FRAUDS IN INSURANCE SECTOR

INTRODUCTION

India insurance is a flourishing industry, with several national and international players competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations, the Indian insurance sector been allowed to flourish, and as Indians become more familiar with different insurance products, this growth can only increase, with the period from 2010 - 2015 projected to be the 'Golden Age' for the Indian insurance industry.

The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the country’s GDP. In spite of all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance.

Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy matures and the wealth of the middle classes increases. The most common types include: term life policies, endowment policies, joint life policies, whole life policies, loan cover term assurance policies, unit-linked insurance plans, group insurance policies, pension plans, and annuities. General insurance plans are also available to cover motor insurance, home insurance, travel insurance and health insurance.

Due to the growing demand for insurance, more and more insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the India insurance industry.

What is insurance fraud?

In a broad strokes definition, fraud is a deliberate misrepresentation which causes another person to suffer damages, usually monetary losses. Most people consider the act of lying to be fraud, but in a legal sense lying is only one small element of actual fraud. A salesman may lie about his name, eye color, place of birth and family, but as long as he remains truthful about the product he sells, he will not be found guilty of fraud. There must be a deliberate misrepresentation of the product's condition and actual monetary damages must occur. Many fraud cases involve complicated financial transactions conducted by 'white collar criminals', business professionals with specialized knowledge and cr iminal in t ent . Criminals are using increasingly sophisticated electronic schemes to defraud insurance companies. Fraud is not easily proven in a court of law. Laws concerning fraud may vary from state to state, but in general several different conditions must be met. One of most important things to prove is deliberate misinterpretation of facts

The dictionary defines fraud as the intentional perversion of truth to induce another to part with something of value or to surrender a legal right. Those who commit insurance fraud range from organized criminals who steal large sums through fraudulent business activities and insurance claim mills to

professionals and technicians who inflate the cost of services or charge for services not rendered, to ordinary people who want to cover their deductible or view filing a claim as an opportunity to make a little money. Some lines of insurance are more vulnerable to fraud than others. Healthcare, workers compensation and auto insurance are believed to be the sectors most affected.

Insurance Fraud can be:

-       Opportunistic – the padding and exaggeration of otherwise legitimate claims

-       Premeditated – Arson, theft, staged incidents involving the fabrication of a

claim

-       Based on Non-Disclosure – Misrepresenting or hiding facts relevant to a

claim

Causes Of Insurance Fraud

The “chief motive in all insurance crimes is financial profit.” Insurance contracts provide both the insured and the insurer with opportunities for exploitation. One reason that this opportunity arises is in the case of over-insurance, when the amount insured is greater than the actual value of the property insured.This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy.

Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims. This allows fraudsters to file claims for damages that never occurred, and so obtain payment with little or no initial cost.

The most common form of insurance fraud is inflating of loss.

Why Is Insurance Fraud So Big?

Insurers sometimes back off. Most insurance companies take a tough stand against fraud, but some companies unwittingly encourage fraud by paying suspicious claims too easily. These companies believe it’s cheaper to pay some smaller suspect claims than fight in court, and a quick payoff also may avoid multimillion-dollar lawsuits for bad faith.

Health system is an easy target. The sheer number of patients and treatments plus complexity of billing attract cons who are skilled at looting our overworked health care system. The pressure to control costs also encourages many doctors or health firms to cheat so they can recoup lost profits or meet rigorous treatment quotas. Immigrants are vulnerable. Insurance cheats consider large and growing immigrant groups easy targets.

Low-Risk Crime- Insurance cheaters view insurance fraud as a low-risk, high-reward game, and far safer than drug trafficking or armed robbery. Consider:

Some states still don’t have specific insurance fraud laws, thus discouraging many prosecutors from tackling tough fraud cases.

Courts are getting tougher on convicted schemers, but too often jail sentences still are light, with courts often reserving space in overcrowded prisons for people convicted of more-violent crimes.

Professional societies overseeing doctors and lawyers often are reluctant to discipline peers convicted of insurance fraud.

Low Legal Priority- Prosecutors often give top priority to combating drugs, violence and other high-profile crimes. Though prosecutors are tackling more fraud cases than in the early 1990s, too many prosecutors still believe insurance crimes often are too complex and technical to successfully prosecute.

People Tolerate Fraud- Too many consumers believe insurance fraud is justified. This environment of tolerance makes it much easier for con artists to operate safely. Research by the Coalition Against Insurance Fraud reveals:

Two of three people tolerate insurance fraud to varying degrees;

Two of five people want little or no punishment for insurance cheats; they blame the insurance industry for its fraud problems because they believe insurers are unfair.

Various stages of insurance fraud :

Fraud can occur at any stage during the process of applying, buying, using, selling,

underwriting insurance or while staking a claim which can be broadly categorized

as pre-insurance otherwise known as application fraud and post insurance

comprising eligibility and claims fraud.

Pre-insurance stage : Application fraud

This is committed when material misrepresentations are made on an application for

insurance with the intent to defraud. Application Fraud differs from claim fraud in

that the perpetrator is not seeking to illegitimately obtain a benefit payment-rather

the perpetrator is seeking to illegitimately obtain a general insurance coverage

only. Planned non-disclosure by clients has always been a major problem faced by

Insurance industry, which sadly is socially acceptable.

Hiding relevant and potentially damaging information is almost a norm in India.

Even if the customer wants to disclose, his/ her insurance agent advises to the

contrary and convinces the customer not to tell as it may attract extra premium.

Agent is after all interested only in his commission and is worried that faced with

extra premium, for which client may decide not to take the policy.

Post insurance stage: Frauds at this stage can be either an eligible fraud or claims

fraud.

Eligibility fraud: Eligibility fraud most commonly involves misrepresentations of

the status of beneficiary. In such cases, the benefit is paid to a person not eligible

to receive benefits because of various factors..

Fraud by way of identity theft where people stole other person's identity to make

false insurance claim, widely prevailing in the west is another species of the

eligibility fraud.

Claims fraud: Most common where the losses are concocted, exaggerated,

inflated, manipulated, manufactured, stage managed, to name a few. Magnitude

and frequency of any insurance fraud is greater at the claim stage in comparison to

pre-insurance stage.

CATEGORIES OF INSURANCE FRAUD

Insurance fraud comes in two main categories: seller fraud and buyer fraud. Seller fraud occurs when the seller of a policy hijacks the usual process, in a way that maximizes his or her profit. Buyer fraud occurs when the buyer bends the process to obtain more coverage, or claim more cash, than he or she is rightly entitled to.

Types of Seller FraudThere are many variations of seller fraud, but they all center around four basic types. These are:

Ghost Companies: In the ghost company scenario, policies are issued and premiums accepted from policyholders, but the company underwriting the policy isn't legitimate and often doesn't exist. These outright frauds are a type of boiler room operation, where a team of high-pressure scam artists dial likely victims to sell them false policies. Unfortunately, the fraud isn't usually discovered until someone tries to file a claim on the policy their family member thought was in effect, in the event of his or her death.

Premium Theft: The premium theft scenario is when the insurance rep accepts premiums, but doesn't submit them to the company underwriting the

policy, thus invalidating the policy. In this case, the agent essentially pockets the money. Premium theft has become less of an issue as more companies have moved towards direct deposit models, but it is still possible in some cases.

Churning: Churning refers to a situation where the insurance rep advises the customer to cancel, renew and open new policies in a way that is beneficial to him or her, instead of beneficial to the client. This type of insurance fraud often targets seniors and is driven by the agent's desire for larger commissions. Churning keeps a portfolio constantly in flux, with the primary purpose of lining the advisor's pockets.

Over or Under Coverage: Similar to churning, under or over coverage occurs when an insurance rep convinces customers to buy coverage they don't need, or sells a lesser policy and represents it as a complete policy. In either case, the rep is trying to maximize commissions and ensure the sale, rather than focusing on meeting the client's needs.

Types of Buyer FraudBuyer fraud also comes in a number of different flavors, but they all center around a theme of dishonesty. Basic types of buyer fraud include:

Post-Dated Life Insurance: Post-dated life insurance refers to a policy that has been arranged after the death of the person being insured, but appears to have been issued before death. This type of fraud is usually carried out with the help of an insurance agent. It is also one of the easier types of fraud for insurance companies to detect, because record keeping has become more stringent.

False Medical History: Falsifying medical history is one of the most common types of insurance fraud. By omitting details such as a smoking habit or a pre-existing condition, the buyer hopes to get the insurance policy for cheaper than he or she would have otherwise been able.

Murder for Proceeds: There are two versions of the murder for proceeds fraud. In the first, the insured doesn't know they are insured and are

understandably surprised to be murdered. In the second, the policy is legitimate and was taken out in better times, however, financial hardships lead the perpetrator to decide that killing his or her spouse/family member/business partner, for the money, is the best way out of the problem.

Lack of Insurable Interest: As with murder for proceeds, insuring people you shouldn't be insuring, in hopes that they will die, constitutes fraud. Insurance is founded on the idea of protecting people from financial loss, so using it to gamble on lives for a financial gain is a perversion of the system. This includes viatical settlements, which combine non-insurable interest with falsified policies taken out on the terminally ill.

Suicidal Accidents: Just as financial hardship can lead otherwise rational people towards murder, the same factors can lead people to commit suicide in a way so it looks accidental. This constitutes fraud in that it is an intentional act for the purpose of collecting the insurance proceeds, and would not have occurred if those proceeds did not exist. This can be a very difficult one to detect, as the medical examiner has final say in accidental death. Even if it is clearly a suicide, the claim centers on the state of mind, rational or not, at the time of suicide.

