prison Blues

Living a lavish lifestyle, complete with beautiful jewels and luxury-brand handbags, shoes, and cars, Devon

Lynn Kile, of Lauguna Hills, had big plans to appear on the TV show, "Real Housewives of Orange County."

Instead, the 42-year-old wannabe star has appeared many times in an Orange County court room after

committing a state record of more than $30 million in workers' compensation insurance fraud.

Two years ago she traded her Prada for prison blues, while her case was pending.

In April, she pleaded guilty to more than 70 felony counts, including misrepresenting facts to the State

Compensation Insurance Fund and failing to file a return with the intent to evade tax.

On Dec. 1, she was sentenced to 10 years of probation. If she does not successfully complete her probation,

she will be sentenced to 10 years in state prison, Superior Court Judge Erick Larsh ordered.

In addition, Kile was ordered to pay $1.3 million in restitution to the Employment Development Department

and $1.5 million in restitution to the Franchise Tax Board. Therestitution to the state insurance fund is still to

be determined, pending a decision by an appeals court on how much her husband, co-defendant Michael

Vincent Petronella, owes.

Petronella, 52, was sentenced in 2010 to 10 years in state prison after being found guilty earlier that year of

33 felony counts of insurance fraud and a sentencing enhancement.

He has been ordered to pay $500,000 in restitution to the state insurance fund. The district attorney, however,

is appealing, seeking a higher amount to cover the millions of dollars in loss.

According to prosecutors, Petronella and Kile used their companies, which included clients such as the

Ocean Institute, in Dana Point, and the Pacific Amphitheater, in Costa Mesa, as personal piggy banks to

support their lavish lifestyle.

Among the luxury items seized at the couple's home: $500,000 in jewels, including Chopard and Rolex

watches, and a 10-carat diamond ring valued at $70,000, Gucci, Chanel, Burberry, and other luxury-brand

handbags and shoes, and two Ferraris, a Bentley, and a Range Rover.

25

Also seized during a raid was an application for Kile to appear on the "Real Housewives of Orange County."

Prosecutors say Petronella and Kile, who owned three businesses in Costa Mesa and Cathedral City,

including Petronella Roofing, underreported the number of employees and discouraged workers from filing

claims.

Starting in 2000, the couple obtained workers' compensation insurance for their companies through the state

insurance fund. From 2000 through 2008, Petronella fraudulently submitted 42 claims for uninsured injured

workers and underreported $29 million in payroll to the fund to avoid paying premiums.

26

MOTOR INSURANCE FRAUD

Hauled to Jail: NYPD Dismantles Staged Accident Ring

New York authorities have dismantled a fraud ring involving U-Haul trucks, a slew of feigned injuries, and

$400,000 in unwarranted insurance claims payouts.

Following a year-long investigation by the NYPD and attorney general, police arrested 16 people on

Tuesday, March 6 in connection with numerous staged accidents designed to take advantage of the state’s

controversial no-fault personal injury protection (PIP) system.

“With New York’s no-fault insurance law, claims can be filed for up to $50,000 to cover physical therapy,

acupuncture, and chiropractic sessions,” explains Detective Patrick Donohue of the NYPD’s Fraudulent

Accident Investigation Squad. “Meanwhile, separate lawsuits for bodily injury can be filed concurrently.”

Donohue told the press that several of the incidents involved U-Haul trucks rented by “people with squeaky-

clean licenses.” Allegedly the scam’s leaders would pay each shill between $100 and $500 to rent a moving

truck to set the stage for various ploys. These accidents involved scammers jumping in front of cars, trucks

colliding into cabs, and various other situations from which the perpetrators could feign injuries, seek

treatment, and ultimately receive reimbursement.

All of the Brooklyn, New York suspects received a free ride to the local jail. Each faces charges of insurance

fraud, grand larceny, falsifying business records, and misdemeanor conspiracy charges.

CONCLUSION

27

Soft frauds are increasingly becoming cause of concern for general insurance companies in India. Because of

dishonest acts of few, all other stakeholders have to pay a price. This must stop. All fraudulent claims

whether soft or hard must be curbed for it is in the best interest of everybody concerned. In case of organized

fraudulent claims racket (MACT,Health etc.) there is need for national level information gathering and strong

mechanism and a collective effort to minimize fraudulent claims. Ultimately, honest customers have to pay

for fraudsters. There is need to declare a war against the "fraud." According to a report published by the

Association of British Insurers (ABI) the cost of insurance fraud is now estimated to be £ 5.2 million ($ 8.48

million) everyday. Back in India, if newspaper reports are to be believed, then according to a recent survey

conducted by India Forensic Research

(Pune based consultancy) the insurance industry in India is loosing around Rs.15000 crores in a year due to

fraudulent claims on health and motor portfolio. Judiciary unfortunately takes a different attitude to

fraudulent claims as compared to other fraudulent civil suit. Public attitude towards insurance fraud is also a

cause of concern for insurance companies. Majority of the people do not see anything wrong in inflating the

claim. This has been confirmed in an independent opinion research into public attitude towards insurance

frauds commissioned by ABI. If such an opinion poll is conducted in India the result will not be any

different. There is a need to create awareness.

