An Adjusters Guide to the Fight Against Insurance Fraud

insurance fraud

How much does insurance fraud affect all of us? The actual numbers may intrigue you. Per the FBI, insurance fraud costs the average U.S. family between $400 and $700 a year in increased premiums. Keeping in mind, the FBI’s $40 billion annual cost estimate doesn’t take into account health insurance scams.

In a broader study, the Insurance Information Institute estimates the annual cost of insurance fraud is somewhere between $85 and $120 billion per year. When analyzed, this translates into approximately $5,000 per year, per family for the added costs of goods and services to make up for this fraudulent activity. Remember, when you buy food at the grocery store, a portion of the cost of each item is a direct reflection of their insurance premiums. If you have an electrician fix an electrical issue at your home, a portion of the cost of his service is a direct reflection of the businesses insurance premiums. It’s a cost of doing business, but it’s a controllable cost.

For the “career clamant”, insurance fraud is a full-time job. They spend their time and energy devising schemes to rip-off the insurance system. Anyone who provides insurance is at risk and must be prepared to identify, then investigate all fraudulent activity. The only way to stay one step ahead of the insurance criminal is to remain vigilant in the pursuit of insurance fraud.

Consistently Identify the Red Flags of Insurance Fraud

For the purposes of this article, the word red flag can be defined as a formal hunch. The best way to protect your company from fraud is to be aware of the current warning signs that indicate fraud may exist.

Properly and consistently identifying red flags is an important part of the claims process. When red flag indicators are present, the likelihood of potential fraud is higher. Knowing this, demands additional preventive measures in the form of additional inquiries outside of the normal claims process. Just like any other crime, the sooner you identify the warning signs a claim may be fraudulent, the sooner you can get the case investigated and work towards saving your company money.

On-boarding your Investigative Vendor

Provide a complete picture of the claim.

Once you have selected your investigative vendor, you will make an assignment for investigative services. It is absolutely critical to provide as much information as possible on the subject and the circumstances of the claim. In my experience, spending the extra time up front to thoroughly review a claim and provide all relevant information, no matter how trivial the data may be, will pay dividends in the long run. In fact, I’ve found the ultimate triumph or failure of an investigation directly relates to the sum of information provided at the time of the claim was assigned.

Develop a partnership built around a common goal.

To achieve the most out of any investigation, it is imperative the insurance company and investigative vendor work in tandem with each other. In order to secure the best and most accurate results, there has to be good rapport between both parties. Communication is always key and in most cases, when there is poor communication, it’s where things go wrong. Discuss the various policies and procedures important to you and your organization. These policies and procedures usually manifest themselves in the form of specific special handling instructions.

Potential Fraud as an Adjusters

Do I need a background investigation on each red flag claim?

Background investigations frequently unveil pertinent and actionable information about a claimant (i.e. criminal history, questionable driving records, extensive litigation histories including injury and negligence claims, indications of financial distress including bankruptcies, judgments, liens, excessive workers’ compensation claim histories, etc.).

These investigations can also uncover signs of identity theft, false identification, or misrepresentation of personal information. Information of this nature will certainly be of interest in your claim investigation and will assist you in determining if a particular case warrants further investigation into insurance fraud.

How can the Adjuster Expedite the Process?

Tell the investigator about any medical appointments the claimant may have.

Conducting surveillance at a scheduled medical appointment provides a great chance to properly identify the claimant.

Also, some claimants have been known to exaggerate the extent of their injuries while at medical appointments. In an effort to fake their injuries, a claimant may hobble into a medical provider’s office barely able to move and using a cane or some other orthopedic device for support.

Video obtained of the same person moving about freely and unfettered prior to or after the medical appointment damages their credibility. Judges love to watch this contradictory video, it takes the burden of guessing off the table.

Internet mining as a resource.

Why not take advantage of the plethora of resources and information available on the Internet? Your investigative vendor can perform pre-investigative tracking to obtain preliminary information on your claimant. For example, a simple Google search may provide invaluable information on your subject’s employment status, hobbies, or sports related activities.

Clearly outline your objective when assigning a case for an investigation into insurance fraud.

This is the most important, and often most overlooked aspect in the referral process. You must make certain your vendor understands what you want to achieve with the investigation. This should be clearly outlined and identified at the onset of the assignment. The more explicit the assignment objective, the better prepared the investigator will be to meet or exceed your expectations and achieve the desired results.

The good day, bad day defense.

This defense is most often used when the claimant is videotaped doing exactly what they said they couldn’t do, self imposed restrictions, or what their doctor said they couldn’t do, doctor imposed restrictions. The claimant will usually elude to the fact they were “trying” things out and it didn’t work because the next day, they were laid up all day and in a great deal of pain.

If surveillance is not performed on consecutive days, the plaintiff attorney will almost always assert a sympathetic plea that the claimant was feeling good that particular day but relapsed almost immediately after the activity. Unless surveillance is conducted on consecutive days this often times becomes a viable defense.

Continue surveillance on active claimants? Absolutely.

Obtaining videotape documentation of a claimant’s activities is critical in refuting injury fraud cases. Take advantage of the time the claimant is on the go and instruct your investigator to continue surveillance on active claimants in order to obtain as much evidence and video as possible. Your opportunities may be limited so take advantage of each one you have when they are presented.

Times and days of investigations should vary.

A key element in conducting effective surveillance is to establish a subject’s daily routine. Most people are creatures of habit and generally follow a similar schedule from day to day. Once you have the routine figured out, you can game-plan the investigation accordingly to provide the best possible results for your money.

In Summary

I’m hopeful these tips will help you and your organization identify, investigate, and combat fraud. Because of the massive amount of money involved, fraud will always be one of the most severe issues the insurance community has to control.

By staying well-informed on the latest trends and insurance scams, claims handlers play an integral part in combating insurance fraud. It is essential that all parties work closely to continuously thwart the fraud problem faced by the insurance community.