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Frauds and scams in insurance

Introduction to Insurance Fraud
Many Texans know firsthand the harm caused by insurance fraud. Consumers who buy policies from unauthorized or unlicensed insurance companies can be left without coverage or forced to pay the full cost of their claims. But in a broad sense, anyone with an insurance policy has experienced the adverse effects of insurance fraud. Fraudulent claims drive up the cost of insurance coverage for everyone. Nationally, insurance fraud costs consumers an estimated $150 billion annually, an average of nearly $1,000 per family each year in additional insurance premiums and added costs to consumable goods.

Fraud is a deception or misrepresentation for financial gain. Insurance fraud can be committed against policyholders or insurance companies. Since companies divide the costs of claims among policyholders, fraudulent insurance claims drive premium costs up. The consequences of insurance fraud are wide ranging and often severe.

What is Insurance Fraud?

Insurance fraud is any act committed with the intent to fraudulently obtain payment from an insurer. Insurance fraud has existed ever since the beginning of insurance as a commercial enterprise.


Frauds and scams in insurance

Fraudulent claims account for a significant portion of all claims received by insurers, and cost billions of dollars annually. Types of insurance fraud are very diverse, and occur in all areas of insurance. Insurance crimes also range in severity, from slightly exaggerating claims to deliberately causing accidents or damage. Fraudulent activities also affect the lives of innocent people, both directly through accidental or purposeful injury or damage, and indirectly as these crimes cause insurance premiums to be higher. Insurance fraud poses a very significant problem, and governments and other organizations are making efforts to deter such activities. Fraud occurs when someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and to which someone is entitled. Depending on the specific issues involved, an alleged wrongful act may be handled as an administrative action by the Department or the Fraud Division may handle it as a criminal matter. What Types of Insurance Fraud or Other Crimes Does the Fraud Division Handle? The Fraud Division is charged with enforcing the provisions of Chapter 12 of the California Insurance Code, commonly referred to as the "Insurance Frauds Prevention Act," California Penal Code, Sections 549-550 and California Labor Code, Section 3700.5. Current law requires the Fraud Division to investigate various felony provisions of the Penal and Insurance Codes. Most often, investigations conducted by the Fraud Division involve some aspect of a "Suspected Fraudulent Claim" or other related crimes. Cases investigated by the Fraud Division most often involve criminal acts involving automobile property and personal injury, workers' compensation, health insurance and residential and commercial property claims. Insurance fraud/false insurance claims are insurance claims filed with the intent to fraud insurance provider companies. Insurance fraud hurts the average person in two ways. First, all fraud costs, including losses, investigations, etc. are recovered by the insured people through higher premiums, or, in the case of government insurance by higher taxes. Second, if a particular individual is the target for the fraud, they have costs such as deductible payments, loss of property use, etc, as well as higher premiums from the claim loss and the potential for denial of future coverage. Insurance claims filed with the intent to defraud an insurance provider is known as Insurance fraud. In the United States insurance fraud estimated-ly cost US$875 per person annually but with The Coalition Against Insurance Fraud working, it decreases each year loss to estimate $80 billion per year. Health insurance fraud is defined as an intentional act of deceiving or


Frauds and scams in insurance

misrepresenting information that results in health care benefits being paid to an individual or group. Studies prove that over 30 billion dollars get lost annually to health care fraud in the United States. In order to control costs, insurance companies investigate fraud for the benefits of their members. Fraud can be committed by both a member and a provider. Member fraud consists of members not eligible, alterations on enrollment forms, prescription drug fraud, etc. Provider fraud consists of claims submitted by fake/bogus physicians, billing for services not provided, for higher level of services, diagnosis or treatments that are outside the scope of practice, and providing services while the license have been revoked.

Fraud Defined
"Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him to enter into the contract; (1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact;

(3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent.


they face various constraints in verifying the legitimacy of the information provided due to factors such as high volume of transactions (for some insurance products). claimants and intermediaries whenunderwriting risks and processing claims. especially since an insurance provider might sometimes encourage it in order to obtain greater profits. One reason that this opportunity arises is in the case of overinsurance. when the amount insured is greater than the actual value of the property insured This condition can be very difficult to avoid. this would usually involve an exaggeration of an otherwise legitimate claim. However. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy. In the case of insurance fraud. Fundamentals Fraud can be defined as an act or omission intended to gain dishonest or unlawful advantage for the party committing fraud or for other related parties.‖ Insurance contracts provide both the insured and the insurer with opportunities for exploitation. This allows fraudsters to file claims for damages that never occurred. complexity of 4 .Frauds and scams in insurance Causes The ―chief motive in all insurance crimes is financial profit. and so obtain payment with little or no initial cost. premeditated fabrication of a claim and/or fraudulent misrepresentation of material information. Insurers rely greatly on the accuracy and completeness of information provided by policyholders. Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims.

5 . For example. insurance fraud can potentially affect the financial soundness of individual insurers anderode both consumers‟ and shareholders‟ confidence in these insurers as wellas the insurance sector at large. an individual misreports previous or existing conditions in order to obtain a lower premium on their insurance policy.[12] Hard fraud occurs when someone deliberately plans or invents a loss. which is far more common than hard fraud. Soft fraud can also occur when. Classification of frauds Insurance fraud can be classified as either hard fraud or soft fraud.this is the most common form of fraud found in organisations. Insurance fraud can pose serious risk to insurers and may result in significant costs to its stakeholders.Frauds and scams in insurance circumstances leading to a claim and asymmetric information. If prevalent and not mitigated. auto theft. is sometimes also referred to as opportunistic fraud. while obtaining a new insurance policy. when involved in a collision an insured person might claim more damage than was really done to his or her car. such as a collision. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars. Broad categories of fraud Fraud can be categorised under three broad headings: Internal Fraud: Perpetrated by management or employees . or fire that is covered by their insurance policy in order to receive payment for damages. Soft fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims.

and rationalisation come together. Most people have pressures. 6. Fraud occurs when pressure. Corruption or collusion: Most indications of internal fraud fall into one of six categories: 1. opportunity. 5. Everyone rationalises. Accounting anomalies Internal control symptoms Analytical anomalies Lifestyle symptoms Behavioural symptoms Tips and complaints.Frauds and scams in insurance External Fraud: Where the fraud is perpetrated by someone outside the organisation. This could include the targeting of your business by organised criminals. Detecting fraud is a matter of acknowledging:   That fraud exists That any organisation can become either a victim of fraud or a perpetrator of fraud That certain weaknesses in internal controls and human character can be conducive to fraud That certain tests of internal controls and tests of the organisation's motivational environment can provide some insight on the possibility of fraud in that environment   6 . Fraud perpetrated with the cooperation of an inside employee and an outsider. When internal controls are absent or overridden. This is one of the most difficult frauds to recognise. 2. everyone also has an opportunity to commit fraud. 3. 4.

