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Anti-Fraud Program 2013. WELCOME TO SIU 101 This presentation was designed to introduce you to our anti-fraud program!

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Presentation on theme: "Anti-Fraud Program 2013. WELCOME TO SIU 101 This presentation was designed to introduce you to our anti-fraud program!"— Presentation transcript:

1 Anti-Fraud Program 2013

2 WELCOME TO SIU 101 This presentation was designed to introduce you to our anti-fraud program!

3 Today we will: (A) Review the function and purpose of the SIU (B) Review the written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIU (C) Review the Identification and recognition of red flags of fraud (D) Discuss any changes to current procedures for identifying, documenting and referring incidents of suspected insurance fraud to the SIU (E) Review the Fraud Division Insurance fraud Reporting requirements: and (F) Review existing and new emerging insurance fraud trends.

4 Review the: Definition of fraud Impact/cost of fraud Examples of fraud Opportunities to commit fraud and who the players are Our partners in preventing, identifying and fighting fraud

5 Function 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.”

6 Function 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.

7 EDUCATE-DETECT-DETER Train associates of the cost/impact of fraud Educate 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.

8 EDUCATE-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

9 EDUCATE-DETECT-DETER Keep staff aware of any new trends or fraud activity, Forewarn alerts-training, etc.

10 Fraud 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

11 Now that we have reviewed the legal definition of fraud, let’s take a look at the cost of fraud!

12 Impact/Cost of Fraud Insurance 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.

13 Impact/Cost of Fraud National Insurance Crime Bureau (NICB) “insurance fraud increases the total insurance premium $2-300 per year for the average household.”

14 Impact/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.”

15 Wow! 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.

16 Fraud can be broken down into two categories: Hard Fraud Soft Fraud

17 Hard Fraud Deliberate loss. Examples of this would be: 1. Staged accident. 2. Arson fire. 3. Owner give-up reported as auto theft. 4. Staged burglary.

18 Soft Fraud Opportunity Fraud. Examples of this type of fraud are: 1. Padding claim to add property that was not damaged or stolen. 2. Increasing the value of the item(s) claimed. 3. Incurring unnecessary medical treatment. 4. Misrepresentation(s) to obtain a lower premium.

19 This 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.

20 When 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.

21 Who commits fraud? Claimant’s/Insured’s and their representatives- Attorney, Public Adjuster Service providers- chiropractors, body shop, massage therapist Can you think of an example of each? Insurance adjusters- Independent and Company Insurance agents/Customer Service Representatives.

22 How has the industry responded to this challenge? Special Investigation Unit or SIU State Fraud Bureaus Industry databases- ClaimSearch/CLUE. National Insurance Crime Bureau/NICB Fraud reporting immunity laws Required reporting of fraud Required fraud training Public Awareness Campaign Tougher penalties

23 State Fraud Bureaus Created in most states and the District of Columbia designed to: 1. Investigate organized fraudulent activity 2. Monitor insurance carriers anti-fraud efforts

24 National Insurance Crime Bureau/NICB Non-profit organization designed by the insurance industry. 1. Assist in the investigation of Organized ring activity. 2. Public Awareness to the cost of fraud and push for anti-fraud legislation. 3. Anti-fraud training.

25 Fraud Detection “Red flags” or indicators of fraud Loss History Databases Best Practices – Investigation Guides Training – NICTA On-line Knowledge of current schemes – activity

26 Indicators of Fraud Indicators by loss type or the NICB Interactive Indicator Guide which allows you to select by indicator or loss type. Both available at

27 Loss history databases ISO-ClaimSearch Database that tracks claim history. Queries can be completed by name, address, SSN, VIN, etc. ChoicePoint-CLUE Database that is used by Underwriters that tracks prior claim history by name or address or VIN, etc.

28 Claims 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 PracticesG:\clm_exam\Property and SIU\Best Practices SIU Investigation Guide for use by loss type for our Claims Investigators G:\clm_exam\SIU\SIU Manual\Investigative Guidelines

29 Training & Education National 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

30 Referral of suspected fraud to SIU To:All Claims Associates Date:March 6, 2009 Re:Referral of Claims to SIU Everyone 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.

31 Referral 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, CATI Assistant Vice President Property & SIU , ext Fax

32 Written procedures established by the SIU regarding the identification, documentation and referral of incidents of suspected fraud to the SIU;

33 Loss specific SIU Referral forms Available at select fraud SIU Referral Procedure SIU Property Referral Form Origin and Cause Referral Form Producer Investigation Procedure Indicators of Fraud

34 Mandatory 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:

35 California 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.

36 Immunity Laws Many states also have created immunity statutes allowing them to report suspected fraudulent activity or share information about suspected fraudulent activity.

37 California Immunity Insurers will not be civilly liable for providing any information relating to suspected fraudulent insurance acts to any authorized persons, if done without malice. [Ins s ] [Ins s ] [Ins s ] [Ins s ] [Ins s ] [Ins s (b)]

38 Texas 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 ]

39 Texas reporting immunity An insurer or a person acting without malice, fraudulent intent or bad faith is not subject to liability for filing reports or furnishing other information concerning fraud if the reports or information are provided to: a. law enforcement; b. the NAIC; c. the Department; d. any other authorized governmental agency; or e. a special investigative unit of an insurer. [Ins. s ] [Ins. s 21.49C(d)] [Ins. s ]

40 Florida-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.

41 Florida-Immunity Designated 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; and c. information is provided to another insurer, the National Insurance Crime Bureau or the National Association of Insurance Commissioners.

42 Florida-immunity Insurers must keep a list of designated employees updated or they will lose immunity if they share confidential information with someone who is not authorized. It is suggested, but not mandatory, that any written sharing of information between insurers and their employees contain 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

43 If Fraudulent activity is suspected please contact any member of the SIU: Fraud hotline

44 SIU Team Members Mark Kleine-AVPext Michael Madrigal-Supext Nicole Mann-SCIext Edward MacCubbin-SCIext Dawn Detrie-CIext Jasmine McCaslen-CIext Mark Merwald-CIext Haley Brogrenext. 8425

45 SIU Organizational Chart 2013 Deb Price Vice President- Claims Mark P Kleine Assistant Vice President SIU Michael Madrigal SIU Supervisor Nicole Mann Senior Claim Investigator Ed MacCubbin Senior Claim Investigator Dawn Detrie Claim Investigator Jasmine McCaslen Claim Investigator Mark Merwald Claim Investigator Haley Brogren Claim Investigator

46 Additional information/training is available. Please see any member of the SIU or your supervisor for details.


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