Articles Tagged with “Insurance Fraud”

If anyone wants to know how prevalent Insurance Fraud is, all they have to do is take a look at the recent arrests and convictions for it in New York, as reported by the state. Nothing much has changed since the last time we looked at them. Some schemes are dangerous; some are complex; some are straightforward; and some, simply, are silly. That people will go to great lengths to steal money is no surprise; it’s always been that way. The really surprising thing is that people think they can get away with some of this; greed doesn’t just cloud good judgement, it can blind it. Insurance Fraud Investigators, however, can use these examples to learn how to better spot Insurance Fraud and, maybe, carriers can use them to better learn how to prevent it.

One of the most dangerous, and hard to prove, Insurance Fraud schemes is back in the news. Eight people were arrested in May 2013, for their alleged involvement in staged accidents, where they allegedly caused accidents for money. Their idea was simple: rent U-Haul trucks and either intentionally strike another car or have another car strike them. The only saving grace was that, reportedly, the only people they hit, or that hit them, were co-conspirators. Many times unsuspecting people are targeted; cars will stop short in front of them or fail to stop behind them. Here, apparently, no innocent victims were involved, just paid participants.

The 8 people arrested allegedly made more than $2 million of claims, to recover for phony injuries, to insurers, including U-Haul’s insurer; the insurers paid out more than $1 million for treatment of non-existing injuries. As always, it looks like it took a lot of work to crack the scheme and bring the charges; fitting the pieces together, connecting the various people and accidents, through the car registrations, rental records, medical providers, and insurance companies, is no easy task. The fact that the claimants used rental vehicles with the rental company’s insurance, rather than their own, probably made it even more difficult. The large number of agencies involved in the investigation shows just how hard it is to uncover this type of fraud. The arrests were the result of a joint investigation by the U.S. Attorney for the Eastern District of New York, the New York City Police Department, the United States Postal Inspection Service, and the New York Insurance Frauds Bureau.

One of the most straightforward types of Insurance Fraud is also perhaps one of the least well thought out. A New York City Transit worker was arrested in May 2013 because he allegedly faked a disability. He was hurt in a car accident in February 2011 and claimed he couldn’t work until May 2012. It seems that if he couldn’t work he had a credit disability insurance policy that would pay his loans. Evidently the policy did what it was supposed to: it made $4,335.50 of loan payments for him. The only problem was that he allegedly did work, and worse, there were records of it. He evidently forgot that there was a record of every time he got paid for being a subway conductor, and those same records showed that he worked when he said he couldn’t. The investigator remembered, though, and the conductor was arrested. Paper trails and fraud do not mix.

Sometimes, even when you alter the records, you still get caught. A man was arrested in May 2013 after he submitted nine claims to recover medical benefits for services he said he received at four different hospitals. He even submitted statements from the hospitals showing they performed, and charged him for, the services. The statements were legitimate, at least when he first received them back in 2005. The only problem was that he tried to pass them off as being recent, and allegedly altered the documents in order to do it. Evidently the investigator from the Insurance Frauds Bureau didn’t accept the documents at face value, did a little legwork, and discovered they were phony. After all, the hospitals probably had the original billing statements or at least records of the original treatment. Sometimes all you have to do is remember to ask. Good record keeping is always difficult to get around.
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We’ve previously talked about how technology can be used in fraud investigations; basically, it can help investigators pay attention to the important things. The trick is learning, and keeping up with, what is important. A good tool for doing this is text mining. By taking advantage of a computer’s ability to “read” many more pages of text than a human ever could hope to, in a fraction of the time, and to draw patterns and other relevant information from all of that “reading,” text mining can point an investigator in the right direction by letting her know what warning signs to look for and address. Turning words in free-flowing narratives, emails, statements, and notes into useful facts that can be studied and analyzed, text mining can, and should, help any investigator.

There are four different parts of the text mining process, each of which is as essential as the other:

1. Information Retrieval Systems: These weed out irrelevant documents in order to concentrate on the ones that are more likely to get you the answers you are looking for. Say you’re looking for the best attorney to help you buy a house; chances are you’d be smart to look for ones who have “real estate,” “houses,” or “homes” somewhere in the description of their practice. This won’t necessarily get you the attorney you want, but it will make your search a whole lot easier. This is what information retrieval systems do.

In our last article, we began a discussion about insurance fraud. It comes in many shapes and sizes, infects many different types of claims, and is hard to eradicate. Like the Hydra of Greek mythology, every time you prevent a fraudulent claim from being paid, many more raise their ugly heads.