They tend to trust their employees and trust the procedures in place to safeguard company assets. It may be good business to trust employees and empower them to make real contributions to the growth of the company. However.Frauds and scams in insurance Organizations’ make the mistake of not actively searching for fraud. it is not wise to turn a blind eye to signs that a trusted employee may be stealing. 7 .

automobile.Frauds and scams in insurance Types of insurance fraud The types of insurance fraud that exist are as diverse as the types of insurance policies that are available. He reappeared on December 1. five years after he was thought to have died in a canoeing accident. 8 . claiming to have no memory of the past five years. 2007. health care. and property insurance industries. 2002. Some of the major areas in which insurance fraud occurs are in the life. who turned up alive in December 2007. Darwin was reported as "missing" after failing to report to work following a canoeing trip on March 21. an ongoing investigation into the faked death of British former teacher and prison officer John Darwin. Life insurance An example of life insurance fraud is the John Darwin disappearance case.

Frauds and scams in insurance Unfortunately. Investors assess less risk in owning policies after the contestability period. As a result there are three vital concepts that must be understood as they relate to a senior life settlement.  A death claim may be denied or "contested" (NOT paid) due to a fraud on the life insurance application or the suicide of the insured.    9 . Life insurance companies do not like life settlements but are particularly averse to life settlement transactions during the contestability period. The life settlement value of a policy is typically higher after the contestability period. the large sums of money involved with life insurance mean that the industry has to protect against people setting up fraudulent policies and transactions. During this two-year period. An overwhelming majority of life settlement buyers will not purchase policies during the contestability period. Contestability Period and Life Settlements The contestability period is the first two years a new life policy is in force. Rescission and Insurable Interest. Contestability. They are.

To do so may be fraudulent because life insurance applications all ask the intent of the buyer. the insured is still alive.Frauds and scams in insurance Seniors should be aware that life insurance companies are not proponents of the life settlement market. life settlement investors will only purchase policies that they believe are in good standing and without any fraud in the origination. If during the two year contestability period the life insurance company suspects fraud it can rescind the life insurance policy. In order to rescind a policy the following conditions need to be met. Obviously. Rescission of Life Insurance and Life Settlements A rescission is a cancellation of the life insurance contract by the issuing life insurance company. the recession can take place at any time. The company believes a fraud or misrepresentation was perpetrated on the application. When a policy is sold to an investor in a life settlement. Also. If the fraud is related to a lack of insurable interest at the time the policy was issued. seniors cannot just buy life insurance with the intention of selling it in a life settlement to make money. it becomes a virtual certainty that the policy premiums will be paid and the death benefit will have to be honored. i. The fact is that life insurance companies profit greatly when a policy lapses without them having to pay a death benefit. o Medical information misstated. These factors lower life insurance company profits.   No death has occurred. 10 .e. Seniors have every right to sell life insurance policies that have been acquired legitimately and the life settlement market provides them a profitable avenue to do that. However. professional investors pay the absolute minimum premiums until the anticipated death of the insured.

Many physicians see it as necessary to provide quality care for their patients. as they want to maximize the services of their providers. Program administrators are often lenient on the issue of insurance fraud. Blue Cross Professor of Health Insurance at the University of Minnesota. One reason for this. This incentive can lead to fraudulent practices such 11 . although disapproving of the idea of fraud. are sometimes more willing to accept it when it affects their own medical care. according to David Hyman. Many patients. a Professor at the University of Maryland School of Law. is that the historically prevailing attitude in the medical profession is one of ―fidelity to patients‖. The most common perpetrators of healthcare insurance fraud are health care providers. one of the main reasons that medical fraud is such a prevalent practice is that nearly all of the parties involved find it favorable in some way.Frauds and scams in insurance o o Financial information misstated. Health care insurance According to Roger Feldman. A misstatement of purpose that indicates bad insurable interest.

Frauds and scams in insurance

as billing insurers for treatments that are not covered by the patient’s insurance policy. To do this, physicians often bill for a different service, which is covered by the policy, than that which was rendered. Another motivation for insurance fraud in the healthcare industry, just as in all other types of insurance fraud, is a desire for financial gain. Public healthcare programs such as Medicare and Medicaid are especially conducive to fraudulent activities, as they are often run on a fee-for-service structure. Physicians use several fraudulent techniques to achieve this end. These can include ―up-coding‖ or ―upgrading,‖ which involve billing for more expensive treatments than those actually provided; providing and subsequently billing for treatments that are not medically necessary; scheduling extra visits for patients; referring patients to another physician when no further treatment is actually necessary; "phantom billing," or billing for services not rendered; and ―ganging,‖ or billing for services to family members or other individuals who are accompanying the patient but who did not personally receive any services.

Automobile insurance


Frauds and scams in insurance

The Insurance Research Council estimated that in 1996, 21 to 36 percent of auto-insurance claims contained elements of suspected fraud. There is a wide variety of schemes used to defraud automobile insurance providers. These ploys can differ greatly in complexity and severity. Richard A. Derrig, vice president of research for the Insurance Fraud Bureau of Massachusetts, lists several ways that auto-insurance fraud can occur. Examples of soft auto-insurance fraud can include filing more than one claim for a single injury, filing claims for injuries not related to an automobile accident, misreporting wage losses due to injuries, or reporting higher costs for car repairs than those that were actually paid. Hard auto-insurance fraud can include activities such as staging automobile collisions, filing claims when the claimant was not actually involved in the accident, submitting claims for medical treatments that were not received, or inventing injuries. Another example is that a person may illegally register their car to a location that would net them cheaper insurance rates than where they actually live, sometimes called "rate evasion". For example, some drivers in Brooklyn drive with Pennsylvania license plates because registering their car in a rural part of Pennsylvania will cost a lot less than registering it in Brooklyn. Another form of automobile insurance fraud, known as "fronting," involves registering