Faking Death or Disability: Many life insurance policies have riders for disability, creating the temptation to fake one to get the payout. However, some people take it a step further and fake their own deaths. In both cases, the fraudster has to deal with the possibility of being discovered through an investigation.

TYPES OF INSURANCE FRAUD

Many types of insurance fraud exist from scamming auto insurance to life insurance to property insurance. All types of insurance fraud can be divided into a “hard” or “soft” fraud

Hard Fraud

Hard fraud includes someone staging a car accident, injury, arson, loss, break-in, or someone writing false bills to Medicare to illegally receive money from their insurance companies. This type of fraud often receives more media attention and it’s easier to detect. Hard fraud often involves criminal activity and the intention of squeezing millions of dollars out of insurance companies. But, the average person can also be found guilty of hard fraud.

Soft Fraud

Soft fraud is more difficult to detect. It happens when a person pads their insurance claim by telling “white lies”, such as, they’re feeling too ill to come to work, so they can receive worker’s compensation benefits that they wouldn’t have otherwise.

Worker’s compensation claims is the most frequent and expensive type of soft fraud. It costs insurance companies millions of dollars a year. As a result, insurance premiums are rising. Yet, approximately up to one-third of consumers don’t see anything wrong with employees receiving worker’s compensation benefits even if they are healthy enough to go back to work.

Public Polls

Recent polls show that people express anger towards hard fraud and would like to see the criminal serving time behind bars. However, more than 25 percent of people also thought soft fraud involving consumers padding insurance claims was acceptable. Even a higher percentage of people found the embellishment of claims and the misrepresentation of policy information in order to recover insurance deductibles and lower the amount of premium they owe to insurers, justifiable.

Though the industry does have its share of issues to contend with, it remains important to secure your personal and family's future with a term life insurance policy from a reputable insurance company.

Getting Caught

Evidence suggests that up to 10-15% of claims exhibit fraud ‘indicators’. Understandably insurers undertake sophisticated anti-fraud measures and will investigate activity believed to be fraudulent.  Insurers work closely with law enforcement in each jurisdiction to ensure that appropriate action is taken when fraud is proven to have occurred. The penalties for a fraud conviction may vary from State to State, but all are classified as serious indictable offences which can result in substantial custodial sentences if convicted.

What is the penalty for being found guilty of insurance fraud?In most of its forms, insurance fraud is a felony. When caught, prosecuted and found guilty, most fraud perpetrators are required to make restitution and jail time is also commonly imposed.

What is the most common types of fraud cases?Insurance fraud can be divided into three categories: false claims for injuries; arson for profit; and false or intentional auto theft and physical damage.

What is the insurance industry doing to reduce fraud?The insurance industry is committed to reducing fraud by teaching claims professionals how to recognize suspicious claims and work with law enforcement and fir services. Insurance companies have units trained to investigate fraud.

What can citizens do to reduce fraud?People who want to fight back against this crime can call their state department of insurance and report the crime.

What effect does fraud have on the average insurance policy holder?The insurance industry estimates the size of insurance fraud to be about 10-15 percent of the premium dollar. This puts the yearly costs at an estimated $18 billion nationally. As fraud is reduced or eliminated, clams costs can be lowers and those savings can be passed on to policyholders.

Insurance fraud: the crime you pay for

Watch out — insurance crooks are picking your pocket in order to line theirs. These thieves are committing insurance fraud, one of largest criminal industries.

Insurance fraud is a crime, and one way or another, honest consumers and businesses pay the price.

Insurance fraud occurs every day and in every state. Fraud are widespread and very costly. Fraud involves intentional deception or misrepresentation intended to result in an unauthorized benefit.

People of all races, incomes and ages are victimized. But look beyond the high costs… you’ll also see honest, hardworking people whose lives, businesses, careers and families are damaged or even ruined by insurance fraud crimes.

People lose their savings. Trusting citizens are bilked out of thousands of dollars, often their entire life savings, by insurance investment schemes. The elderly are especially vulnerable.

Health is endangered. People’s health and lives are endangered by swindlers who sell nonexistent health policies or perform quack medical care to illegally inflate health insurance claims.

Premiums stay high. Auto and homeowner insurance prices stay high because insurance companies must pass the large costs of insurance fraud to policyholders.

Consumer goods cost more. Prices of goods at your department or grocery store keep rising when businesses pass higher costs of their health and commercial insurance onto customers.

Honest businesses lose money. Businesses lose millions in income annually because fraud increases their costs for employee health coverage and business insurance.

Innocent people are killed and maimed. People die from insurance schemes such as staged auto accidents and arson — including children and entire families. People and even animals also are murdered for life insurance money.

Employees lose jobs. People lose jobs, careers and health coverage when insurance companies go bankrupt after being looted by fraud thieves.

Life Insurance Fraud

Life insurance fraud is when a person either buying or selling a life insurance policy intentionally misrepresents information on the policy, or deceives the insurance company in some way in order to profit from the misrepresentation. The most common type of live insurance fraud is misrepresenting information on the application form. Life Insurance Fraud

Age may be misrepresented, along with health status or claiming to be a non-smoker when it is not true. That actually does represent fraud. People have faked death so that family members can claim policies. Others create a false identity that they can then “kill” for the money. As unsavory as these crimes are, they are at least not physically harming an actual person. Unfortunately, there have been many

instances where someone has killed someone else in order to collect on life insurance. This is not only fraudulent but typically considered as first-degree murder. Fraud on an application will invalidate the entire policy, even if premiums were paid timely. Life insurance policies may be more expensive when medical conditions exist, but it is better to pay the additional premium amounts than to totally invalidate the claim when the fraud is discovered.

Life insurance agents can also commit fraud when writing life insurance policies. Some unscrupulous agents intentionally prey on the elderly by slipping things in the policy that were not asked for. Insurance agents working on strict commission can add benefits not requested or wanted, or sign the policy holder up for annuities that are not in their best interest. Always check the policy carefully before signing. Elderly persons should have a trusted family member or financial planner review the policy to prevent live insurance fraud.

This fraud by insurance agents can happen to anyone. Always check the policy carefully and know what is being signed. No one should ever write out a check for the premiums to the insurance agent. Always make the check out to the insurance company issuing the policy.

In viatical fraud, agents recruit people with terminal illnesses to buy numerous policies, all of which will have an annuity. The person gets some money to make it to the end of his or her life, but the majority of the funds will end up in the pockets of third-party investors after the person’s death. Doctors may be involved to certify the “health” of the severely ill person, who also lies about medical condition, and the broker or salesmen is clearly part of the scheme too.

Along with viatical life insurance fraud, other types of fraudulent activities may be practiced by agents selling insurance. Sometimes agents ask people to sign blank forms or offer people new deals on insurance that drain their present insurance to pay for the new policy. These can be fraudulent acts, and people looking to purchase more insurance should be aware of them.

Life insurance fraud case study

Delayed intimation of death of an insurance policyholder can't be reason to deny claim Delayed intimation of death of an insurance policy holder cannot be reason to deny compensation, the city consumer redressal forum has ruled. Four years after Vijaya Dhumal, a farmer, died in an accident, the Mumbai suburban district consumer disputes redressal forum has directed an insurance compa ny to settle the claim made by her relatives. Vijaya was covered under the state government’s insurance policy for farmers.The forum directed Reliance General Insurance Co Ltd to pay Dhumal’s son Prakash and her husband — both Raigad residents — Rs 50,000 each towards the settlement of the claim that the company had rejected citing late intimation. Prakash was also paid Rs 10,000 towards compensation and cost of complaint.Dhumal was covered under the scheme ‘Shetkari Vyaktigat Appaghat Vima Yojana’ — a farmers’ personal accidental insurance policy taken out by the state government in collaboration with National Insurance Company and Reliance General Insurance Company. Dhumal’s policy taken from Reliance fell under the Konkan and Pune area’s revenue department for farmers in the age group 14-75 years. The policy was in force from 2005 to 2007 in which the person was insured for Rs 1 lakh towards accidental death.Prakash said his mother died in an accident while travelling in a tempo on her way back from a family function on November 18, 2006. Dhumal then filed the insurance claim documents and sent it to the concerned the village revenue officer — as per policy rules.Prakash said he was not aware when the documents reached the insurance company. But, on March 31, 2008, he received a letter by the company that the claim was repudiated for late intimation. Before the forum , the company did not deny Prakash’s version. However, through his lawyer, Prakash stated there was no time limit on the policy under which his mother was insured.The forum on the basis of the state consumer commission’s judgment observed that Reliance General Insurance Company’s refusal to settle the claim on the basis of late intimation had lead to deficiency in service by the insurance company.

The forum thereby directed the company to settle the claim by paying the insured amount to Prakash and his father along with other compensation.

Top Ten Things You Need to Know About Life Insurance Fraud

Life insurance fraud is rampant and very costly, but there are things to be done about it, and ten proven areas of knowledge can be learned about his problem to help people be smarter consumers when purchasing life insurance.

1. Bogus Agents – Phony agents are on the rise because of the Internet. They can scam people in many different ways. People need to trust their instincts. Getting excessively low life insurance instant quotes can be the first sign of a scam.

2. Fraudulent Policy Enrollments – Many agents offer ridiculously low life insurance instant quotes that can’t possibly be realistic. This can lead to equally fraudulent new policies being issued in a person’s name so watch the fine print carefully.

3.  Claims to be Licensed – Not every agent is licensed, especially the scammers. Just because a person gets cheap life insurance quote doesn’t mean it’s coming from a state licensed insurance broker. Contact the better business bureau and state insurance boards for the truth.

4. Phony Website – Getting a free term life insurance quote on a website doesn’t mean the site is legitimate. Look for signs of phishing, required downloads that may be malware, etc. Legitimate sites may ask for some information like your state or zip code before getting a quote…this is fine. But before you submit any confidential or private information (especially your SSN) make sure you are securely logged into an encrypted webpage .

