Copyright held by The John Cooke Fraud Report. Reprint rights are granted with attribution to The John Cooke Fraud Report with a link to this website.
All carriers need to be sensitive towards good faith handling of claims for catastrophe victims. However, massive disasters overload insurance claims personnel. Insurance personnel are under enormous pressure to settle losses quickly so as to alleviate the hardship of insureds. Criminals recognize and exploit these crises.
Catastrophe related fraud and abuse primarily falls into three categories: insurance claim related fraud, property repair related fraud and fraud associated with claims and loss related processes. Each category can involve bribery, kickbacks, misrepresentation, concealment, forgery and theft.
Even the presence of several indicators, while suggestive of possible fraud, does not mean that a fraud has been committed. Indicators of possible fraud are not evidence that fraud has occurred.
INDICATORS OF CLAIM RELATED FRAUD
Catastrophe insurance claims fraud includes inflated and totally fabricated losses, intentionally caused damages, claims for pre-existing damage and backdated policies.
CLAIMANTS WITH EARTHQUAKE INSURANCE COVERAGE
-
Claimant declares extensive losses without heavy debris or photographs or documentation receipts
-
Items claimed do not match claimant’s lifestyle, decor, house, occupation or income
-
No carpet indentations from alleged large furniture or appliances
-
Extensive commercial losses occur at site where few or no security measures are in effect
-
Insured is unusually knowledgeable regarding insurance terminology and the claims settlement process
-
Insured is willing to accept an inordinately small settlement rather than document all claims losses
-
On scene investigation reveals absence of remains of items claimed and normally found in a home or business.
The following is a sample listing of such items: Kitchen – major and minor appliances;
Living room – television and/or stereo equipment, record/tape collections, organ or piano and furniture.
CLAIMANTS WITHOUT EARTHQUAKE INSURANCE COVERAGE (Claim of Theft, Fire or Water Loss)
Theft
-
Was area evacuated?
-
Was security in the area?
-
Were other homes burglarized in vicinity?
-
Insured has no documentation or receipts (stolen, damaged or thrown out).
-
Insured had all cash purchases.
-
Insured claims items were new.
-
Receipt name/address does not match insured name and/or address.
-
Insured can’t properly describe item as to function or features.
Fire Losses
-
Was insured property near epicenter?
-
What was prior condition of property?
-
Were there other fires in the vicinity?
Landlords
-
Although homeowner policy residence is rental, landlord claims tenant’s contents.
INDICATORS OF PROPERTY REPAIR FRAUD
Property repair fraud involves unethical, incompetent and dishonest building contractors who employ a variety of illegal or questionable techniques. These include such activities as collecting for defective or unperformed service, damage inflation, insurance fraud conspiracy, bribery of insurance adjusters and kickbacks. Insureds may conspire with the repairer to cover their deductible, upgrade their property or repair pre-existing damage or defects.
CONTRACTORS/PROVIDERS
-
Do not maintain a local office and/or do not have a local telephone number.
-
Are not able to provide references.
-
Want “cash” or payment up front.
-
Have inadequate equipment to perform job.
-
Arrive at loss site without being solicited.
-
Offer “too good to be true” below market prices.
-
Offer cash incentives to get the job.
-
Estimate is very general … a lump sum.
INDICATORS ASSOCIATED WITH THE CLAIMS PROCESS
Fraud related to the claims process includes people impersonating insureds and fraudulently collecting on their claims, forging and cashing claim payment drafts and using contractor damage repair estimates to collect for property damages never intended to be repaired.
-
Insured over-documents losses with a receipt for every loss and/or receipts for older items of property.
-
Insured cannot provide receipts, canceled checks or other proof of ownership for recently purchased items.
-
Insured provides numerous receipts for inexpensive items, but no receipts for items of significant value.
-
Insured provides receipt(s) with incorrect or no sales tax figures.
-
Insured provides receipt(s) with no store logo (blank receipt).
-
Loss inventory indicates unusually high number of recent purchases.
-
Insured cannot recall place and/or date of purchase for newer items of significant value.
-
Insured indicates distress over prospect of an examination under oath.
-
Insured cannot provide bank or credit card records for recent purchases of significant value.
-
Insured provides receipts/invoices from same supplier with sequence numbers in reverse order of purchase date.
-
Insured provides two different receipts with same handwriting or typeface.
-
Insured provides single receipt with different handwriting or typefaces.
-
Insured provides credit card receipts with incorrect or no approval code.
Copyright 1994 by NICB
Reprinted with permission