False insurance claims

Insurance fraud or false insurance claims are insurance claims filed with the intent to defraud an insurance provider.

In the United States insurance fraud is estimated to cost US$875 per person per year with The Coalition Against Insurance Fraud estimating the loss to be $80 billion per year and Medicare estimating fraud in its system costs the government $179 billion per year.

Memorable examples

Some memorable examples of insurance fraud include the following:

• Former British Government minister John Stonehouse went missing in 1974 from a beach in Miami. He was discovered living under an assumed name in Australia.
• Derek Nicholson and Jottie Nagle were accused of attempting to defraud a life insurance company for $1 million after Mr Nicholson apparently went missing in New Jersey in July 2003 and Ms Nagle reported him missing and made a claim on the policy.
• Gaylan Sweet of San Diego, California, who was a claims adjuster for Allstate Insurance set up a scheme in 2002 that included non-existent children who were killed in hit-and-run auto accidents at non-existent intersections by phantom drunk drivers. Sweet and two others (who posed as the parents of the non-existent children) pocketed $710,000 before being caught by Allstate.
• John Magno, a Toronto businessman, allegedly hired accomplices to set fire to his Woodbine building supply hardware store, so he could collect insurance money. This was one of the biggest fires in the city's history as more than 170 firefighters were required to bring the six-alarm blaze under control. One accomplice was burned to death, and another was in a coma for several months. Not only did investigators immediately suspect arson, Magno and his accomplices were later charged with second-degree murder.

Health insurance fraud

Health insurance fraud is described as an intentional act of deceiving, concealing, or misrepresenting information that results in health care benefits being paid to an individual or group.

Fraud can be committed by both a member and a provider. Member fraud consists of ineligible members and/or dependents, alterations on enrollment forms, concealing pre-existing conditions, failure to report other coverage, prescription drug fraud, and failure to disclose claims that were a result of a work related injury. Provider fraud consists of claims submitted by bogus physicians, billing for services not rendered, billing for higher level of services, diagnosis or treatments that are outside the scope of practice, alterations on claims submissions, and providing services while under suspension or when license have been revoked. Independent medical examinations are used to de-bunk false insurance claims and allow the insurance company or claimant to seek a non-partial medical view for injury related cases.

In response to the increased amount of health care fraud in the United States, Congress, through the Health Insurance Portability & Accountability Act of 1996 (HIPAA), has specifically established health care fraud as a federal criminal offense with punishment of up to 10 years of prison in addition to significant financial penalties.

Auto (or Motor) insurance fraud

Globally, one of the largest categories of insurance claims fraud revolves around the insurance of vehicles. There are a number of modus operandi:

Staged accidents

This rapidly growing category involves staging an accident where the fraudsters will use a vehicle to stage an accident with the innocent party. Typically, there would be 4 or 5 fraudsters in the vehicle which makes an unexpected manoeuvre causing the innocent party to collide with the fraudsters vehicle. Each of the fraudsters then claim for injuries sustained in the vehicle. Working with a “recruited” doctor, the injuries are typically whiplash or other soft tissue injuries which are hard to dispute later.

Exaggerated claims

A real accident may occur, but the dishonest owner may take the opportunity to incorporate a whole range of previous minor damage to the vehicle into the garage bill associated with the real accident.

External links

• The Insureance fraud Bureau
• BBC article on insurance staged accident scams
• BBC article
• http://www.insurancefraud.org
• http://www.insurancejournal.com/news/west/2002/12/20/25075.htm
• http://www.nhcaa.org
• What is Auto Insurance Fraud and How to Prevent it? by CarSnaps (2006)
• Computer Weekly Article on detecting staged accidents
• John Cooke Fraud Report
• www.fightfraudamerica.com
• Zalma's Insurance Fraud Letter