5. Stealing Premiums – Finding a good rate on a free term life insurance quote online is a convenient way to compare rates. However, some scammers set up fraudulent payment schemes. So before you send a check or submit credit card information, perform due diligence with all companies who ask to collect your premiums.

6. Letters of Coverage Lapsing – Once a person has a free term life insurance quote that appeals to him, it’s okay to take out a policy. But if frequent letters are being sent that state the policy coverage has lapsed when it really has not, this is a genuine sign of a red flag fraud case occurring.

7. Be Careful Who Checks Are Made Out To – Only make insurance checks out to the company itself, never to the actual agent, because he can then easily pocket the money.

8. Adding Unneeded Coverage – Some agents try to supplement their income by adding unnecessary riders to standard life insurance policies without ever telling the consumer. Read all written polices that are sent to prevent this from happening.

9. Selling Inadequate Coverage – Many unscrupulous agents committing life insurance fraud will state that a person is fully protected when they’re really underselling adequate coverage and pocketing the difference. If the price sounds too good to be true, check your life insurance policy coverage and limits so you don’t fall for this type of fraud.

10. Referrals into Kickback Policies – Many agents in order to earn more income will only steer potential clients into various insurance policies that generate illegal kickbacks for them. So it’s essential to thoroughly investigate any claims of unfamiliar coverage elements that an agent tries hard to sell and convince an individual with.

How to Report Life Insurance Fraud?

1. Examine the health and legal standing of a life insurance signatory to determine whether insurance fraud has taken place. You should report instances where individuals sign the name of an elderly, disabled or comatose relative in order to gain benefits upon death.

2. Assess the amount of money paid out by a life insurance policy to determine the likelihood of fraud. Your report should feature a breakdown of ongoing benefits as well as funeral benefits to provide an overview of the severity of insurance fraud.

3. Speak with friends, family and co-workers to learn about past attempts at ethically questionable uses of life insurance. You should follow leads for

life, auto, health and other insurance fraud to show the character of the party in question.

4. Hunt down contact information on witnesses to acts of life insurance fraud for your report. You should ask witnesses to schedule time with your attorney for an official report on the acts they witnessed to add legitimacy to your case.

5. Speed up the reporting process by utilizing online forms that allow the attachment of scanned documents. You should send the same documents by mail as a security measure, though your online query will likely receive attention within days.

6. Outline the type of life insurance featured in fraudulent activities to help investigators determine the likelihood of fraud. Specific policies, like an accidental death policy, provide a narrow definition for payouts, which leads to a specific type of fraud.

7. Approach a criminal lawyer in your community to help complete your report on life insurance fraud. This lawyer should be familiar with insurance law and the punishment for criminal activities independent of life insurance to give your report the right context.

Tips to Avoid Life Insurance Fraud

The following tips are provided to educate and inform you about how to avoid insurance fraud:

If it's too good to be true, it is.

Never ignore notices from the insurance company even though your agent tells you it's a "mistake" and nothing to worry about.

Be careful of any life insurance plan that promises "vanishing premiums" or guarantees you a premium-free policy over a specific period.

Don't be confused by life insurance disguised as a "pension plan" or a "retirement fund." Life insurance is NOT a pension plan.

Don't let yourself be pressured. You do NOT face any deadlines. Never buy coverage you don't understand. It is the agent's and company's

responsibility to explain your coverage in terms you can comprehend. Save every piece of paper explaining your coverage and your policy. Keep

them on file with your policy. (If the agent used a laptop computer, insist on a hard copy version of what you were shown.)

If a new policy replaces an old policy, make sure the old coverage is not terminated until the new policy has been issued. Also, an agent should explain how you will benefit whenever one policy replaces another.

Never buy life insurance as an investment without understanding that some of your "investment" is paying for your coverage. Life insurance provides protection against economic loss resulting from death. (Also: Be careful of "special opportunities" to expand coverage for a non-working spouse or children.)

If an agent tries to sell you life insurance as an investment with a high return, insist that you be shown that specific guarantee in your contract.

If you are offered a chance to turn in a small policy for a larger one without paying substantially more, WATCH OUT!

Never give an agent money without getting a receipt. Never "loan" money to an agent.

Never sign a form that includes blank spaces, even if the agent assures you they are merely a formality.

Never buy insurance from an unlicensed agent or an unauthorized company. You can check their status by calling your state's Department of Insurance.

Health Insurance Fraud

Health insurance fraud is described as an intentional act of deceiving, concealing, or misrepresenting information that results in healthcare benefits being paid illegimately to an individual or group. The main purpose of fraud is financial gain. However, it not only creates a hole in the insurance companies' pocket, but affects all the stakeholders. It not only invites higher premiums, but also leads to restricted benefits, higher insurance co-payments, potential of denial for future coverage, higher service taxes and also impacts on the quality of care. In India, statistics are also alarming. According to the survey conducted by one of the leading TPA the number of false claims in the industry is estimated at around 10-15 per cent of total claims. The report suggests that the Health care industry in India is loosing approximately Rs 600 crore on "false claims" every year. So to make health insurance viable there is a need to focus on eliminating or reducing fraudulent claims.

Fraud can be committed by both a member and a provider. Member fraud consists of ineligible members and/or dependents, alterations on enrollment forms, concealing pre-existing conditions, failure to report other coverage, prescription drug fraud, and failure to disclose claims that were a result of a work related injury. Provider fraud consists of claims submitted by bogus physicians, billing for services not rendered, billing for higher level of services, diagnosis or treatments that are outside the scope of practice, alterations on claims submissions, and

providing services while under suspension or when license have been revoked. Independent medical examinations are used to debunk false insurance claims and allow the insurance company or claimant to seek a non-partial medical view for injury related cases.

Health insurance fraud case study

A privately insured member claimed for treatment to his shoulder two days after obtaining a policy. The member was on a full medical underwriting (FMU) policy.

An Initial request for the members medical history did not identify a pre existing injury and the insurer commenced to fund the treatment. The members GP confirmed in a report that the condition was new.

Three months after the initial claim an anonymous caller contacted the insurer and reported that they were aware the medical insurance members injury was pre existing.

The matter was referred to fraud investigators who interviewed the physiotherapist. The physiotherapist informed investigators that the injury was pre existing.

Investigators interviewed the health insurance member who admitted the fraud.

The member repaid the £1800 of funding that the insurer had paid, their policy was cancelled and they were reported to the HICFG.

The most commonly observed types of fraud from a provider are:

Patient not admitted in the hospital but claim generated Providers charging more than the peer providers for the same type of

services. Billing for more expensive services or procedures than were actually not

provided or performed. E.g. billing for advanced life support services when basic life support was provided.

Double billing: Charging more than once for the same service. Billing for larger amounts of drugs than are dispensed; or billing for brand-

name drugs when less expensive generic drugs are dispensed.

Billing for ambulance which was not required. Performing medically unnecessary services, investigations, surgeries

solely for the purpose of generating insurance payments. Eg performing angioplasty on the cardiac patients which was not required.

Misrepresenting non-covered treatments as medically necessary covered treatments for purposes of obtaining insurance payments—widely seen in cosmetic-surgery schemes, in which non-covered cosmetic procedures such as "nose jobs," "tummy tucks," liposuction or breast augmentations, for example, are billed to patients' insurers as deviated-septum repairs, hernia repairs, or lumpectomies.

Increasing the length of stay in the hospital. It has been observed that the Length of stay in smaller hospital is much more then the larger set up.

Managing insured patient's accounts by completing and submitting claims on behalf of the patient. There have been instances when the member went for renewal of the policy, he/she found that a claim has been made in his/her policy inviting loading of premium from the insurer.

Claiming for additional services without the knowledge of the patient.

Consumer

With the increasing awareness of the insurance benefits, many policy holders have got involved in healthcare fraud. Consumer frauds mainly fall in three categories:

Claim fraud, Application fraud, and Eligibility fraud.

Claim Fraud

Consumer claim fraud occurs when a consumer makes an intentional misrepresentation in order to receive a benefit payment he is not entitled for. Such Claims can be categorized as:

False claims: e.g. Maternity claims which are not covered under the policy benefit and member is making a claim of hysterectomy with fabricated medical papers.

Collusion with providers to submit false claims: Both provider and the member collude to submit a false claims where the physician receives the benefits from the false claims,

Insurance speculation: An insured applies for several health insurance policies without revealing his/her other coverages. Insured makes a claim from all insurance companies.

Fraud rings: A Group involving consumers, agents, physicians, provider, making a false claim.

Application Fraud

Application fraud is committed when material misrepresentations are made on an application for insurance with the intent to defraud. Application fraud differs from claim fraud in that the perpetrator is not seeking to illegitimately obtain a benefit payment—rather; the perpetrator is seeking to illegitimately obtain health insurance coverage itself.

An applicant denies serious medical condition at the time of taking the policy to obtain coverage that might have been denied or excluded from the scope of coverage or to avoid additional loading of premium.

Consumer is having pre-existing disease but does not declare at the time of filing a claim.

Corporate changing the joining date of the employee by passing an endorsement from the insurance company with falsified records.

Eligibility Fraud:

In eligibility fraud, the benefit is paid illegitimately because the beneficiary was not truly eligible to receive benefits because of non-disclosure from the insured. Eligibility fraud most commonly involves misrepresentations of the status of a dependent or of someone’s employment status. For eg

· Member submitting claim of his siblings / relatives/ dependants, who are not covered under the policy.

· A business’s group health plan covers all full-time employees but not part-time workers. A part-time employee colludes with another employee in human services to falsify records so that it appears that he works full-time and is covered by the plan.