Frauds and scams in insurance

someone other than the real primary driver of a car as the primary driver of the car. For example, parents might list themselves as the primary driver of their children's vehicles to avoid young driver premiums. Hard fraud can also occur when claimants falsely report their vehicle as stolen. Soft fraud accounts for the majority of fraudulent auto-insurance claims. "Crash for cash" scams may involve random unaware strangers, set to appear as the perpetrators of the orchestrated crashes. Such techniques are the classic rear-end shunt (the driver in front suddenly slams on the brakes, eventually with brake lights disabled), the decoy rear-end shunt (when following one car, another one pulls in front of it, causing it to break sharply, then the first car drives off) or the helpful wave shunt (the driver is waved in to a line of queuing traffic by the scammer who promptly crashes, then denies waving) Organized crime rings can also be involved in auto-insurance fraud, sometimes carrying out schemes that are very complex. An example of one such ploy is given by Ken Dornstein, author of Accidentally, on Purpose: The Making of a Personal Injury Underworld in America. In this scheme, known as a ―swoop-and-squat,‖ one or more drivers in ―swoop‖ cars force an unsuspecting driver into position behind a ―squat‖ car. This squat car, which is usually filled with several passengers, then slows abruptly, forcing the driver of the chosen car to collide with the squat car. The passengers in the squat car then file a claim with the other driver’s insurance company. This claim often includes bills for medical treatments that were not necessary or not received.

Property insurance


or to destroy and subsequently receive payment for goods that could not otherwise be sold. One reason for this is that any evidence that a fire was started by arson is often destroyed by the fire itself. According to the United States Fire Administration. resulting in losses of $755 million. in the United States there were approximately 31.000 fires caused by arson in 2006. 15 .Frauds and scams in insurance Possible motivations for this can include obtaining payment that is worth more than the value of the property destroyed. the majority of property insurance crimes involve arson. Example: The Moulin Rouge in Las Vegas was struck by arson twice within 6 years. According to Alfred Manes.

Or worse. The pullout. Here's how airbag scams work. Your next drive should be in a safe car. The switch. Airbag fraud places the lives of you and your passengers in danger if you're in a crash. you count on your airbags to open and protect everyone.. The scams Here are several scams you should watch for. But your airbags don't deploy. Crooked body shops are stealing airbags from vehicles to make a quick dollar at your expense.. cardboard or beer cans into your empty airbag space. not an ambulance. 16 . The mechanic then inserts a cheap knockoff bag after your insurer finishes the estimate for replacing the original airbag.000 or more – even though your original is long gone. and how you can protect yourself. A dishonest body shop pulls out your airbag so it seems like the bag deployed during the accident. Another car suddenly careens across the lane into yours. the mechanic stuffs old rags. As the cars collide. Mechanics can easily remove your airbag without your knowing it. The swindles also cost you money.Frauds and scams in insurance Another types of insurance frauds Airbag fraud Imagine you and your family are driving along a rainy highway. The body shop bills your insurer full price for "replacing" the bag – up to $2. the price you pay. They were stolen.

You may have a hard time tracing exactly what's happened to the vehicle. Your passengers' lives also are at stake if you crash and the airbags don't work right. and whether they tampered with your airbags. Your own auto premiums also might go up even faster. Your life is in danger every time you step into a vehicle without good airbags. the mechanic may simply insert rags and other junk. since an airbag scam against you unfairly inflates claims against your own auto policy. Innocent drivers have died in crashes when crooked body shops stole their airbags. The swindles raise auto premiums for every honest driver because insurance companies must pass the cost to all policyholders. Used & salvaged vehicles. Be careful. The price you pay Lives & safety. Airbag fraud also takes hard-earned money out of your pocket. who repaired it.Frauds and scams in insurance The body shop removes your un-deployed airbag and installs another deployed one to make it seem the original bag inflated during the accident. Are you and your friends or family members next? Pay higher premiums. Maybe you're buying a used or salvaged vehicle (which was rebuilt after the insurer declared it totaled). You may only have an unsafe used or cheap knockoff bag. Or. 17 . Or just rags and beer cans. The mechanic then puts back your original bag after the insurance company makes a repair estimate. but they may not open properly if the module was soaked. Cars that were totaled in a flood may still have the original airbags. then sell your original bag on the black market.

Best lists financial ratings of insurance companies. what isn’t. Know exactly what benefits you want from your policy. or written policy summaries you’re given. Know what benefits you get. make sure it’s financially healthy. the fastest-growing crime in America. Don’t rely on TV ads with celebrity endorsements. 18 . Policies contain limits on what’s covered. Make sure the policy clearly spells out the criteria for qualifying for specific benefits. Contact your state insurance department to see if the company is licensed in your state. Social Security number and other personal information. Medical identity theft frauds Identity theft. has spawned a vicious new strain: medical identity theft. Thieves steal your personal information to line their own pockets with fraudulent claims against your own health policy. and resold on the black market. Even if the insurer is licensed. slick marketing literature. then carefully check the policy to make sure you’re getting what you expect. You should rely only on the full policy itself. A.M. and under what circumstances. and that you understand the criteria fully. Know the policy restrictions. Medical thieves can heist your health-insurance number. a verbal say-so during the sales call. Rely only on the policy wording.Frauds and scams in insurance Fight Back Check out the insurance company. Often the information is stolen by employees at medical facilities. not on sales pitches or marketing material.

Medical ID theft can cost you thousands of dollars. or feed their own addictions. courtesy of your policy. The scams Illegal and bogus treatment.Frauds and scams in insurance Thieves also may hack into medical databases or break into medical facilities. They assume your identity at a hospital or clinic. Buy addictive drugs. Dishonest pharmacists might bill your policy for narcotics. Unless you check your medical records closely.000 Americans have been victims of medical identify theft. and even threaten your life and health. Medical personnel with access to your data may use your identity to obtain prescription drugs to sell. and set up fake clinics to make bogus claims against the health policies of honest consumers. About one every four reports came in 2006 alone. you may discover you were defrauded only after the damage has been done. Medical ID thieves who don’t have their own health coverage often receive free medical treatment. The crooks often are doctors and other medical personnel who know how the insurance billing system works. constant stress. Medical ID thieves bill your health plan for fake or inflated treatment claims. The price you pay 19 .500 reports of medical ID theft from January 1992 to April 2006. Organized theft rings also are involved. Obtain free treatment. and your policy receives the bills. says the World Privacy Forum. or nurses may call in prescriptions in a patient’s name but pick it up themselves. They buy stolen patient information on the black market. And this crime is spreading fast: The Federal Trade Commission received almost 19. As many as 500.

