Busted!

“People are facing, at the least, financial distress and, at most, financial ruin. This is a very powerful motivator for insurance fraud.” That’s the warning from Jim Quiggle, director of communications for Washington, D.C.-based Coalition Against Insurance Fraud, who says insurance fraud tends to spike during economic downturns. “Normally honest people, who wouldn’t steal a candy bar from a drugstore, are reflexively turning to insurance schemes to protect themselves from falling off a financial cliff.”

All too often, he adds, people turn to insurance as an economic stimulus package and view insurance fraud as a harmless prank with no real victim other than the insurer. “To many of these people, scamming an insurance company is a no-brainer,” Quiggle believes. “They’re thinking, ‘Heck, the insurer won’t miss the money. Nobody pays a price. I am being made whole, financially. So why not?’”

Calculated crimes can rise, too, he says because “the recession creates opportunities for criminals to exploit others’ anxiety, vulnerability and desperation.”

William Bokel, CFE, SCLA, chief investigator for the Maryland Insurance Administration’s Insurance Fraud Division, has seen an uptick, but not just in claims counts. “Common schemes are becoming more complex,” he says. His observation is largely limited to his region, and the same holds true for his peers. That’s because few data are aggregated—anywhere.

“Every county might have its fire marshals, but they don’t report to anybody else,” explains Bokel, who chairs the Association of Certified Fraud Examiners Maryland Chapter President’s Advisory Committee. They may turn arson investigations over to police. But again, no clearinghouse exists. Multiply the situation by 50, and take into account the absence of a national clearinghouse. “Nobody is actually keeping a firm tab on exactly what the numbers are,” Bokel says.

Compounding the reported increases in fraud numbers and complexity is the pressure on insurers to trim staff and operating expenses while still meeting demand for quality. Expectations are that claims will be adjusted quickly, says Marty Brown, president of Brown Adjustment Service in Fayetteville, Ark., and 2008-2009 president of the National Association of Independent Insurance Adjusters. That’s not just on the carrier’s part, either. “It’s become a pretty immediate world,” he adds. “Clients expect instant response, too.”

Technology to the Rescue
“With laptops, BlackBerrys, GPS units and everything else, we’re just go, go, go,” says Tim Middlebrook, claims management specialist with Selective Insurance Company’s Northeast Region. Communication is anytime, anywhere. “If you’re out in the field, BlackBerrys get you online quickly. With a wireless laptop, just pull into a Dunkin’ Donuts or Starbucks, get connected, tap some keys quickly and get a report, even when you’re running between appointments.

“We have access to much more data than even six or seven years ago,” he adds. While on the road, adjusters can now retrieve much of the information they can access from their own offices.

Technology helps adjusters handle communication challenges better, too. “We can send text messages, call from anywhere, even shoot a picture of the site and send it on the spot,” Brown adds. Digital recorders and digital cameras also make the claims business run more quickly and more smoothly.

“Such technology used to be ‘nice to have,’” says Paul DeMasi, MetLife assistant vice president for information technology, who supports MetLife Auto & Home. “Now, the hardware and software are ‘must-haves.’”

Mark Nixon, president of Nixon & Company Incorporated, an independent adjusting firm and third party administrator headquartered in St. Louis, was recently called on to adjust a substantial loss. The carrier’s underwriting file was sparse, but within a couple of minutes, he got a picture of the building online and knew what to expect. Marty Brown also tapped the Web for a recent house fire claim he was working. He found a Web site where the homeowner documented the entire process of building the house and took credit for doing nearly all of the work. “While the owner claimed our guy had done something that led to the fire, the Web site told a different story,” Brown says. Because the house burned to the ground, it was tough reconstructing much on the scene, but when Brown showed up armed with pictures and accounts printed off the Web site, the liability issue was resolved.

Nixon has found Web searches also come in handy for finding out if a property is for sale—something that’s not always mentioned in the course of an investigation. Brown adds, “Companies can even look at a roof from the sky and give accurate measurements of it.”

Facebook, YouTube, Twitter and other community/social sites are finding their way into conversations—and investigations. Brown cites attorneys who found pictures on Facebook of supposedly injured kids jumping off a wall.

Web-based claim management systems help adjusters meet challenges by letting them handle claims anywhere. “It gives great supervision ability,” Nixon says. “We don’t need a paper file in our hands to review the status. We are able to manage and supervise it a lot better in real time.”

Technology also feeds collaboration. Imaging allows all sorts of files to be transferred, DeMasi notes. “If you’re an experienced adjuster in New Jersey and I’m a rookie in Rhode Island, you could help me on a particular claim because now everything is in digital format. You could look at it along with me.”

Middlebrook uses technology for back-and-forth with special investigation unit (SIU) staff. “They’re always ready to give us a hand,” he explains. “If something doesn’t look right or sound right, we give them a buzz and talk about it.” Often, the investigator on the other end of the line does a quick Web search to validate a hunch or rule something out.

Carrier Initiatives
At MetLife Auto & Home, collaboration may be getting easier. “Our chief claims officer is bullish on technology,” DeMasi says, “and welcomes with open arms anything that delivers a benefit.” Among the technologies the firm plans to deploy is an online community that lets staff interact better.

Carriers are building out other functionality, too. “We have seen insurance carriers beginning to budget and allocate more money for claims technology than they have in the past,” Nixon says.