Insurance Staff members / Agents / TPA’s / Brokers

Creating false documents and processing false claims against genuine member’s records.

Stakeholders involved in unfair trade practices to clear non-payable claims.

Statistical healthcare fraud detection techniques

The net effect of excessive fraudulent claims is excessive billing amounts, higher per-patient costs, excessive per-doctor patients, higher per-patient tests, and so on. This excess can be identified using special analytical tools. Provider statistics include;

Total amount billed. Total number of patients. Total number of patient visits. Per-patient average billing amounts. Per-patient average visit numbers. Per-patient average medical tests. Per-patient average medical test costs. Per-patient average prescription ratios (of specially monitored drugs). and many more.

Analytic Healthcare Fraud Detection Methods

Healthcare fraud detection involves account auditing and detective investigation. Careful account auditing can reveal suspicious providers and policy holders. Ideally, it is best to audit all claims one-by-one carefully. However, auditing all claims is not feasible by any practical means. Furthermore, it's very difficult to audit providers without concrete smoking clues. A practical approach is to develop short lists for scrutiny and perform auditing on providers and patients in the short lists. Various analytic techniques can be employed in developing audit short lists. Keep in mind that excessive fraudulent claims lead deviations in aggregate claims statistics. In addition, fraudulent claims often develop into patterns that can be detected using predictive models!

Managing Health Insurance Frauds

Managing frauds is one of most challenging and difficult tasks. There are some suggested ways for better monitoring of the fraud claims but there are still no full proof mechanisms to deal with the burning issue.

Insurers Role:

The first one to get affected by insurance frauds is the insurers, so they need to play an active role in preventing frauds. They need form a team to fight against it. Some suggested methodologies may be:

Formulate a program / internal audit for fighting fraud and sometimes include special investigation units to identify fraud patterns. Investigate frequent reimbursement claim from network hospital, delayed request for cashless, insured admitted for chronic disease like CABG, Angioplasty, kidney failure etc within a year after insurance coverage etc.

Use of our special investigative unit to look into suspicious claims and report fraud to local and state authorities.

Fraudulent claims when discovered and proved should be liable to strict legal action and insurers need to join hands with the regulatory authorities to penalize the frauders.

· Fully investigating fraudulent claims to stop further loss prosecute perpetrators, recover any loss upon discovery.

Fraud awareness training for their claims and investigative staff to identify potential fraudulent cases.

Robust fraud detection tools to deal with the full spectrum of health benefit products and wide array of participants in the healthcare market - doctors, hospitals, pharmacies, pharmacists, dentists, equipment suppliers and more.

Developing the concept of “Partner Providers” rather then “network hospitals” and sharing the insurance risk with them.

Taking patient signature on the bills, preauthorization request note. Use of document management system (DMS) which will help in easy

retrieval of patient previous claim and clinical history if any at the time of settlement of subsequent claim.

Sharing the list of fraudulent providers with all insurance companies, medical councils, doctors association and the insured.

Promotion of “fraud hotline”. Rewards if any someone reports about fraudulent claims. Discouraging treatment in non-network hospitals by introducing co-

payment. Encouraging network hospital usage by providing additional benefits for

treatment taken from partner providers. Cost effective special insurance products with all planned hospitalization to

be taken only on network hospitals. Educational posters and sessions to explain fraud and its penalties. Increased use of technology like using anti fraud software’s to throw triggers

for fraudulent claims. The software’s uses a unique combination of data mining capabilities, visualization techniques and reporting tools, which can identify potentially fraudulent before a claim is paid, or retrospectively analyze providers' statistics and past behaviors to flag suspicious patterns.

Advanced analytics and easy integration with your claims payment processes for improved recovery and prosecution efforts.

Private and public insurance players forming anti fraud association. Psychological profiling and use of lie-detectors. (Insurance companies in

England uses this tool)

Insured’s Role

· Protecting Health Insurance Information: The member should never give their health insurance number to telephone or door-to-door solicitors in a “free medical camp”

The insured needs to understand any "free" treatment that features “no out-of-pocket expense” or “no deductibles,”

· The member should read their benefit and billing statements to ensure that has actually received the treatments that were paid for, and report any apparent discrepancies to concerned authority.

· The member should deal with reputable agent.

· The member should disclose all illnesses at the time of taking the policy. This may amount to little more extra premium but bring more peace at the time of claim.

Providers Role:

Fraud is a serious crime that legitimately concerns all stake holders of the health care system - insurers and premium-payers, government and taxpayers, and patients and health care providers. The doctors and the providers need to play a major role in preventing fraud.

The providers need to avoid fraudulent practice and intimate the TPA / Insurance companies if any beneficiaries approach them for fabricating a false claim. It’s a social and ethical commitment of the hospitals.

Use of Electronic Medical records and integrating with the TPA software or insurance company’s software which will prevent manipulating / tampering with the patients medical history.

Fraud Claims Trigger:

· Insurance frauds usually have common profile and pattern.

· Treatment costs are usually on the higher side as compared to the etiology.

· Costlier investigations are more.

· Diagnosis of the ailment and the investigations done are not much related to each other

· Duration of stay is more at times

· At times histopathology reports usually not available in surgical cases.

· Documentations are usually in order.

· Similar handwriting / over writing

· In most fraudulent claims the treating doctor, agents, ailments are the same.

· Medicine bills in serial order.

· Member purchasing medicine far from the place of residence or provider.

· Patient residence and the hospital address are not geographically same.

· Fraud claimers are short term policy holders with lower sum insured.

· Claims registered immediately after the waiting period is over

· Higher per-patient cost.

· Excessive per-doctor patients.

· Higher per-patient test.

· Higher per-patient average visit numbers. · Per-patient average medical tests. · Fluctuating monthly claims of the providers· Double billing

Managing fraud is one of the most challenging and costly realities, which insurers, government, different regulatory authorities and society cannot afford to overlook. There is a need for participation of the honest stakeholders to jointly address the most burning issue in healthcare industry. All the insurers need to join hands and form a committee for tackling fraudulent claims. Similar to the Health Insurance Portability & Accountability Act of 1996 (HIPAA), which established health care fraud as a federal criminal offense with punishment of up to 10 years of prison in addition to significant financial penalties, there is a need to introduce similar sort of act for the Indian market. All these efforts towards fraud detection and control are not a full proof mechanism but an attempt towards minimizing the same; towards the growth of the health insurance industry.

What Can You Do To Avoid or Prevent Health Care Fraud?

Here are some simple ways you can protect yourself from health care fraud, and keep health care costs down for everyone:

Protect your health insurance ID card like you would a credit card. In the wrong hands, a health insurance card is a license to steal. Don’t give out

policy numbers to door-to-door salespeople, telephone solicitors or over the Internet. Be careful about disclosing your insurance information and if you lose your insurance ID card, report it to your insurance company immediately.

Report fraud. Call your insurance company immediately if you suspect you may be a victim of health insurance fraud. Many insurers now offer the opportunity to report suspected fraud online through their Website.

Be informed. Be informed about the health care services you receive, keep good records of your medical care, and closely review all medical bills you receive.

Read your policy and benefits statements. Read your policy, Explanation of Benefits (EOB) statements and any paperwork you receive from your insurance company. Make sure you actually received the treatments for which your insurance was charged, and question suspicious expenses. Are the dates of service documented on the forms correct? Were the services identified and billed for actually performed?

Beware of “free” offers. Is it too good to be true? Offers of free health care services, tests or treatments are often fraud schemes designed to bill you and your insurance company illegally for thousands of dollars of treatments you never received.

Auto insurance fraud

Auto Insurance Fraud is a mean by which a person claims money more that what he is entitled to from the insurance company. On the other hand it’s seen that insurance company also get involved in the fake transaction and deny the claim of victims who actually deserves. Auto insurance fraud statistics show that insurance fraud begun when insurance first started. Today with advancement of technology auto insurance fraud cases are also on rise and become hard to detect.

World over auto or motor insurance constitute the single largest portfolio ranging between 40% to 70% of total general business insurance segment. Motor insurance is the most potential and vulnerable fraud ridden sector in the industry in comparison to other line of insurance.

Motor insurance is now the leading area for fraud, with its member uncovering 24,000 fraudulent car insurance claims.

Motor Own Damage Claim Fraud : Motor own damage claims fraud committed

at pre and post insurance stage involving both hard and soft fraud.

Hard frauds includes total damage to the vehicle deliberately to get rid of the same

or to earn more money than its market value. Some of the examples are staging

collision, theft of the vehicle, burnt by fire, fall into river, owner vehicles give ups,

loss under an excluded peril etc.

A real accident may occur, but the dishonest owner may take the opportunity to

incorporate a whole range of previous minor damage to the vehicle into the garage

bill associated with the real accident. Soft fraud accounts for the majority of the

motor insurance frauds. Some of the common soft frauds are filing more than one

claim for the single loss, higher costs for repair, damage caused earlier,

replacement of old spare parts etc.

With the advent of orgnised gangs in auto insurance fraud, it become more

complex and sophisticated., which are much difficult to detect, if detected difficult

to prove.

Motor TP :

From chasing ambulance to organise accidents, fraud in motor third party

insurance come a long way . Fraudulent motor TP claims is a multi million dollar

business today involving highly orgnised gangs. More than one of every three

bodily-injury claims from car crashes involves fraud. Insurance Research Council

(1996). More than one-third of people hurt in auto accidents exaggerate their

injuries. Such gangs have their code words for communication among themselves,

where accident is referred to as Movie, vehicles as cans, hospitals as fruit stand and

victims as pineapple. Some of its modus operandi are as under :

Exaggerated claims: Many instances have been discovered in which corrupt

attorneys and health-care providers (combine to bill insurance companies for

nonexistent or minor injuries)

Hit and run cases : Conversion of natural death into a hit and run case or converting a hit and run case to an accident is very common in India as well as abroad.