Meanwhile. and delivered a baby who tested positive for illegal drugs. Loss of health coverage. She had to hire a lawyer to keep her family. and forced to pay higher lending costs. Legal troubles. Higher health premiums. You also could lose jobs. or medicine to which you’re allergic. Your records also could be falsely saddled with damaging—and inaccurate—diagnoses such as mental illness. This could include the wrong blood type. Recovering can take years. Fraudulent insurance claims can max out your health-policy limits. falsely thinking she was the addict. Medical ID theft can threaten your health or even life. turned down for loans or mortgages. A pregnant woman stole the medical identity of a mother. Inaccurate records.Frauds and scams in insurance Medical ID theft can cause serious and long-lasting damage. This could follow you throughout your life. False claims against a health insurance policy can raise your health premiums—costing you yet more money. or need an expensive operation or other treatment. 20 . Thieves often ring up large hospital bills in your name. Ruined credit. then disappear without paying. some employers check a candidate’s credit history. Straightening out inaccurate credit records can take months or even years of time-consuming headaches. Your life thus could be on the line if you receive the wrong treatment based on the thief’s treatment. A thief’s treatment history can end up on your medical records. you could be hounded by bill collectors. This can leave you with no coverage when you have a medical emergency. Social workers tried to take away the real mother’s four children. This can ruin your credit.

Also avoid buying on price alone. Get trusted outside opinions. 21 . Check out policies from different insurance companies before deciding. Avoid sales pitches that say you need more than one policy ¾ you don’t. Contact your state insurance department. adult daycare and in-home medical equipment. One suitable long-term care policy is enough.Frauds and scams in insurance Fight Back Compare policies. Have a trusted friend. Never buy the first one you’re offered — especially if you’re pressured to buy. Long-Term Care Insurance Fraud Long-term care insurance can help make extended medical help affordable for many Americans. relative or credentialed financial advisor review the policy with you to make sure it meets your unique needs and ensure you’re paying a fair premium. Avoid duplicate policies. Are the agent and insurer licensed? Make sure the agent and insurance company are legitimate and licensed in your state. More and more people in the 40s. Some of these benefits include nursing home care. especially disabled seniors. hospice. Long-term care insurance also will play a growing role as the nation’s 78 million Boomers continue aging. 50s and 60s are buying long-term care policies to help pay for these potentially large medical expenses if they arise in their later years. It covers benefits not typically protected by Medicare and private health coverage. The cheapest policy isn’t always the best value.

Deceptively watered coverage. The Scams Here are just some of the scams and abuses to watch for: Selling unsuitable policies. Another scam involves selling two expensive and overlapping policies when only one is needed.Frauds and scams in insurance Most insurance agents and insurance companies are honest and reputable. To close the sale. You aren’t told that critical benefits such as inflation protection were watered down or eliminated. Churning policies. deny you vital medical care. Low-income people and seniors on fixed incomes often are targeted. You also may be denied key benefits under the new policy based on pre-existing conditions if your medical needs have changed. Watch out for fraud and deception. confusing and expensive. The replacement policy may be more expensive and offer little or no improvement. But long-term care coverage can be complex. Insurance schemes could drain your hard-earned savings. the seller may deceptively eliminate or reduce vital policy features so you can afford the premium. Sales pitches may aggressively prey on people’s fear that high medical costs will leave them destitute or a burden on family members. Nor are you told how such changes could affect your medical care or expose you to high out-of-pocket costs. and jeopardize your health. 22 . threaten your financial security. Overstating benefits. You’re urged to cancel a perfectly good policy and “trade up” to a “better” policy from your current insurer or another company. You’re also forfeiting years of premiums you’ve paid for your previous policy. Dishonest insurance providers knowingly sell expensive policies to people who can’t afford the high premiums.

Agents or policy applicants might use this fraudulent tactic. Organized crime rings hatch many schemes. The scams Phantom treatments. Deliberate misstatements about your current medical condition. Hospital chains. especially bogus home health care coverage. But here are just some of the health care scams you should know about. Making misstatements on applications.. Taxpayer-funded programs such as Medicare. For example. Selling phony policies. Medicaid and others are among the biggest victims.. Watch out for fake coverage. Dishonest medical providers will bill health insurers for expensive treatments Most medical providers are honest and ethical. Health fraud Health care scams cost Americans billions of dollars each year. does the policy adequately adjust current benefits for future inflation when you need care in future years? Are you aware of other stated policy limits and restrictions? If not. But this may not be true — read the policy’s fine print.tests or 23 . These schemes steal your premiums and leave you without vital protection when you need it the most. individual employees and even patients also can be involved — as victims or perpetrators. age. This makes health-care fraud one of America's largest taxpayer ripoffs. past medical history or other key information are entered onto the policy application to secure the coverage or lower the premium. you may have to pay a large portion of medical expenses out of pocket.Frauds and scams in insurance You might be told the policy covers ―all‖ of your long-term medical expenses.

Unethical providers may double or triple bill health insurers for the same treatments. and hack into computer databases containing your records. Then they take your premiums and disappear. You're left without vital health coverage. then bill health insurers for expensive procedures. hoping the insurer won't discover the overruns in the big stack of bills. Mobile diagnostic labs give needless or fake tests or physical exams to consumers. You might receive dangerous and even life-threatening treatment you don't need. Crooks steal your health info from dumpsters behind medical clinics. then use it to bill health programs tens of thousands of dollars for phantom treatment. One surgeon performed heart surgery on patients who didn't need it. Unneeded care. Cheaters steal your medical ID number. Identity theft. Insurance agents or brokers sell you low-cost health coverage from fake insurance companies. Runners. break into doctor offices and steal files.Frauds and scams in insurance equipment you never received — and for illnesses or injuries you don't even have. which have killed patients or required more surgeries to correct the problems. You might receive shoddy or substandard treatment for real and urgent medical problems. and don't even know it until you make a claim. Bogus insurers. Rolling labs. 24 . Surgeons have used defective pacemakers and catheters during heart surgeries. Shoddy care. Double billing. One eye doctor shined pen lights into patients' eyes and said he'd performed cataract surgery.

so you could be denied health coverage or pay higher premiums because of a trumped-up medical record.Frauds and scams in insurance A person hired by a medical provider to drum up business trolls through neighborhoods. Premiums rise. False medical record. Personal distress. Your coverage limits might be drained by worthless and unnecessary treatments. Your information is available to insurers. High health premiums discourage employers from offering this needed employee benefit. you could face financial disaster if you must pay large medical bills with your life savings because your policy's worthless. distressing. Financial disaster. injuries or other problems you never had. diseases. Fight back Taxpayer ripoff. 25 . Your medical record contains false information about illnesses. The price you pay Coverage drained. These runners will even roundup children for unneeded tests and procedures. And if you bought health insurance that ends up completely fake. often low-income areas. can threaten your health — and even kill you. enticing people to come to a clinic for tests. You receive bogus or needless treatments that are painful. Your health premiums rise because insurers pass the cost of fraud on to policyholders. Inflated or phantom medical bills can increase your co-payment. This could force you into collections and damage your credit rating. beyond your ability to pay.