Also in MetLife Auto & Home’s arsenal is software that identifies, up front, potential fraud. It takes available information, analyzes it, and, if something doesn’t add up, it alerts the company’s SIU. “It’s a predictive analytics product,” DeMasi says. “We worked with our quantitative research group in modeling what is potential fraud.”

Some claims are referred directly to the SIU for investigation. “For others, one or two more pieces of information might be needed to generate a more accurate score,” he adds. “In that case, a message goes to the adjuster, who does research and fills in the blanks.” Then it’s rescored.

The company is also helping adjusters meet challenges by automating assignments and dispatch. “The software can schedule an adjuster’s day and optimize his or her route,” DeMasi notes. “If you’re going to adjust five or six claims during the day, we want to make sure they’re within an area you can handle. It takes the scheduling and routing process away from the adjuster.”

Effective adoption of technology has, in large part, allowed adjusters to put their skills to work where they’re best suited. “We’re getting back to basics,” says Middlebrook. “These tools get us back to what we do best: adjusting claims—investigating, spending time to see if something looks suspicious.”

Brown complements technology with workflow improvements and training. He currently employs an intern to help with paperwork, mounting photos, doing diagrams, picking up reports and other less technical parts of the business. This lets him focus his expertise on actual adjusting work. The association has a similar program underway.

When things do require a second look, technology can augment adjuster expertise and instincts. “If you get something that even looks suspicious, you can search for information and get some background before you go off to a scene or a business,” Middlebrook says. “It can validate your instinct.”

Still, instinct must be developed. “Instinct may make you a little more curious, but instinct is based on your experience,” Nixon says. “Without the experience, the instinct isn’t going to lead you to ask any further questions. You need a combination of instinct and experience to take you down the right road.”

Cause for Suspicion
This instinct—or curiosity, expertise or experience—is being called on more and more. Some carriers, Quiggle explains, have lowered the threshold for investigations. “It takes less to trigger a fraud investigation during a recession than it might during easier times,” he says. “This mandate gets passed down to the adjusters who are watching for the warning signals of a potential scam.”

As the home crisis has erupted, desperate homeowners have been torching their houses for insurance money, especially as foreclosure looms, Quiggle notes. “Some people will dramatically raise their policy limits very shortly before torching the house in order to inflate the insurance payout.”

On the auto side, one of the scams of this recession involves people ditching unwanted vehicles for insurance cash, Quiggle adds. Bokel says give-ups, as they’re called, have been increasing for several years. “Although the number of stolen vehicles is relatively the same in recent years, the number being recovered burned has increased dramatically since 2004,” he says.

Bokel’s department investigators work with a task force in Baltimore and another in Washington, D.C., to combat give-ups. Too often, in the course of investigations, they run into communication snags. Problems continue to the prosecution stage.

Bokel believes adjusters—his first line of defense—can help. “They are the ones interacting with claimants,” he explains. “They do a good job of picking up on the red flags.” Their suspicions, in most cases, turn into investigations.

Just Keep Talking
According to Bokel, adjuster interviews are vital to successful prosecutions down the road, especially if things proceed beyond the civil stage to criminal. A few tweaks, he believes, could boost prosecution success rates.

Recorded interview setups represent one opportunity. “It’s easy to assume it’s the claimant they’re talking to,” he explains. To make statements most valuable, he suggests asking definitive, pointed questions. “Verify their identity. Maybe ask the last four digits of their Social Security number, the number they are calling from, where that number is located, whether it’s their residence or work, things like that.” The latter helps when venue issues arise.

“If we are looking at the place of a crime, and then you play a recording of the contact giving false information, that’s a crime right there,” Bokel explains.

On the auto side, law enforcement agencies have a short-list of pertinent questions Bokel encourages adjusters to ask. These help lock people into certain scenarios, he adds, which can be later verified or proven false. “This can determine how good of a criminal case you can make,” he notes.

Such questions include: Who was the last person operating the vehicle? Did they have a key to the car when they used it? What kind of condition was the car in at the time? How many keys were there and can they all be accounted for? Do you have any idea who may have taken the vehicle? Are your payments up to date? Was the vehicle ready for repossession or have you been contacted by anybody for that? Have you been trying to sell your car? Were there any valuables in the car?

“Most of these aren’t so pointed that they’d violate a company’s internal policy,” Bokel notes. Forensic examination of the recovered auto can validate or refute the answers.

Bokel also has a broader instruction. “When the hair on the back of your neck stands up, you’ve got something. Keep asking questions. Follow company policy, of course, but ask as many questions as you think are pertinent. As long as they are answering, keep talking.”

Proper Perspective
Brown notes that the majority of claims don’t involve fraud. “They’re just people making claims, and we’re there to help them through the process,” he says. “This is a people business. The adjuster—whether it’s a staff adjuster or an independent adjuster—is still the insurance company representative.”

Workflow and technology improvements help adjusters, of course. But they, too, help customers. “These all cut the cycle time,” DeMasi says. “If we can turn things around more quickly and save a rental day, for instance, that keeps our expenses down. But the customer also gets the car back quicker.”

Perhaps the greatest benefit—and for DeMasi, a key motivator—is how technology and workflow changes can improve work-life balance. “By removing or reducing administrative tasks, adjusters can do their assignments in a timely manner,” he explains. “That adds to customer satisfaction, of course, but it affects the adjuster’s work-life balance, too.”

In the end, considering what seem to be increased demands from every side, the ability to maintain such a balance may be the biggest challenge adjusters face today.

Dave Willis is a Claims Advisor contributing writer.