Claims Advisor: In a June 21 news release, you mentioned that professional crime rings and gangs are still a challenge in some parts of the country. How are they affecting insurance claims? Is it just that they are stealing cars and causing auto theft claims, or do they play a bigger role in insurance fraud?
Joe Wehrle: Professional crime rings and gangs play a much bigger role in insurance fraud. They have gone beyond just making an auto theft claim and collecting payment. In many ways, they operate like a corporation. They still make the initial claim, but they also push for all policy limits by utilizing runners to recruit additional participants, conspiring with auto body shop owners to enhance damages, co-opting medical professionals (medical doctors, chiropractors, physical therapists, acupuncturists, etc.) who provide unnecessary medical treatments and/or surgeries (durable medical equipment, diagnostics testing, etc.), and working with attorneys who bill and demand payment up to the policy limit. These groups are so sophisticated that they conduct counter-surveillance, verify new patients' Social Security numbers, and know which insurance companies to submit claims to.
We hear a lot about vehicle claims fraud. What are the trends you're seeing on the commercial and medical side?
Wehrle: We're seeing a lot—commercial rate evasion, staged accidents with high-limit commercial auto policies, arson-for-profit rings, and inflated contractor invoices or fabricated damages. We're also seeing factoring. Factoring occurs when an attorney or medical provider sells a medical lien to an outside party (a factoring company). The outside party then pursues the full price of the bills, although they originally bought the lien for a cut price. The fraud comes from the medical providers, who inflate all the billing with the knowledge they will not be responsible for trying to settle the final bill. Through the use of referral networks for services, such as MRIs, pain treatment, possible unnecessary surgeries and the like, the medical providers can provide the patient with expensive and useless testing to create an astronomical bill. They sell the bill to the factoring company, which can then attempt to settle for the full cost of the bill regardless of what they actually paid for the lien. These factoring companies are shielded by the collateral source rule in civil court and can pursue the inflated total in some states.
NICB offers training for law enforcement personnel and others on fraud and special investigations for its members and governmental agencies. You've got online and in-person classes. What specifically is covered in these sessions?
Wehrle: In NICB training, the characteristics of the scheme are identified (e.g., upcoding medical bills, owner vehicle give-ups, inflated or fictitious property claims, etc.); the indicators pertaining to that particular scheme are identified as are specific action steps to resolve the indicators.
Who's most apt at sniffing out fraud—the frontline claims rep or somebody else in the chain? Has any analysis been done on that and on how they spot the guilty?
Wehrle: It is widely acknowledged by the industry that the frontline claims person is in the best position to initially detect any questionable aspects concerning the claim. They have the proof of loss and the supporting paperwork (application, policy, police reports, receipts, etc.), and they interact with the insured/claimant. As such, the frontline claims officer has the most complete picture of the claim's details. Acknowledging the crucial role the front line plays in detecting fraud, NICB publishes numerous job aides for them in which we identify them as the "first line of defense" against fraud. NICB provides printed Indicators of Fraud (by scheme and line of business), an Interactive Indicator Guide (a software application), various investigative guides, and numerous training programs to assist them.
Where do you see the states going when it comes to helping carriers shut down insurance fraud?
Wehrle: This year, several states have taken on legislation to address insurance fraud, namely in the personal injury protection no-fault states like New York, Florida, Michigan, Minnesota, Kentucky and New Jersey where we are seeing large questionable-claim increases. Other states, such as Pennsylvania and Texas, passed legislation to allow for greater exchange of information on potential fraud schemes among the insurance industry, law enforcement and the National Insurance Crime Bureau. It's critical that state lawmakers provide law enforcement with adequate laws to help prevent the triple-digit increases in medical fraud that we are currently seeing. Although many of these laws this year did not pass, many of them will carry over to 2012.
There has been a push in the past couple of years to use Web-based case management systems in the states to improve reporting of suspicious claims. What's your take on their success—not just in reporting, but in prosecution and convictions?
Wehrle: With limited resources, state fraud bureaus can only do so much. That is why we implemented the Fraud Bureau Reporting Program (FBRP) that allows the industry to report questionable claims to 45 state jurisdictions. This allows state fraud bureaus to receive the information needed to promptly investigate suspected fraud and coordinate efforts with NICB and the insurance industry. This gets the information quickly into the hands of investigators and prosecutors, which we feel aids conviction efforts.
Taylor Smith is a contributing writer and Maureen Latimer is managing editor for Claims Advisor.