Paper accidents : Many a times documents created in collusion with various authorities to fake an accident and claim compensation.

Staged accident: Where the fraudsters will use a vehicle to stage an accident with the innocent party. Typically, there would be 4 or 5 fraudsters in the vehicle, which makes an unexpected manoeuvre causing the innocent party to collide with the fraudster's vehicle.

Swoop and Squat: Where one or more drivers in "swoop" car force an unsuspecting driver into position behind a "squat car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car.

Drivers maneuver innocent motorists into low-speed crashes, often making it seem the motorists are at fault. In many cases, the con’s car is packed with so-called passengers who are part of the scam. The passengers claim they received painful (and fake) back and neck injuries that require expensive treatment from a chiropractor or physical therapist who’s part of the scam. The shady medical provider files thousands of dollars with the motorist’s insurance company for useless or even phantom treatment. Increasingly, the crashes never happen at all—the cash and ensuing treatment are fabricated. The largest concentrations of staged accidents are in urban areas. The high traffic volume makes large numbers of injury claims more plausible and recruits for the scams are more-easily available.

Organized gangs: Organized gangs involving recruiters, car “passengers,” doctors, medical clinics, lawyers are involved in many of the largest staged-accident crimes. The gangs lure motorists into crashes, crash their own cars into each other, or invent “paper” accidents that never happened in order to make large volumes of bogus injury claims. These rings are widespread in several areas of the US, and often involve immigrants as street-level operatives. Many states have passed laws and regulations targeting staged-accident rings, and some have formed taskforces, hired special prosecutors and deployed other resources to shutting down the rings.

In India : Whatever is practiced in west easily find its way to India. A recent survey has shown that more than 50% of the TP claims in India are bogus. There are several claims that are based on bogus accidents carried out with the connivance of law enforcing agencies.

In India one public sector insurance company become richer by around Rs.184 Crores due to withdrawal of 427 number of Motor Third Party claim cases, including 40 cases where award have been made, fearing action following investigation by the CBI in pursuance to the direction of the Madras High Court.

Last year it is reported that the Insurance companies were defrauded of around Rs.500 Crores for over five years in seven South Bengal districts. It is apprehended that the figures could be around Rs.1500 Crores over the past ten years. Some of the common Modus operandi of TP frauds in India are conversion of ordinary death / other accidental death cases to Hit and Run cases. Conversion of hit and run cases by implanting another vehicle. Most of the hit and run cases are fixed at a later stage in collusion of the police.

In some cases it was found that the person making the claim changes but all the other details remain the same like 20 claims made on the same car. It was also found that the same vehicle involved in 18 different accidents, all in the same city and the same years.

Death due to own negligence and without involvement of TP vehicles was converted to cases where accident shown to be caused by another vehicle. Accident caused under influence of alcohol converted to cases where accident caused by another vehicle.

On Dec 2, 2000 M. Palanivel was injured in an accident while riding pillion on a two wheeler. Investigation reveals he was riding the two wheeler and fell down when he lost balance.

Mr. Shankar died in an accident when his car was hit by an Ambassador car. Investigation revealed that he died in an accident when his car hit a tamarind tree. There was no involvement of any Ambassador car.

Mr. Periyaswanmy was injured in an accident when his two-wheeler hit by an auto-rickshaw. Investigation revealed that he was allegedly driving under the influence of alcohol and fell off his bike.

Mr. Mohan died in an accident when a lorry hit him when he was driving a motorcycle. Hospital record shows that he died in an accident when his motorcycle rammed into a bullock cart.

Mr. Senthilkumar was injured as a pedestrian when he was run down by a tempo. Fire Dept. records show that he was injured when he fell down the village well. (Moneycontrol .com)

Father and son succeeded in receiving compensation of Rs. 3,55,000/- and Rs. 1,52,000/- for the alleged injury sustained while proceeding in a motorcycle, which was dashed by a car, actually they are operating their own tractor, which jilted into a ditch as result of which the occupants slipped down and sustained injuries. United India vs. Rajendra Singh : 2000(3) SCC 581.

Inclusion of some stock victims name in the list of persons as injured persons even though they are not traveling. Substitution of un-insured vehicle with a insured vehicle. X claiming compensation for the treatment to an injury sustained by Y in vehicle accident. Passengers traveling in a truck converted to either owner of goods or coolies carried in the vehicle. Impersonating the victim, claimant, owner, driver sometimes advocates had been a norm.

Fraud on grand scale committed in MACT and labour Courts in the State of Gujarat by invisible Advocates reports Yong Lawyers.

CBI books Ambala based Advocate for insurance frauds to the tune of Rs. 200 Crores reports Hindustan Times.

Filing cases without consent of the claimants, and in the name of advocates who do not exist had been widely prevalent. Filing of bogus injury report / medical certificate etc. to inflate compensation considered to be a right.

FIR field against a Doctor from Godhra General Hospital for issuance of false certificate to get compensation u/s 161 / 167 / 193 / 196 / 197 / 198 / 199 / 200 / 406 /417 / 420/ 465/ 471/ 472/ 476/ 474/ 475 IPC.

Tips while Buying Insurance

Very carefully select the insurance companies don’t get carried away with offers which you receive over phone calls or see an advertisement over the internet.

Verify the terms and conditions very carefully and in case you come across something which is not being offered by any other company be very careful.

Check for the validity of the insurance company by verifying it with the concerned authority.

Tips you need to follow after an accident

Obtain the details of the other vehicle as well the details of the person to whom it belongs.

Try to take photos of the damaged vehicles. Always call the police to accident scene and show them the damage of both

vehicles so that the other party does not try to make more damage to their vehicle in order to claim more. Always keep note of the medical bills and repair bills if any related to the

accident. You should never sign any blank claim form of the insurance.

Punishment and Penalties for involvement in auto insurance fraud

Auto Insurance Fraud Punishment for any staged accident involves prosecution in both criminal and civil side. Different states have different laws around it but fine and prison is definite. As a result one has to pay Auto Insurance Fraud Penalties. Your permanent record goes for a toss and it would become very difficult for the person to get job or loan in future.

Home Insurance Fraud

Insurance fraud takes place when a person lies in order to claim money what is not due to him. The common types of insurance frauds are Medical, homeowners and auto. Home Insurance protects the investment made by you on your home. It provides protection in event of fire or theft. But many people are involving themselves in the fraud of the home insurance. Home Insurance Fraud is when a person deliberately claims for more loss than actual. Even helping others and preparing wrong documentation to support false claim makes you responsible for Home Owners Insurance Fraud. Whether the claim is given by the insurance company or not, this is still a crime.Home Insurance Fraud is much simpler since insurance policy insures the goods of the home also. At the time of claim they require the receipt for the goods purchased by you for your home. The receipt can be easily taken from anybody.

Home insurance fraud

Case Study 23 - Policyholder supplies misleading and fraudulent documents in making a valid claim Policyholder supplies misleading and fraudulent documents in the course of making a valid claim – insurers able to ‘forfeit’ policy from the date of the claimMiss J made a claim under her general household policy for ‘escape of water’ damage. As the damage was reasonably limited, the firm simply asked her to send in repair estimates. She provided three. The firm discovered that all three estimates

— purporting to come from different contractors — were fraudulently produced by one contractor who had carried out extensive works for Miss J in the past. The firm considered Miss J to be guilty of fraud. It cancelled her policy and refused to deal with the claim. Miss J then bought her complaint to us.Complaint rejectedMiss J had already admitted supplying false information to the firm, and in an attempt to resolve the matter, had produced further – genuine – estimates from independent contractors. However, these merely served to show the extent to which the prices quoted in the fraudulent estimates had been exaggerated. If the fraud had not been discovered, the firm would have ended up paying more in compensation than was properly required of it, and more than Miss J was legally entitled to. To this end, the fraud affected the firm’s ultimate liability and was a fundamental breach of contract. Having applied that rationale, it was decided that the firm had been entitled to ‘forfeit’ the policy from the date of the claim.

Types of Home Insurance Fraud

Staged Fires: People set their homes on fire on their own and try to show it as accident. Further, they ask for claim from Insurance companies. While filing the claim instead of mentioning correct number of items, many a time’s people intent to take claim for extra items, which they never owned. It becomes difficult for the insurance company to proof that the claim being made is not valid. The insurance company has to pay the claim for the home and also for goods that were damaged in the fire. This fraud on home insurance claim is very common and many people are charged for this every year.

Vandalism: Person stages as if somebody broke into his house and destroyed several items and may be stole few of them. The person reports the crime in police and hence investigation is carried out for the same. Further the person submits claim to the insurance company. To the insurance company it appears as a real act and they pay to the person insurance check for the damaged items. This type of fraud is difficult to be identified.

Theft Residential -  Suspicious residential theft.

Theft Commercial -  Suspicious commercial business theft. Theft Commercial Carrier -  Insured reports baggage/cargo lost by

commercial carrier (airline, bus, train, vessel). Watercraft/Aircraft Theft - Theft or damage to watercraft/aircraft while not

on a trailer. Watercraft/Aircraft Arson - Arson of watercraft/aircraft while not on a

trailer. Property Theft from Vehicle - Suspicious theft of personal property while

stored in a vehicle or motor home (commonly claimed under a homeowner's insurance policy).

Agent/Broker - Policy backdated prior to loss date and/or theft of premium dollars intended for payment of coverage.

Mold Related - Mold related. Other Property Damage - Property damage not included in other definitions

How to avoid Home Insurance Fraud

In case you suffer loss by fire or theft, do not use this as a chance for financial gain. You should contact insurance company and get the claim as per policy. You should provide original documentation of the goods.

