2WELCOME TO SIU 101This presentation was designed to introduce you to our anti-fraud program!
3Today we will: Review the function and purpose of the SIU Review the written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIUReview the Identification and recognition of red flags of fraudDiscuss any changes to current procedures for identifying, documenting and referring incidents of suspected insurance fraud to the SIUReview the Fraud Division Insurance fraud Reporting requirements: andReview existing and new emerging insurance fraud trends.
4Review the: Definition of fraud Impact/cost of fraud Examples of fraud Opportunities to commit fraud and who the players areOur partners in preventing, identifying and fighting fraud
5Function and Purpose of SIU California law:“ Every insurer admitted to do business in this state, except those otherwise exempted in this code, shall provide for the continuous operation of a unit or division to investigate possible fraudulent claims by insured’s or by persons making claims for services or repairs against policies held by insured’s.”
6Function and Purpose of SIU The purpose of this requirement is to confront aggressively the problem of insurance fraud by facilitating the detection of insurance fraud, eliminating the occurrence of fraud through the development of fraud prevention programs, requiring the restitution of fraudulently obtained insurance benefits, and reducing the amount of premium dollars used to pay fraudulent claims.
7EDUCATE-DETECT-DETER Train associates of the cost/impact of fraudEducate associates of the indicators or “Red Flags” of Fraud for their particular area or position.Review guidelines or procedures to verify we are using the resources available to identify fraudulent activity.Provide associates with the resources needed to identify fraud such as ISO-ClaimSearch for Claims Examiners and CLUE for Underwriters.
8EDUCATE-DETECT-DETER Investigate claims where the indicators of fraud are present.Put procedure in place then educate associates of requirement that fraud is to be reported to the appropriate authority and that SIU is responsible for filing all such reports.Act as conduit between company and the authorities
9EDUCATE-DETECT-DETER Keep staff aware of any new trends or fraud activity, Forewarn alerts-training, etc.
10Fraud Defined“ An intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right. A false representation of a matter of fact, whether by words or conduct, by false or misleading allegations or by concealment of that which should have been disclosed, which deceives and is intended to deceive another.”Blacks Law
11Now that we have reviewed the legal definition of fraud, let’s take a look at the cost of fraud!
12Impact/Cost of FraudInsurance Information Institute Study Property & Casualty Fraud estimated at $30 billion per year!36% of those surveyed felt it was okay to overstate their claim to make up for premiums they paid in the past.40% okay to pad claim to make up for deductible they have to pay.
13Impact/Cost of FraudNational Insurance Crime Bureau (NICB) “insurance fraud increases the total insurance premium $2-300 per year for the average household.”
14Impact/Cost of Fraud Insurance Research Council (IRC) study “One-third of all personal injury claims resulting from an auto accident contain some amount of fraud.”
15Wow! Sounds like fraud can have quite an impact on the cost of insurance and that by identifying and challenging fraud, we can make quite an impact on the cost of insurance.
16Fraud can be broken down into two categories: Hard Fraud Soft Fraud
17Hard Fraud Deliberate loss. Examples of this would be: Staged accident.Arson fire.Owner give-up reported as auto theft.Staged burglary.
18Soft Fraud Opportunity Fraud. Examples of this type of fraud are: Padding claim to add property that was not damaged or stolen.Increasing the value of the item(s) claimed.Incurring unnecessary medical treatment.Misrepresentation(s) to obtain a lower premium.
19This training will not discuss in detail staged losses or opportunity fraud but provide a general overview. Future training designed to fit individuals responsibilities will be provided that provides greater detail.
20When can Fraud occur? Application for Insurance? During the Claim Process?Both. The insured may misrepresent material facts to obtain a lower premium when applying for insurance and as we discussed earlier, at numerous stages through out the claims process.
21Who commits fraud? Insurance adjusters- Independent and Company Claimant’s/Insured’s and their representatives-Attorney, Public AdjusterService providers-chiropractors, body shop, massage therapistCan you think of an example of each?Insurance adjusters-Independent and CompanyInsurance agents/Customer Service Representatives.