The extent of the problem is illustrated by the complex fraud rings that have made the news recently. A multi-year, multi-agency investigation, named Operation Sledgehammer, in Dade and Palm Beach counties in Florida, just led to the arrests of 26 people in an insurance fraud ring. The defendants allegedly staged accidents to collect personal injury protection benefits which would be split among the recruiters, those allegedly injured, the medical professionals who allegedly treated them, and the owners of the clinics where they were treated. According to news reports, those arrested were charged with having billed more than $20 million to insurance companies in the scheme. Earlier this month, Allstate Insurance Company filed its third insurance fraud lawsuit of 2013. This one, filed in the United States District Court for the Eastern District of New York, seeks to recover $3.8 million from five medical professional corporations and six physicians for allegedly fraudulent medical billing related to no-fault claims. It alleges that the defendants submitted bills for examinations and testing that were not performed, not necessary, or not designed to benefit the patients who allegedly were treated.

In order to fight insurance fraud, insurers need to be as flexible and adaptable as the perpetrators. One way to do this is through the effective use of the vast amounts of information already within the carrier’s control.

The term “Big Data” has been used a lot recently, within both the scientific and business communities. It’s defined as a huge amount of digital information, so big and complex that normal database technology cannot process it. Computers can handle large amounts of information, much more than any single person could analyze; Big Data is many times bigger. Think of the well-publicized human genome project, in which scientists mapped human DNA. They first had to identify each piece of information before they could try to figure out what each part is used for and how it affects the others. Or consider the case of retailers who now analyze customer data to decide on the types and amounts of inventory they need to stock and the price points or sales they need to run in order to sell it. They need to gather, and integrate, the data regarding their customers from myriad sources, before they can analyze and make intelligent decisions based on it.

Identifying information is hard enough, even if you already have it. Figuring out what each piece of information means can be daunting, especially when there are so many to sift through. There is a lot of information to work with: Of all the data that currently exists in the world, 90% has been created in the last two years. How that data can be, and is, used is the key.

Insurance carriers have a lot of information at their disposal. How many claims does a large insurer handle a year and how much information is gathered on each? Should that information be kept isolated, or should it be integrated to help make intelligent decisions about fraud investigations?

A September, 2012 study, entitled “The State of Insurance Fraud Technology,” which was conducted by the Coalition Against Insurance Fraud, with technical assistance from SAS Institute, found that most insurers now use technology to assist them in determining which claims to investigate:

When it comes to technology, most insurers’ anti-fraud efforts begin with rules-based systems. These systems test and score each claim against a predefined set of business rules and report the results to the SIU teams that look suspicious due to their aggregate scores or relation to threshold value.

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Insurance fraud is a widespread problem, in New York, throughout the United States, and around the world. It involves many different types of insurance claims. Insurance fraud can be found in first-party claims, where the insured is seeking to recover more than he otherwise would be entitled to under his own policy, be it a homeowner’s, business owner’s or other commercial lines policy, or an automobile policy. It also can be found in third-party claims, where claimants seek to recover from the insured’s liability carrier for loss or damage that did not occur, which the insured did not cause, or for exaggerated or pre-existing damage or injuries. Its impact is well known: Insurance carriers incur higher costs, including expenses to investigate and defend against fraudulent claims, higher claims payments and lower premium income. The Coalition Against Insurance Fraud estimates that insurance fraud schemes steal approximately $80 billion a year. Policyholders are forced to subsidize, through higher premium payments, the claimants who collect on fraudulent and/or exaggerated claims. The National Crimes Bureau estimates that insurance fraud adds $200-$300 per year to an individual’s insurance premium. The fraud is attempted through everything from complex schemes to mundane lies. What makes it important is not so much how it’s done, but its prevalence.

Sometimes the insurance fraud schemes are ingenious. In March 2013 an upstate New York man was arrested because he was found in possession of a tilt bed truck and vehicle identification number, both of which were stolen. Even though he was caught and arrested, the man still could be considered clever: The truck he was found with actually was built from two other, stolen trucks.

Sometimes the insurance fraud schemes are mundane. In March 2013 an Oneida County, New York, man was arrested for insurance fraud. He made a claim under his homeowner’s policy with Liberty Mutual Insurance Company to recover $11,779 for water damage to his residence, and submitted a sworn statement in proof of loss in support of the claim. It turned out, however, that there was substantial evidence that the water damage he tried to recover for was actually pre-existing damage; it was there before the date of the claimed loss. As it turns out, that was neither clever nor effective.