contact the insurance company immediately. notify the insurer immediately. Auto repair fraud A trustworthy auto repair shop is vital to the safety of every motorist. Use the “free-look” period. If you later find an error. Never pay cash.) Use this ―free-look period‖ to re-check your coverage if need be. never use cash. fix dangerous crash 26 . Have you received your policy? If you don’t receive your policy within 60 days. Let’s say you’ve bought the policy but now have second thoughts. Medicaid and other taxpayer-funded health programs every year. Also make checks payable to the insurance company instead of the agent whenever possible. If you cancel the policy. By law. Keep a copy of all documents you return. Fill out the application accurately. Sign and return the application only after you’ve doublechecked all information — whether you or the agent fill out the application. Word of caution: Making serious and willful misstatements could be grounds for criminal charges of insurance fraud. notify the company by certified mail to prove you cancelled in time.Frauds and scams in insurance Billions of your tax dollars pay for fraudulent claims against Medicare. An insurer may deny a claim or cancel a policy if your application is inaccurate. These are your tax dollars being stolen. Pay your premiums by check or debit or credit card. Your shop can keep your vehicle running smoothly. (Don’t think this is the case in every state. you can cancel the policy within 30 days and receive a full premium refund.

A shop may pad bills by ―repairing‖ mechanical problems and damage that don’t exist. putting you and your family at risk. True story: A motorist on vacation noticed his car was leaking oil. These parts can give out when you’re on the road. substandard or used. Among them: Padding charges. but crooked body shops will bill you for new parts but install used ones. Counterfeit or used parts. the driver bought a seal for just $13 from an auto-parts store. and protect you and your passengers from life-threatening harm while on the road. but charge you for expensive new parts. Shops may offer reasonable verbal repair estimates. The scams Dishonest repair shops may try a number of scams. the National Highway Traffic Safety Administration estimates. auto repairs rank third among the top 10 consumer complaints compiled by the Consumer Federation of America. Most body shops are honest and professional. then secretly fill in an inflated amount. Used parts are viable for some repairs. Needless repairs. Or a mechanic may leave the estimated amount blank when you sign a repair authorization. 27 .820. He stopped at a local car dealership whose mechanic said he needed a new vacuum pump for $1. Drivers lose tens of billions of dollars each year to faulty or unnecessary car repairs. save you money. In fact.Frauds and scams in insurance damage. Some dishonest shops install parts that are counterfeit. Shoddy work or none at all. Stunned. but present final bills that are far beyond the estimates. but some will try to defraud you and your insurance company.

Frauds and scams in insurance

A shop may cut corners by doing quick and shoddy work. True story: One mechanic held car parts together with nothing more than bailing wire. Sometimes the mechanic also does no work at all, but bills you and your insurer for a full repair job. You may have to return several times—wasting your valuable time and causing needless headaches. Specials and maintenance hook schemes. Dishonest repair shops advertise super-low prices on specific repairs or check-ups, then use these specials to bilk their customers. A simple oilchange-and-lube job can turn into expensive and unneeded repairs. The price you pay Fraudulent repairs cost you in many ways: Stress & wasted time. Nothing is more frustrating than getting repairs repaired. Avoid the headaches and wasted time. Get it done right, and safely, the first time. Higher insurance premiums. Inflated charges and unnecessary repairs can raise your auto premiums—and premiums of every honest driver because the costs of fraud are passed to all policyholders. Fight back Get a written estimate. This should include parts and labor—and get the estimate before you authorize repairs. Also make sure the shop agrees, in writing, to contact you for approval before performing work that exceeds a certain dollar amount. Watch out for waiving the deductible. Be leery if the shop offers to help you recover or ―waive‖ your deductible. For example, a mechanic might suggest installing a used


Frauds and scams in insurance

part, billing your insurance company for a new one, and passing on the illegal cost savings to you. This is insurance fraud. It’s a crime that can put you in jail and ruin your family.

The scams Here are several scams you should watch for... Stealing your premiums. An agent pockets your insurance premiums instead of sending it to the insurer. Crooked agents may steal your premiums to support their business, feed a gambling or drug habit, or buy luxury goods such as cars or jewelry. Sometimes insiders at an insurance company loot the insurer, causing it to go bankrupt. Selling phony insurance. An agent or company rep sells you fake coverage from a phony insurance company. Or the agent sells you bogus coverage using a legitimate company's name — or a name that's similar to a legitimate insurer. You might receive an official-looking policy or proof of insurance that's worthless. You could lose thousands of dollars if you suffer a loss and don't have a real policy to pay your claim. Selling coverage you don't want or need. Maybe the coverage is real, but it's expensive, unnecessary, and your current policy may already cover that risk. Three examples: Churning: Dishonest agents might convince people to use the built-up value of their current whole life policy to buy a "better" policy even though their present life coverage is perfectly suitable. The agent gets a nice commission, but you must start building up cash value all over again. Sliding: An agent or insurer slips you extra coverage you didn't ask for — but do pay for. This can easily add $100, $200 or more to your


Frauds and scams in insurance

premium. The agent cheerfully says it's simply part of a "package," or doesn't tell you about the coverage at all. Motor club memberships, accidental death coverage and guaranteed renewable life insurance are three policies that crooked agents sometimes sell to unwitting policyholders. Twisting: An agent may urge you to change policies prematurely by "twisting" the truth about the downside. If you have an illness, injury or other medical condition, for example, will that "affordable" new health policy refuse to cover it because it's a pre-existing condition?