22How has the industry responded to this challenge? Special Investigation Unit or SIUState Fraud BureausIndustry databases-ClaimSearch/CLUE.National Insurance Crime Bureau/NICBFraud reporting immunity lawsRequired reporting of fraudRequired fraud trainingPublic Awareness CampaignTougher penalties
23State Fraud BureausCreated in most states and the District of Columbia designed to:Investigate organized fraudulent activityMonitor insurance carriers anti-fraud efforts
24National Insurance Crime Bureau/NICB Non-profit organization designed by the insurance industry.Assist in the investigation of Organized ring activity.Public Awareness to the cost of fraud and push for anti-fraud legislation.Anti-fraud training.
25Fraud Detection “Red flags” or indicators of fraud Loss History DatabasesBest Practices – Investigation GuidesTraining – NICTA On-lineKnowledge of current schemes – activity
26Indicators of FraudIndicators by loss type or the NICB Interactive Indicator Guide which allows you to select by indicator or loss type. Both available at
27Loss history databases ISO-ClaimSearchDatabase that tracks claim history. Queries can be completed by name, address, SSN, VIN, etc.ChoicePoint-CLUEDatabase that is used by Underwriters that tracks prior claim history by name or address or VIN, etc.
28Claims Best Practices SIU Investigation Guides Claims Best Practice Guides developed for use by loss type for our Claims Examiner G:\clm_exam\Property and SIU\Best PracticesSIU Investigation Guide for use by loss type for our Claims InvestigatorsG:\clm_exam\SIU\SIU Manual\Investigative Guidelines
29Training & EducationNational Insurance Crime Training Academy - NICTA On-line anti-fraud training focused on position – Property or Casualty Claim Examiner – Underwriter and/or type of loss. Required training for all Claims Examiners, SIU Staff, Underwriters, CSO and Inspections personnel. If you have not received your user ID and instructions or been advised what classes you are required to complete, please contact Mark Kleine at ext or
30Referral of suspected fraud to SIU To: All Claims AssociatesDate: March 6, 2009Re: Referral of Claims to SIUEveryone on your respective staffs should have a copy of the indicators of fraud for the types(s) of claims they handle. Please remind them to consider these indicators and to refer to them when they are reviewing their claims. As a general rule, if there are four or more indicators they have identified in any of their claims, the file should be referred to the SIU for review to determine if SIU involvement is warranted. The general rule of four indicators generates a referral to the SIU is just that, a general rule. There may be cases where only one indicator of fraud is present but do to the situation warrants that the file be referred to the SIU for review.
31Referral of suspected fraud to SIU If the adjuster assigned feels the file should be referred to the SIU, he/she should complete the appropriate referral form selecting the indicators of fraud identified as well as the reason for referral section then print a copy of the referral form and attach it to the front of the claim file. The adjuster should also a copy of the referral form to The adjuster should deliver the file to his/her Supervisor for review and if the Supervisor feels the referral is in order, they should sign off and deliver the file to Mark Kleine. The referral will be reviewed and a response provided to the adjuster within twenty four hours after it has been received by the SIU. The SIU is handling the investigation and adjustment of all first party homeowner theft claims and receives these claims automatically from the Administration area immediately after they are reported. The SIU also automatically receives copies of all loss notices involving auto theft/auto fire claims and first party homeowner fire claims immediately after the loss is reported. These copies of the loss notices and coverage screens should be delivered to Mark Kleine directly. The SIU will shadow these claims to learn if SIU involvement is warranted. If anyone has any questions, please let me know.Mark P Kleine CIFI, FCLS, PCLS, CATIAssistant Vice President Property & SIU, ext. 8320Fax
32Written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIU;
33Loss specific SIU Referral forms Available at http://find/ select fraud SIU Referral ProcedureSIU Property Referral FormOrigin and Cause Referral FormProducer Investigation ProcedureIndicators of Fraud
34Mandatory Reporting of suspected fraudulent activity Many states have created laws requiring that suspected fraudulent activity be reported to their state fraud bureaus. A link to a list of the states that require reporting of suspected fraudulent activity and what immunity if any is granted for the reporting of fraudulent activity has been created and is located on the FIRST website along with our reporting procedure. Here are two examples:
35California California Fraud reporting requirements (a) Any company licensed to write insurance in this state that reasonably believes or knows that a fraudulent claim is being made shall, within 60 days after determination by the insurer that the claim appears to be a fraudulent claim, send to the Fraud Division, on a form prescribed by the department, the information requested by the form and any additional information relative to the factual circumstances of the claim and the parties claiming loss or damages that the commissioner may require.