28

Bibliography

Newspaper

16 Hauled to Jail:. (2014). PROPERTY CASUALTY 360, 9th march 2012, p. NYPD Dismantles

Staged Accident Ring.

Fraudster Trades Prada for Prison Blues '. (2014). PROPERTY CASUALTY 360, 9TH DECEMBER

2011, p. 'Real Housewives' Wannabe Breaks Calif. Workers' Comp Record.

Insurance scammer gets more charges Isabel Parker, 71, who was convicted in slip-and-fall schemes

in N.J., is charged with filing bogus claims in Pa.. (2014). Philadephia., 2nd july 2033.

Book’s

Hymes, L. & Wells, J. T. (n.d.). Insurance fraud casebook.

Fordney, M. T. (1999). Insurance handbook for the medical office. Philadelphia: W.B. Saunders.

Journals

Petrosino, A., Kiff, P. & Lavenberg, J. (2006). Research note: randomized field experiments

published in the british journal of criminology, 1960--2004. Journal Of Experimental Criminology, 2

(1), pp. 99--111.

Websites

Business.gov.in. (2014). Business portal of india : managing business : insurance : types of insurance

: fire insurance. [online] Retrieved from: http://business.gov.in/manage_business/fire_insurance.php

[Accessed: 16 Feb 2014].

Business.gov.in. (2014). Business portal of india : managing business : insurance : types of insurance

: miscellaneous insurance. [online] Retrieved from:

http://business.gov.in/manage_business/miscellaneous_insurance.php [Accessed: 16 Feb 2014].

Cii.co.uk. (2014). Types of insurance. [online] Retrieved from:

http://www.cii.co.uk/membership/new-starters/types-of-insurance/ [Accessed: 16 Feb 2014].

New York Alliance Against Insurance Fraud. (2014). Causes. [online] Retrieved from:

29

http://www.fraudny.com/causes-of-insurance-fraud [Accessed: 16 Feb 2014].

There’s a conspiracy theory that the Titanic didn’t actually sink! - OMG Facts. (2014). There’s a

conspiracy theory that the titanic didn’t actually sink!. [online] Retrieved from: http://www.omg-

facts.com/Interesting/There-s-A-Conspiracy-Theory-That-The-Tit/54649#PR5tS0kYywSYEfDM.99

[Accessed: 16 Feb 2014].

Unknown. (n.d.). [online] Retrieved from:

http://www.acfe.com/uploadedFiles/ACFE_Website/Content/documents/Insurance-Fraud-

Handbook.pdf [Accessed: 16 Feb 2014].

Wikipedia. (2009). Insurance fraud. [online] Retrieved from:

http://en.wikipedia.org/wiki/Insurance_fraud [Accessed: 16 Feb 2014].

Wikipedia. (2011). Vehicle insurance. [online] Retrieved from:

http://en.wikipedia.org/wiki/Vehicle_insurance [Accessed: 10 Feb 2014].

Wikipedia. (2014). Insurance. [online] Retrieved from: http://en.wikipedia.org/wiki/Insurance

[Accessed: 16 Feb 2014].

Wikipedia. (2014). John darwin disappearance case. [online] Retrieved from:

http://en.wikipedia.org/wiki/John_Darwin_disappearance_case [Accessed: 13 Feb 2014].

Wikipedia. (2014). Horse murders. [online] Retrieved from:

http://en.wikipedia.org/wiki/Horse_murders [Accessed: 15 Feb 2014].

The Globe and Mail. (2011). John magno sentenced to 12 years in prison in fatal arson scheme.

[online] Retrieved from: http://www.theglobeandmail.com/news/toronto/john-magno-sentenced-to-

12-years-in-prison-in-fatal-arson-scheme/article595313/ [Accessed: 16 Feb 2014].

Wikipedia. (2014). Hospital corporation of america. [online] Retrieved from:

http://en.wikipedia.org/wiki/Hospital_Corporation_of_America [Accessed: 16 Feb 2014].

30

31

32

33

34