If a false claim has already been paid. a person in the United States who is covered by Medicaid may have their medical claims reviewed by a government insurance investigator. Both personal and commercial insurance investigators must be comfortable with undercover surveillance. which can 31 . is collected. Commercial insurance fraud jobs are often similar. Insurance fraud jobs generally require investigators to obtain truthful information about the claimant without their knowledge. the insured person may face legal ramifications. These insurance investigators will often gather information through activity checks. The insurance investigation of a business may also require extensive inventory checks to validate any claims of property loss. For instance. the investigator usually files a report. Business and accounting knowledge may be required. or the claim. Once the information about the claimant.Frauds and scams in insurance What Are the Different Types of Insurance Fraud Jobs? InsuranceI fraud occurs when someone files a false or fabricated claim with an insurance company. Fraud investigators tend to work in the field more often than in an office. however. and involve work that is very much the same as. and fact-checking of the claim information. and the claim will either be approved or denied based upon the investigation results. Each of these fraudrelated positions focus on insurance claims filed by individuals. or medical. and insurance investigators. home. which means extensive travel may be necessary at times. to calculate the net loss of income a business has suffered and the effect of any damage on future business profits. claimant surveillance. claims adjusters. Personal insurance fraud jobs typically include positions such as private investigators. Such a claim may be submitted to any type of insurance agency including auto. Governments may also hire insurance fraud specialists to handle claims made by people or businesses that are covered by governmental policies. Insurance fraud jobs are used to evaluate these types of claims and to verify the validity of the report prior to payment. personal cases. Investigations into insurance fraud can occur with both personal insurance policies and commercial insurance policies.

Patience is often an essential requirement.Frauds and scams in insurance mean long hours spent watching a person or business. an insurance lawyer may file suit against the claimant. An insurance company may only choose to file a lawsuit if the claimant has received payment as a result of a false claim. If the investigation uncovers that a report is a false claim. Many major insurance companies employ a staff of fraud lawyers to handle all court cases. a false claim is typically denied 32 . If no payment to the insured has been made yet.

With this big potential reward. as the world has grown wise to Africa's scams. comes new substantial risks. Foreign businesses aren't alone in this increasingly risky market.Frauds and scams in insurance Ghana Scams on the Rise Ghana appears to have adopted many of the fraud methods used in Nigeria. criminal networks in Ghana that they hope will diminish their Nigeria stigma. Unfortunately. International business is becoming a way of life here. Whether its romance or a new business contact . In fact. Business scammers now have 33 . and the population is growing very rapidly. The city continues to attract foreign investment and is the center for Ghana's international commerce and foreign trade. Most of us think the scams. simply aren't going to happen to us. such as advance fee fraud. This transition of advance fee fraud and scams means Ghana is the emerging market for fraud. Accra is capital of Ghana and the home of an estimated 6 million people. however. many individuals are finding personal relationships in Ghana. Similar to a small business in London or Singapore having to verify its business relationship in Accra. Other fraud operations simply have affiliate. Ghana can mean opportunity and profit. many professional scammers have relocated to Ghana in order to escape the "bad reputation" of Nigeria for its high level of fraud. the fraudsters have grown quite sophisticated. Doing business in Accra.

send email. According to Vice President. businesses and individuals should always "enter into relationships with insurance given the amount of fraud here. Ghana scammers are some of the best. Wyoming International is currently the industry leader for Ghana background checks. and they use the lingo." 34 .Frauds and scams in insurance the industry know how. They carry on phone conversatons. Beautiful women (including white women) in Accra definitely exist. How can one entering into a business or personal relationship in Ghana learn the truth? We strongly recommend a professional background check. Here too. They have resumes and references. preferably a firm not based in Africa but with local investigators who understand the local customs. David Wilkerson. provide visa and passport copies. the players are professional. and more. and a professional background check is prudent policy. but the number of men portraying to be these women is staggering. etc.

other affiliates or buyers. The emergence and rise of the Internet has brought new opportunities for businesses. it's a sure sign it will never stop. namely known as affiliate fraud. Affiliate Marketing has been around for the last 10 or so years. ways of detection online fraud and tips for preventing it. As affiliate fraud happens mostly because there is money involved. The extent of such practices ranges from repeated clicks on incomegenerating links of CPC (cost-per-click) programs to using sophisticated software that will simulate human activity. The merchants are at a loss by fraud affiliates that mislead them into paying commissions that they shouldn't be paying. An article about affiliate fraud. 35 . individual merchants might not be aware of the phenomenon. the power of online businesses comes from affiliate marketing. allowing them to reach new market segments and niches that would have been intangible otherwise. other affiliates or buyers. What is Affiliate Fraud? Affiliate fraud is any type of illegal activity designed with the intention of cheating merchants. Affiliates take loses due to black hat affiliates that redirect the sale to a parasite site and cash the commission that this way never gets to the rightful. but merchants are nowadays confronted with one of the newest types of scams. While Affiliate Networks have the technology and know-how to fight affiliate fraud.Frauds and scams in insurance How to Prevent Affiliate Fraud Affiliate fraud is any type of illegal activity designed with the intention of cheating merchants. Here are my 2 cents. To a certain extent.

Affiliate theft and fraud are on the rise. deceiving marketing techniques or by being miss-informed about the product/service they need. who will no longer want to become involved in affiliate programs for fear of having to face affiliate fraud. More than ever merchants need to monitor the actions of their affiliates and arm themselves against fraud. maybe it's time to do your homework and make some research. they do most of the work to fight and eliminate fraud. Especially if you consider that the FTC is now making 36 . which also translates into merchants losing their customers. merchants). there will be people trying to steal your income. On the other hand. Here are some symptoms specific to affiliate fraud. meaning you are safe 4 Tips to Avoiding Affiliate Fraud As long as there are internet businesses. and you notice that things are not going the way you hoped they would. Check your activity logs (together with your specialized personnel) and look for anything that looks suspicious. The negative effects are obvious for both individual merchants and Affiliate Networks. Affiliate marketing networks face the much dreaded peril of losing their members (i. How to Recognize Affiliate Fraud and What to Do About it If you already have an affiliate program set up and working. if you outsource your affiliate marketing to an affiliate network. any unusual pattern. Buyers are affected by spam. There are more parasite techniques described in the next chapter. They may actually help you with the detection of online fraud.Frauds and scams in insurance hard working affiliate.e.

More than ever merchants need to monitor the actions of their affiliates and arm themselves against fraud. leads. The first action to take is to find out what type of frauds your affiliates may be capable of. Spammers: Affiliates who send unsolicited e-mails featuring a net marketer‘s product. Or they may sign up as affiliates and then make large purchases using a stolen credit card. naughty ones can cost you a lot. Typo squatting: Also know as URL hijacking.Frauds and scams in insurance merchants responsible for the action of their affiliates. Typo squatters register several variations of a high traffic domain names and then sign up for that same merchant‘s affiliate program to sell them what should have been their own traffic. Spammers also make it difficult for the legitimate e-mailers to separate themselves. As long as there are internet businesses. While good affiliates can make you money. there will be people trying to steal your income. In many cases complaints have gotten the merchant's domain on blacklists Fraudulent and Fake Transactions: This can be in the form of the fraudster creating scripts to generate phony clicks. Below are a few examples. naughty ones can cost you a lot. this can essentially tarnish the product. While good affiliates can make you money. Especially if you consider that the FTC is now making merchants responsible for the action of their affiliates. Thus legitimate affiliates don't get paid and eventually move on. Affiliate theft and fraud are on the rise. Malware: Some affiliates use adware that is inadvertently installed on a person's computer is designed to steal traffic from legitimate affiliates by replacing their links with new ones. you will want to screen 37 . Once you are aware of the types of frauds out there. or transactions.