36Immunity LawsMany states also have created immunity statutes allowing them to report suspected fraudulent activity or share information about suspected fraudulent activity.
37California Immunity Insurers will not be civilly liable for providing any information relating to suspected fraudulentinsurance acts to any authorized persons, if donewithout malice.[Ins s ] [Ins s ][Ins s ] [Ins s ][Ins s ] [Ins s (b)]
38Texas fraud reporting requirement Any person suspecting insurance fraud must report all relevant information to the fraud unit or other authorized governmental agency, in writing, no later than 30 days after the determination. [Ins. s ] [Bulletin B ] [Bulletin B ]
39Texas reporting immunity An insurer or a person acting without malice, fraudulentintent or bad faith is not subject to liability for filingreports or furnishing other information concerning fraudif the reports or information are provided to:a. law enforcement;b. the NAIC;c. the Department;d. any other authorized governmental agency; ore. a special investigative unit of an insurer.[Ins. s ] [Ins. s 21.49C(d)] [Ins. s ]
40Florida-sharing of information Florida has a unique law concerning the sharing of information between carriers where fraud is suspected. To encourage sharing of information/prevent fraud while trying maintain control, Florida provides immunity when information is shared between members of an SIU who have been designated with the Florida DOI. As such, whenever we are involved in a situation where fraud is suspected and information is needed from other carriers, a member of our SIU who is designated with the DOI will contact the DOI and learn the name or names of the person or persons designated by that carrier then make our request for information to that carriers designate. Likewise, if anyone receives a request for information on a Florida claim, please contact any member of our SIU for handling.
41Florida-ImmunityDesignated employees of insurers who are investigating suspected insurance fraud may receive immunity as long as:a. the Department has received written notice of the names and job titles of these employees;b. employees act without bad faith or recklessness; andc. information is provided to another insurer, the NationalInsurance Crime Bureau or the National Association ofInsurance Commissioners.
42Florida-immunity Insurers must keep a list of designated employees updated or they will lose immunity if they share confidentialinformation with someone who is not authorized. It issuggested, but not mandatory, that any written sharing ofinformation between insurers and their employeescontain the following notice:"I am a designated employee pursuant to s (4)(d), F.S., for the ____Insurance Company and request the following information _____. Please ensure that the person who responds to this request is also a designated
43If Fraudulent activity is suspected please contact any member of the SIU: Fraud hotline
44SIU Team Members Mark Kleine-AVP ext. 8320 Michael Madrigal-Sup ext. 8329Nicole Mann-SCI ext. 8410Edward MacCubbin-SCI ext. 8352Dawn Detrie-CI ext. 8332Jasmine McCaslen-CI ext. 8417Mark Merwald-CI ext. 8376Haley Brogren ext. 8425
45SIU Organizational Chart 2013 Deb Price Vice President-ClaimsMark P Kleine Assistant Vice President SIUMichael MadrigalSIU SupervisorNicole MannSenior Claim InvestigatorEd MacCubbinDawn DetrieClaim InvestigatorJasmine McCaslenMark MerwaldHaley Brogren
46Additional information/training is available Additional information/training is available. Please see any member of the SIU or your supervisor for details.