In case somebody else asks you to help him in insurance fraud you should stay away from that. If you are caught helping others you may also be in trouble.

You should never see the claim as moneymaking chance. If you have to get a claim contact the insurance company and ask for what is actually entitled for your policy.

Workers Compensation Fraud

There are two types of workers compensation insurance fraud: fraud committed by an employer and fraud committed by an employee. Both carry consequences and can be prevented with accurate communication between the insurance company, employees, and employers.

When employers commit workers compensation insurance fraud, they provide less than the minimal amount of workers compensation insurance required by the state government. Employers accomplish this by misreporting the number of employees they have, misreporting the wages they pay their employees, or by misclassifying the level of risk inherent in their employees' job duties. Since the cost of workers compensation insurance depends on a percentage of each employee's wages and this percentage is determined by the riskiness of each person's work, appearing to have fewer employees or to pay employees less than they actually do reduces the amount a business has to pay for workers compensation insurance premiums.

One way businesses commit workers compensation insurance fraud is by paying employees off the books either in full or in part. That way, there is no record of employment. Misrepresenting what your employees do on the job is also workers compensation insurance fraud. Downplaying any safety hazards faced by your

workers or presenting your business as having proper safety procedures that are actually not in place is considered workers compensation insurance fraud.

While some businesses think they can save money by committing workers compensation insurance fraud, the cost of being caught without a workers compensation insurance policy that meets your state's standards can be financially devastating. If your business purposely did not provide your employees with the workers compensation insurance they are entitled to, that gives your employees the right to sue if they do become ill or injured in a job-related incident. These lawsuits can cripple a business, and courts are not likely to look favorably on a business that knowingly evades the law.

Another risk of failing to provide the legally required workers compensation insurance to your employees is government fines. Aside from the cost of potential lawsuits, your business could face expensive fines for trying to defraud the workers compensation insurance system. If you have any concerns about whether or not your business meets your state's requirements for providing adequate workers compensation insurance, check with your state government or a workers compensation insurance agent. Trade organizations in the industry can also provide information and resources about workers compensation insurance requirements.

Why Does This Happen and How?

Worker’s compensation is a no-fault system, which makes it ripe for abuse. Since employees do not have to prove employer negligence to recover for injuries, it can be easy to stage an injury or falsify a claim.

Some lawyers and doctor’s have created “Claim Mills” which are illegal schemes designed to perpetuate fraud in the worker’s compensation industry. These lawyers recruit worker’s to become “injured.” The worker’s then go to clinics where the doctor’s are also “in on” the scheme, and the doctors pronounce them injured or disabled. These schemes exist because of the potential for large settlements inherent in worker’s compensation claims.

Claimant Fraud - Suspicious employee applicant claim.

Employer Defrauding Employee - Employer committing illegal act against employee(s).

Legal Provider - Legal provider inflates billing or materially misrepresents the facts.

Medical Provider -  Medical provider inflates billing, knowingly submits bills with improper medical codes and misrepresents facts.

Pharmacy - Pharmacy inflates bills or falsifies codes.

Misclassification -  Misclassifying the type of workers to obtain workers' compensation coverage at a lower premium. (Example: classifying roofers as clerical, etc.)

Under Reported Wages - Misrepresenting payroll to obtain workers' compensation coverage at a lower premium. (Example: Over-reporting wages as if employees are experienced journeyman with less likelihood of injury and thus allowing for lower premiums or under-reporting payroll to keep premiums lower.)

X-Mod Evasion - Misrepresenting claims history by not reporting reportable injuries or by creating shell companies to give the impression of a non or low claims history to obtain workers' compensation coverage at a lower premium.

Embezzlement - Embezzlement of funds.

Uninsured Employer -  Uninsured Employers.

Here are several red flags for fraudulent claims. Note that not all of these alone mean that an employee is trying to cheat the system, but they are still good to watch out for:

The timing of the claim: Be careful of claims that come in on a Monday morning: Some workers will try to make a weekend injury look job-related so they can get their treatment paid for by your company. Equally important are injuries that are reported immediately after the employee receives corrective action (discipline) or right before an employee knows that layoffs are coming.

Claims for injuries that are hard to verify: Stress and carpal tunnel syndrome can be legitimate but hard to prove. Unscrupulous workers know this.

Frequently changing doctors: Workers often use one who is a family friend or one who will go along with their scam. If you receive a note from a different doctor each time a return to work has been issued, that could be a warning sign of workers’ compensation fraud. With each physician change, an employee has a new opportunity to lie about their pain levels and date of original injury.

Refusing physical therapy: This could be a sign that the employee does not want to get better. The employee is not making a good-faith effort to heal and get back to work. You can deny a workers’ compensation claim (or suspend benefits) if a worker refuses medically necessary treatments or skips scheduled physician visits.

Not providing a physical address: Providing only a post office box ensures you will not have the employee’s real address when he or she does not return your phone calls.

An un-witnessed accident: Be careful with this one. An accident does not have to be witnessed to be legitimate. However, this is something to watch for if any other red flags are present.

Poor performance reviews: If an employee thinks his job is at risk, he may milk the system to get whatever he can before the employer dismisses him. Some workers know that it can be hard to terminate an employee who is on workers’ compensation without it looking like retaliation

How to Prevent Worker's Compensation Fraud?

If you suspect a co-worker or employee sporting a fake injury, contact your employer or supervisor. Help put an end to this fraud that has resulted in companies claiming bankruptcy and thousands of layoffs. Some behaviors that may signal an employee falsely claiming to suffer an injury on the job, includes some one who:

 

Claims to have suffered an injury, but no one else witnessed it. Provides different stories of how they got injured on the job. Delays seeking medical treatment for their injury. Appears to have been injured while off work. Appears to have been injured before being terminated from their job, or prior

a planned strike.

Has a record of filing multiple claims.

Worker’s compensation fraud is often discovered by surveillance tapes or from an investigation by the workers compensation bureau. Employees who claim to be injured may be observed engaging in sports or other physical activities that suggest that they are exaggerating the severity of their injuries. Many states have also established investigation departments designed to combat worker’s compensation fraud.

In most cases, the consequences of worker’s compensation fraud can be quite severe. Possible penalties include large fines and jail time. Restitution (return of money obtained as a result of fraud) is also required. In some states, worker’s compensation fraud is a felony with severe penalties.

Worker’s Compensation Case Study

Impact

Since the very basis of general insurance system revolves around the principle of

"collecting from large to pay a few" ultimately it is the policy holders who bear the

brunt of the fraud for no fault of its own.

Existing system of fraud management: Anti fraud programme

Individual insurance companies do make attempts to combat fraud, but they are

more concerned about maintaining profitability and not being out-of-line with peer

companies, rather than with reforming the system. In most developed and

developing countries, insurance associations and insurers have joined hands with

the government to combat fraud and mange to promulgate anti-insurance-fraud

legislation.

As far as Indian insurers are concerned, companies are in a denial and forfeiture

mode and, hence, unable to formulate a strategy to combat fraud.

Is there any speciality in a financial fraud requiring a separate treatment?

Difficulties In Proving Fraud : Evidential Complexity: Insurance fraud is

considered an 'invisible and victimless crime' and all over the world.

An allegation of fraud should not be made lightly. From the point of view of law of

Evidence, it becomes a challenge to prove fraud. The burden of proof is on the

insurer, if it suspects that fraud has taken place. Therefore, insurers often end up

paying the claims because they find it difficult to prove the fraud and reject false

claims.

Insurance Fraud Investigations – Latest Innovations Add Sheen To Insurance Fraud Investigations

Insurance Fraud Investigator TodayNowadays a lot of insurance companies notice that their customers are not always sincere with them and in many cases when claiming the cases due to be covered by their insurance, insurance owners are simply cheating. There might be a number of reasons to such frauds but the most important and general one is probably the shortage of money. Of course, no insurance company wants to cover the cases that were staged or that contain the wrong information because if they do such things, they run into the risk of becoming bankrupts. To avoid mistakes and to be sure that they are covering only real cases that are due to coverage, a lot of insurance companies start working with an insurance fraud investigator who has to lead the process of insurance fraud investigation and understand if the fraud took place or not.

The profession of an insurance fraud investigator is very risky and reliable and no mistakes are possible here because in cases of insurance coverage customers may talk about thousands dollars. Experts in this sphere have to apply all their skills when determining whether the claim for insurance coverage is legal or not. It is a well know fact that if insurance companies pay off the coverage for the staged accident, the losses are truly huge. Most often, insurance companies encounter a car or health insurance fraud but recently there took place even some cases of life insurance fraud. Thus, the main goal of a health insurance fraud investigator, for example, is to understand whether the information about customer's health is medically proven and real or not. Most of insurance companies try to hire a professional licensed private investigator to solve the problem of insurance fraud.

A request for conducting insurance fraud investigation is made for by either of the two parties to an insurance policy, viz. the consumer and the insurance company, when one of the two parties feels that the other party has committed a breach of contract, or the contractual obligations agreed to between the parties have not been fully met.

There are a number of insurance schemes offered by the insurance companies to the consumers including medical insurance or health insurance, automobile insurance, life insurance, crop insurance and such other types of insurance.

The opportunity for fraudulent activities in insurance industry is more as the room for making quick money is more. The role of insurance fraud investigations is crucial in assessing the validity of the claim, discouraging fraudulent claims and bringing the culprits to court, and providing relief to the aggrieved parties.