Fraud prevention 38 . spammers and sophisticated con artists. It is important to weed people out in order to be left with serious marketers. you may have hundreds or even thousands of people signing up for your affiliate program.Frauds and scams in insurance all your affiliate. but among these may be unserious hobbyists. Yes. You can not afford to be lazy.

Frauds and scams in insurance Introduction Major corporate fraud and collapse have hit the headlines in recent times. However while large organisations have the resources to implement what they hope are effective systems of internal control to prevent fraud. The issues associated with these frauds may seem far removed from your organisation. A key difficulty faced by smaller organisations is the lack of options to segregate duties. we consider how you can increase your awareness of the factors that indicate fraud and the defences that you can implement to minimise the risk within your organisation. Individuals have to fulfil a number of roles and this can lead to increased opportunity and scope to commit fraud. the simple truth is that fraud can affect organisations of all sizes. No doubt you can think of a handful of key employees who you couldn’t imagine being without! Sadly some organisations have found out the full extent to which this trust can be abused. Whether you employ a small team or a significant workforce. smaller and medium-sized organisations often have to rely on a small team of people who they trust. and for some. however. It couldn’t happen here It is easy to think that fraud is something that ‘couldn’t or wouldn’t happen here’. the temptation can be too great Areas where fraud can occur 39 . The people involved have been high profile and the amounts quite spectacular.

Frauds and scams in insurance While the precise nature of any fraud will be specific to the nature of an organisation and the opportunities afforded to a potential fraudster. where either expenses are overstated or income understated. Employees abusing their position Most fraud impacts on the profit and loss account. Many fraudsters gain in confidence and the amounts involved escalate as they become ‘greedy’. Positions could also be abused where an organisation requests tenders. However as time progresses the amounts involved can become significant. Nevertheless the time taken to detect fraud is vital. Here there is a risk of ‘kickbacks’ where the individuals involved in the tender process accept bribes or sweeteners from potential suppliers. so they go unnoticed for some time. Frauds here could range from a few pounds of fiddled expenses. The individual amounts involved in these types of fraud may not be large. It may make all the difference to cash flow as fraud drains an organisation of resources that it needs to grow. Of course large scale frauds are more likely to be discovered and greed often plays a part in the identification and capture of fraudsters. where no one checks supporting documentation or reviews the reasonableness of the claims made. Suppliers taking advantage Where an organisation has few or weak checking controls. a supplier may 40 . there are a number of common areas where fraud can occur. This could result in inefficient contracts being signed perhaps for dubious quality goods. to more significant frauds involving the setting up of fictitious suppliers and the production of bogus invoices.

The same advances in technology sometimes lead us to believe that the computer is always right.Frauds and scams in insurance recognise this fact and take advantage. Information could also be vulnerable to attack from outside. so fewer manual checks are completed generally within the organisation as a result. Certain types of organisation are at greater risk of fraud. Invoices may include higher quantities or prices than those delivered and agreed. Organisations that are growing rapidly may also be more susceptible to fraud. Advances in technological developments mean that all organisations connected to the internet need to consider the risks associated with this. For example fewer items may actually be delivered than those included on the delivery note. When both company resources and directors personally are stretched to capacity. for example those that are cash based can be more vulnerable due to the difficulties in implementing effective controls over cash. Similarly businesses that deal in attractive consumer goods are at increased risk. it is even more difficult to maintain an overview. This highlights the importance of checking both delivery notes and invoices and following up any discrepancies promptly Other risk areas Theft of confidential information such as client or customer lists or intellectual property such as an industrial process could cause a business untold problems if these are stolen by disgruntled employees. Indicators of fraud may go unnoticed 41 .

Frauds and scams in insurance Fraud detection 42 .

the next step is to refer these claims to investigators for further analysis. the public can provide tips to insurance companies. Due to the sheer number of claims submitted each day.Frauds and scams in insurance The detection of insurance fraud generally occurs in two steps. Hand. and because it can only be used to detect types of fraud that have been committed and identified before. both of Imperial College in London. Regardless of the source. Additionally. it merely identifies suspicious claims that need to be investigated further 43 . Both claims adjusters and computers can also be trained to identify ―red flags. law enforcement and other organizations regarding suspected. suspicious claims are identified by comparing data about the claim to expected values. on the other hand. In both cases. this method has some drawbacks as it requires absolutely certainty that those claims analyzed are actually either fraudulent or non-fraudulent. observed. Instead. This can be done by computerized statistical analysis or by referrals from claims adjusters or insurance agents. Bolton and David B.‖ or symptoms that in the past have often been associated with fraudulent claims. Statistical detection does not prove that claims are fraudulent. Unsupervised methods of statistical detection. In a supervised method. or admitted insurance fraud perpetrated by other individuals. it would be far too expensive for insurance companies to have employees check each claim for symptoms of fraud. The main difference between the two methods is how the expected values are derived. involve detecting claims that are abnormal. expected values are obtained by analyzing records of both fraudulent and non-fraudulent claims. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. There are two main types of statistical analysis tools used: supervised and unsupervised. many companies use computers and statistical analysis to identify suspicious claims for further investigation. According to Richard J.

3: Ensure that you have a clear policy that fraud will not be tolerated within the organisation and ensure that this is communicated to all staff. These investigators look for certain symptoms associated with fraudulent claims. 2: Begin by recruiting the right people to work in your organisation. or SIUs.Frauds and scams in insurance Fraudulent claims can be one of two types. Develop some simple 44 . or otherwise look for evidence of falsification of some kind. insurance companies usually try to negotiate the claim down to the appropriate amount Suspicious claims can also be submitted to ―special investigative units‖. These units generally consist of experienced claims adjusters with special training in investigating fraudulent claims. Make sure that you check out references properly and ensure that any temporary staff are also vetted. Target the areas where most of your revenue comes from and where most of your costs lie. particularly if they are to work in key areas.” or they can be false claims in which the damages claimed never actually occurred. Once a built up claim is identified. This evidence can then be used to deny payment of the claims or to prosecute fraudsters if the violation is serious enough Ten step guide to preventing and detecting fraud 1: Given the wide range of fraud that could be committed. 4: Consider which areas of your organisation could be at risk. then plan and implement appropriate defences. for further investigation. They can be otherwise legitimate claims that are exaggerated or “built up. what steps can you take to minimise the risk of fraud being perpetrated within your organisation? Consider our top ten tips for detecting and preventing fraud.