The type of investigations being carried out for each type of insurance varies in type and analysis. In the case of medical health insurance frauds, insurance fraud investigations are carried out from the database to get hold of the medical history of the clients service history records. A detailed study of the service records, in most of the cases in medical health insurance fraud investigations, reveals that the practitioner had created or re-created the client service records to falsify the accounts, increase the number of visits made by the clients for seeking consultations, thereby indulging in increasing the revenue per visit from the client, and indirectly increasing the market price of the client visits to the medical practitioners.

With regard to auto insurance fraud claims, the insurance fraud investigations are centered around the damage estimates and claims filed in the claim form. The insurance fraud investigations will then be concentrated on the comparison of the claim with similar claims in the past that were available in-house in the investigators office. The type of damages claimed for the vehicle and the amount charged for repairs for the vehicle, quoted by the auto mechanic, also offers valuable clues with regard to the damages, when compared with similar case histories from the databank available at the investigations house.

The sophisticated methods employed by the investigators in investigating frauds related to insurance frauds have resulted in decreasing the time lag between the lodging of the claim and the delivery of verdict. However, the prevalence of insurance frauds in the industry, on the whole, has been rampant, considering the lure of quick money, which is available in the insurance industry.

It is advisable for both the consumers as well as the insurance companies offering policies to the consumers to act in accordance with the rules and regulations that are in vogue in the region, and avoid insurance fraud investigations.

What Does an Insurance Fraud Investigator Do?

An insurance fraud investigator is an individual who works for an insurance company in order to determine if a claim is made under false pretenses. This is especially true of disability claims, where individuals may say their movement or quality of life is limited because of chronic pain. Due to the fact that chronic pain is often hard to prove medically, this can present a problem for insurance companies. Some also may investigate medical bills, but these are easier to verify.

In some cases, an insurance fraud investigator will work for a company on a full-time basis. The larger insurance companies often have enough cases where they can support an individual, or even an entire department in this capacity. The other alternative, of course, is to use the services of a private investigator, contracting for services only when needed. This is the way many investigators in private practice make their living.

After an insurance fraud investigator is given a case, he or she will usually start with some background information. The case file will include the subject's last known address and any other personal contact information available. The

complaint filed will also be on hand. This will allow the investigator to determine if the complaint is valid. For example, in a disability case, the person involved may claim they do not have the use of their legs.

After the initial review of the case file, the insurance fraud investigator will then usually turn to surveillance work in order to see if the claim is valid. While this may involve some highly technical equipment, such as remote surveillance video, most of the work is done using a standard still camera and video camera. Using the example of the man who claimed he could no longer use his legs, the investigator will look for evidence. If he sees the man regularly using a wheelchair, he may conclude the claim is valid. If, however, he sees the man playing football with neighborhood kids, he will likely document the event with pictures and videos, and report his findings.

In most cases, the findings will be presented to an insurance lawyer or consumer fraud lawyer. At this point, the company will likely suspend any disability payments to the individual. Civil and even criminal charges could come as the result of the insurance fraud investigator's work. At a trial, the insurance fraud investigator may be called upon to testify as to what he actually witnessed during the insurance investigation, and to report on the accuracy of his equipment and recordings.

Guidelines for overall assessment

When we look into cases involving an allegation of fraud, we examine all the facts and use the following guidelines to help us reach an overall assessment.

an exaggeration is not always fraud. And the firm should not repudiate the entire claim simply because the customer has mistaken the cost of replacing the item claimed for — or has an inaccurate recollection of its purchase price. To repudiate the claim, the firm must be able to show that the customer was trying to obtain more than he or she was entitled to. For example, many people consider their car is worth more than the value placed on it by the firm’s engineer. But since they will not normally receive more than the "market value" when their claim is settled, their exaggerated view of the car’s worth will not render their claim void.

the fact that a customer may have lied in another context is not sufficient proof of fraud in the current claim. Some firms have relied on a loss

adjuster’s evidence about a different claim under another policy to demonstrate that a customer has lied in connection with a current claim. Such evidence may raise doubts about the accuracy of the customer’s version of events in the current claim, but is not in itself conclusive.

a customer who presents a forged document to support a claim is not necessarily guilty of fraud. There must be some evidence to show that the customer knew the document’s true source. Even if a customer knowingly produces a false document, the firm may not be justified in rejecting the claim.By insisting that customers produce receipts for all the items they claim for, firms sometimes put customers in a position where they may be tempted to create substitutes for lost receipts. So if customers do produce false receipts, it is essential to determine why they did this. Was it solely to substantiate transactions that really took place, or did the customers intend to obtain more than they were entitled to?

where the firm has sufficient evidence to justify rejecting a claim and/or cancelling the policy, it is only entitled to recover any payments made in connection with earlier claims if it can show that the customer completed the insurance proposal fraudulently. Firms are not justified in retrospectively cancelling a policy on the grounds that the customer used counterfeit documents to support a claim.

In some recent cases involving claims for written-off vehicles, firms appear to have asked customers to substantiate the original purchase price of their vehicle. As a result, some customers who had lost the original sales material (or perhaps purchased the car through somewhat informal routes) have sent in false documents.

Other customers have produced false documents to try and substantiate a higher price than they actually paid. This is clearly improper, but it does not justify the firm voiding the policy. The customer’s claim is for the present market price, not the original purchase price. As long as there is no doubt about ownership and no suggestion of fraud, the firm should meet such claims on the basis of the normal market value.

Where we can reach a view about whether the firm has obtained enough evidence to show that a claim is fraudulent, we will decide whether or not to uphold the firm’s rejection of the claim. Where the issue is uncertain and relies on the evidence of third parties, we may decide it is more appropriate for the courts to determine the outcome. One needs to have a fraud strategy, clear ownership and a policy to direct thinking and planning. The four key areas to be addressed are:

1. PREVENTION2. DETECTION3. INVESTIGATION4. CORRECTION

Each of these areas is important, and the overall effect must be to deliver a balanced and effective policy.

Prevention

For fraud prevention, it is always crucial to understand the problems and losses that a business is experiencing — but also to have clear measures of the key fraud indicators that allow the business to drive new initiatives and action. An organisation that does not understand the risks involved may easily do something ill-advised, such as sending out cards to non-domiciled customers in another country where post is known to frequently go missing; or taking on business through brokers without really knowing a customer. Businesses fail due to an incorrect assessment of the exposures.What else? In a card business, clear authorisation strategies should be in place to prevent fraud — strong referral rules for unusual transactions, limits on transaction sizes in certain risk categories, card security, card dispatch, functionality, provision of services, limit sizes and pre-blocked dispatch. Whichever industry we are in it is the same, in the retail sector we could be sending out goods to unchecked addresses ..... repeatedly.How and from where we acquire new customers, and who introduces the customers to us, also influences the fraud risk. We can likewise influence these in our policies and agreements with sales agents and introducers. In addition, how we deal with mail returns, post handling and replacement cards or certificates, PR messages, etc., should all be recognised as touch points where fraud can be prevented.We should not forget that the fraud prevention task is a large one and covers a wide variety of issues across the business, but considered correctly can save more than a strong focus upon the 'investigation of frauds' alone. Lastly, it is worth mentioning that the corporate culture in relation to fraud should be one of the anti-fraud measures. We often see businesses suffering from high fraud losses in part

because the company does not make fraud savings a priority. This usually accompanies a strong setting of accountabilities that are delegated to the card management in relation to fraud. Every growth in any fraud loss category should be seen as an opportunity to look at a new way of doing things and to write another business case for the next solution.

Detection

Increased detection means finding more fraud sooner. Rarely do we see organisations that closely track fraud losses on a daily basis (and make changes to their detection systems as a result), but also know how to adjust their efforts as they see things going awry.In the extreme, if we were to remove the detection tools and functions from an organisation, we would have to wait for customers to tell us that their credit has all been used up or that their statement had arrived with transactions that they do not recognise. These can then be investigated, refunded, charged-back, etc., but the losses are going to be far too high. Often in other industries there are more challenging issues of detection - i.e. insurers often NEVER see the loss as it gets paid in and amongst the big claims payouts that are made.

InvestigationAs mentioned previously, investigation is often the ‘bread-and- butter' of a fraud department, and must be managed and investigated. This usually consists largely of clerical processes in assessing whether an insurance claim should be paid, whether a refund should be made from a utility supplier of responding to customers that claim fraud has occurred on their accounts; collecting affidavits (another opportunity for preventative statements to be made) and then refunding the amount involved; re-issuing cards as required and looking out for further fraud in the future for similar charge-off and processing. Two areas of investigation are often neglected:

Identifying whether customers are being honest about the transactions being theirs. For example, if there are anomalous insurance claim issues or stories

that differ or if the fraud is involved in an ATM transaction in Canada and the customer is clearly living in the UK, then there is not much to investigate. Treating everything that the customer says as true and refunding everything, or treating everything as false and delivering a poor customer service to customers, are equally poor strategies. Challenge interviewing, based upon the psychological theory behind what customers say and how they say things to spot fraud has become prevalent for determining the truth in these situations.

Analysis of fraud losses should drive future fraud investigation and also detection work. For example, when we see a second or third fraud that has a common denominator, such as the spend location or postal area address, we should look into this further. Maybe a common passenger over several claims or a common phone number or address for delivery. It could be that we have fallen upon a major compromise, a new fraud tactic or gang operating against us. In every case, we should act upon these situations — with major policy changes, corrective actions, changes to systems or other actions like system changes or enhancements.

Correction

Taking corrective action is not straightforward. In theory it should be, but strategic changes are often hard to make.Operationally, a fraud team must recover all they can and stretch every aspect of the chargeback rules for opportunities to recover frauds and so forth, but the real challenge is to implement new products, solutions and initiatives in a 'business as usual' way.A business (through the board member with accountability for fraud) needs to make sure that:

The fraud department has the ability to draw together a fraud business case with the potential exposure for every fraud loss project and likelihood of occurrence highlighted.

The management and timeliness of project delivery is tracked. The business case is acted upon and tracked monthly through to

implementation. The board knows the situation and understands the real priority.

Projects and project delays should be tracked with associated 'real-time' costs and featured in board reporting — if not to the exclusion of all other fraud reporting.Key areas for continued focus by the industry include cross-border transactions,

Internet fraud and, above all else, ways of identifying and tracking points of compromise (especially in point-of-sale devices.

Fighting Back

Insurance Companies Respond

Fraud-busting units. Most insurers have made fighting fraud a priority, more than tripling anti-fraud spending in recent years. Most insurers have created special fraud-busting units, often staffed by former detectives and police officers.

Educate consumers. Many insurers actively educate consumers how to detect and protect against fraud, and often sponsor active fraud hotlines so people can phone in tips.

Train employees. Most insurers train employees and alert insurance agents to spot fraud.

Track down cheaters. Insurers also sponsor the National Insurance Crime Bureau (NICB). The NICB is increasing the number of fraud convictions by gathering detailed data about suspected fraud crimes, and referring them for prosecution. The NICB also runs a national consumer fraud hotline.

States Increase Pressure

More fraud bureaus. State insurance regulators have created 37 fraud bureaus in 45 states, whose job is to investigate and hunt down fraud.

Closer scrutiny of companies. State regulators have created a model law that makes it harder for con artists to set up fake insurance companies. Many states also are scrutinizing insurance company finances and market practices more closely.

Tougher fraud laws. Increased crackdowns in the 1990s uncovered far more insurance fraud than anyone realized existed. To give prosecutors better legal tools to convict crooks, the Coalition Against Insurance Fraud

developed a tough model state fraud law. Some 15 states have adopted or strengthened their insurance fraud laws based on the Coalition’s model. Among other provisions, this model:

- creates state fraud bureaus that help hunt down fraud artists and build strong cases against them. Many fraud bureaus even have power to subpoena and fine crooks.

- requires insurance companies to develop thorough plans for preventing and detecting fraud.

- requires insurance applications and claim forms to warn that fraud is a serious crime.

- provides immunity to insurers when sharing fraud information with other insurers, investigators and law enforcement.

Feds Tighten Up

Tougher health fraud penalties. Stopping widespread Medicare and Medicaid fraud is a special focus of federal efforts. Congress has enacted tougher penalties and expanded current federal health insurance fraud laws to cover all payers.

More pressure on white-collar crooks. Federal law imposes stiff prison terms and fines for white-collar criminals who loot insurance companies. The law also heavily penalizes anyone who gives false financial information to state insurance regulators, and forbids convicted insurance felons from returning to insurance without permission.

Information sharing. The federal government and health insurers share fraud info on a large scale, thus helping them discover hundreds of hidden schemes and build stronger cases for prosecution. The Justice Department began sharing with health insurers its own field intelligence about health frauds with health insurance companies in 2000. The federal government further tightens the net by collecting and sharing vast amounts of data covering convictions and other actions against health providers under a landmark 1996 federal law.

Fewer people believe it’s ok to inflate insurance claims by small amounts to recoup their deductible or premiums, according to the Insurance Research Council.

General Tips to Protect Yourself Against Insurance Fraud

Never sign blank insurance claim forms or applications. Get a copy of every form that you sign. Fill out your application carefully. Incorrect, incomplete or false information on your application can jeopardize your insurance coverage. It is a crime to supply false information on an insurance application or claim. Do not let an agent convince you to say anything or file information that is not true.

Keep a file of documents related to your insurance, including the policy, correspondence, copies of advertisements, premium payment receipts, notes of conversations, and details of any claims submitted.

Never pay premiums in cash. Always pay by cheque or money order and make your cheque payable to the insurance company or agency not the individual agent. Whenever possible, give your payment to the insurance company instead of the agent. Never pay with a blank check. If you are paying in installments make sure you understand how much your payments will be. Be suspicious if an agent tries to bill you for future installments. Normally only the company or premium finance company will do this.

Demand detailed bills for auto and home repair and medical services. Check closely for accuracy. Make sure “free services” are not actually hidden in your insurance bill.

Be cautious of buying insurance from door-to-door or telephone salespeople or off the Internet. Never pay for insurance until you are certain that the agent or company is legitimate. A key warning signs to look for are if an agent or company tells you that this is a “one-time deal” or your “last chance for special savings” or a company boasts it will insure everyone regardless of history or risks.

Know what your policy does and does not cover. Expect a copy of your policy from your agent in a reasonable amount of time. Read your policy immediately to verify that it contains the coverage you discussed with your agent. If not, contact your agent immediately or return your policy.

Keep your insurance identification number confidential. Go elsewhere if an agent becomes evasive when questioned about things like coverages, prices, or installment plan arrangements. Deal only with reputable agents. Ask your friends or family to recommend agents they found helpful and reliable. Do not buy the first policy you find. With most things you buy, you shop around and compare prices and features. Do the same with insurance. Always obtain

quotes from several companies and compare benefits and rates before you pay your first premium.

Deal only with licensed companies or otherwise eligible insurers and with licensed agents. In addition, guaranty associations pay claims of licensed insurance companies that fail. Claims against unlicensed insurance companies could go unpaid if the company becomes insolvent.

Remember there is a free-look period in which you have time to review a policy once you have received it. All life and health policies must have a free-look period of at least 10 days, although some may be longer.

Read the policy when you receive it. Make sure that the word “insurance” is actually used and that there is no disclaimer stating that “this product is not insurance, nor is it intended to replace insurance.”

After an auto accident be careful of strangers who offer you quick cash or urge you to see a specific medical clinic, doctor or attorney. They could be part of a fraud ring.

Tools for fraud management

Amendment to Indian Penal Code to criminalize financial fraud : Insurance

fraud to be defined as an offence with severe punitive punishment with the burden

of proof to be shifted on the accused to prove absence of commission of fraud by

amendment to the IPC, Indian Evidence Act.

System reforms in insurance practice: Every insurance company should be

required to develop Best Practice Code (BPC) within a time frame and submit the

same to the regulator; make effective measures to internalize the BPC in its staff,

effectively supervise the fictionalization of the BPC, control and monitor variation

from the BPC, enforce BPC in the use of discretionary power and make

documentation of the same, periodically review the use of discretionary power,

conduct periodical legal system, audit and obtain compliance certificate.

Adherence to International Best Practices against prevention of fraud : In the

UK, the Association of British Insurers has set up databases that detect multiple

insurance, multiple claims, break in insurance, etc. They have taken the service of

experts to do data-sifting to detect potential fraudulent claims. Frauds have a

pattern and data-sifting helps insurers detect those patterns.

Law for data sharing: Sharing of data amongst the General Insurance Companies

in India could be a very effective tool for identification, detection control and

combat the fraud. However, for this they require legal immunity from sharing

information on fraudulent claims among themselves, as well as with other financial

institutions, regulators, statutory agencies and departments. At present, there are no

guidelines with regard to sharing of information among insurers on such fraudsters.

Specific Tool For insurance fraud management : The National Insurance

Academy (NIA) has devised a "scientific method" that would facilitate insurers

and tackle these third party motor claims. The NIA method is based on seven

processes, four preventive and three retrospective tools.

Preventive tools brought about are:

Stress analysis that would detect the strain and tension in a claimant's voice to

figure out if he/she is truthful about the accident.

Red flagging' which essentially means reporting bogus claims, thereby creating

some sort of a bank. The next time a surveyor deals with a particular accident case,

he can dip into the bank to help him identify a pattern.

Predictive modelling is a third tool by which an insurer can lay his hands on

information on the type of vehicles making a claim in a certain area.

The fourth preventive process is database searching. A record of various places and

conditions surrounding that area will be kept. This would help an insurer to be

extra cautious while settling claims in that area."

Retrospective tools that to be implied are;

'Exception report' which would point out any exception in the number of claims in

various branches of the insurance company.

'Online analytic processing', to maintain a person's records to keep track of the

claims he has made. 'Link analysis', where a link would be searched for similar

types of accident in different parts of the country.

CONCLUSION

The Future: Still Dangerous

Despite the encouraging progress, insurance fraud will remain a vast and dangerous criminal enterprise. Here are several fraud trends consumers should know about:

The Internet will hatch new insurance swindles as computer-savvy consumers buy from online insurance companies that may be virtually untraceable. Young people raised on the Internet will be the vanguard of this crime wave.

The global economy is igniting huge insurance money-laundering schemes, often involving fake insurers that bilk people out of millions. Tracking them across international borders will pose a big problem for U.S. law enforcement.

The large population bulge of aging Boomers needing more medical attention will keep health fraud near the forefront of the largest and costliest fraud crimes.

Insurance fraud against immigrants will remain a serious problem as diverse ethnic groups continue migrating to the U.S. Many fraud crimes will be committed by fraud rings or organized mafias of immigrants themselves.

The elderly will remain one of the largest targets of insurance swindles. Investment schemes are among the newest approaches: Thousands of seniors are investing in bogus viaticals – life insurance policies that don’t exist or were obtained illegally. Many seniors also are investing in fake promissory notes sold by insurance agents and guaranteed by non-existent insurance companies.

One cannot diminish frauds, schemes, swindles, scams but can positively be alert of them so as not to be a victim of it themselves. Tumbling fraudulent situations is a unremitting and collective effort of countless. One must be sensitive and offer their helping as much as they can. One can either grumble about how things are all going wide of the mark and swallow the consequences. Or put their foot down and make an attempt to change the immoral to the right. The wrong will change and everyone will see the bright light of truth and right with the revolution of knowledge, awareness, an attitude for change amongst the humanity