This in particular includes the accounting function but will also include other key areas. Don’t pre-sign blank cheques other than in exceptional circumstances and ensure that the corresponding invoices are presented with the cheques. 5: Wherever possible don’t have only one person who is responsible for controlling an entire area of the organisation. 6: Always retain a degree of control over the key accounting functions of your business. 10: Prepare budgets and monthly management accounts and compare these against your actual results so that you are aware of variances. stock control and despatch in a business where stocks include attractive consumer goods. something we see when we look back retrospectively. For example ordering goods.they may have something to hide. These could both be indicators of fraud. who might be bearing a grudge or those whose circumstances change for the worse or inexplicably for the better! 9: Watch out for notable changes in cash flow when an employee is away from the office. 7: Be on the lookout for unusual requests from staff involved in the accounting function. Similarly be aware of employees who never take their holiday.Frauds and scams in insurance systems of internal control to defend these areas. 8: Watch out for employees who are overly protective of their role . Taking prompt investigative action where variances arise could make all the difference by 45 . Similarly watch out for disaffected employees. on holiday for example.

Who s to blame? Accountants and internal auditors are often the scapegoats for management 46 . Two types of fraud are addressed in this book: fraudulent financial reporting. also known as "Treadway" fraud. these officers are rarely provided with the resources. Businesses lose over $100 billion a year to fraud. From following clues to achieving a prosecution. usually originating in the top management sector. and commitment from top management that are essential to effective fraud detection and control. Guide to Fraud Detection and Control From internal control structures that are not fraud-specific to insufficient communication in the fraud discovery-to-investigation and conviction process. here is sound advice that accountants and auditors will find invaluable. Where a fraudster is caught. with very few exceptions. likely to be practiced by virtually anyone. the more common and more costly type. Unfortunately. Only 20 percent is discovered. including outsiders. proper training. the corporate tendency has been to react to fraud after the fact. The Accountant s Guide to Fraud Detection and Control offers comprehensive direction for this largely uncharted area. Historically. and "asset-theft" fraud.Frauds and scams in insurance closing the window of opportunity afforded to fraudsters. rather than to be proactive in its prevention. make sure that appropriate action is taken and learn from the experience. fraudulent activity is a widespread fact of life in the business world. blame is directed at accountants and auditors. And in most cases. Treadway fraud is being adequately detected by independent auditors (CPAs) in their annual audits. Asset-theft fraud is not being adequately detected by anyone.

Imagine the shock of the vigilance official from ICICI Lombard who went to track down a Sympathy Hospital only to find a three-storey house in its place. here is comprehensive. Including actual case studies. Using different names. the authors show accountants and auditors how to: * Anticipate problems and follow clues * Successfully disclose fraud * Compile the evidence necessary to prosecute acts of fraud * Develop investigative techniques * Create effective internal controls . and for conducting proactive fraud-specific examinations. But the icing on the cake of this fraud was that not only did he take out policies under different names. intermediate training for evaluating. Had he made a big claim. taking out a health insurance policy seems like giving away money. For those of us blessed with perfect health. and installing fraud-specific internal controls. he swindled the ICICI Lombard General Insurance Company to the tune of several lakhs of rupees before being found out and arrested. he would have been put through greater checks and would have been required to submit more document. What he failed to account for was the vigilance checks carried out by the insurance company. Akash Sharma is one man who decided that it was time to make the insurance companies pay. to fill the needs of this crucial area. and much more. ―Initially we never suspected anything because the amount in the claims was always under Rs 50000. . He had it all planned down to the last letterhead for 'Sympathy Hospital‘ and the ‗pathology reports‘ to buttress his claims. Akash‘s scam was almost perfect.‖ 47 . Between January and June of this spokesperson for ICICI Lombard General Insurance said. devising. he also created a fictitious hospital to manufacture the papers required for a mediclaim.Frauds and scams in insurance s insufficient fraud detection operations and guidelines. . At last.

But despite strengthening their fraud management capabilities. firms have been told they need go further to protect 48 .Frauds and scams in insurance Growing threat of insider fraud Insider fraud poses a growing threat to financial firms in the UK.

some firms are currently not in a position to adequately assess where and why they are at risk from fraud.whether arising from collusion. The report found firms that underinvested in anti-fraud measures tended to suffer relatively high levels of losses." Firms that underinvested in anti-fraud measures tended to suffer relatively high levels of losses. Without this. coercion.Frauds and scams in insurance themselves and their customers from fraudsters. In particular. "Fraud threats are dynamic and fraudsters constantly devise new techniques to exploit the easiest target. Firms need to continue to invest in systems and controls and manage their responses to fraud in order to avoid being targeted as the weakest link. It found that CEOs or other senior figures generally recognise that the increasing threat of fraud needs to be managed in a more effective and integrated way. it warns." said Philip Robinson. the report urges firms to be more proactive in collecting more detailed and accurate data and investing in systems and controls to detect mounting fraud threats at an early stage. "While the larger firms have been forced to wake up to fraud. infiltration or existing employee 49 . But it adds that there areas where firms need to work harder. Insider fraud . The Fraud Governance report from government regulator the Financial Services Agency (FSA) looked at how senior management is tackling fraud risk in 16 mainly larger financial services groups. "A robust fraud strategy is one that is sponsored at the highest level within a firm and embedded within the culture. those that have so far remained outside the fraudsters' radar are not as developed. financial crime sector leader at the FSA.

The most common example offered by firms was incidents of staff being approached outside work and offered money to sell confidential information. In particular. The intensity of vetting varied between firms but did not always apply to both temporary and permanent staff. accountability in individual roles was not always clearly defined and responsibility may be de-prioritised in favour of other business needs. One firm applied seven levels of screening with the degree of due diligence tailored towards the seniority of the role. are key to improvements in fighting fraud. which are embedded in business units. and firms see this as critical to the success of anti-fraud measures. mitigating and reporting fraud risk. To counter this rising threat firms have tightened their employee vetting procedures. The report noted some unclear or inappropriate allocation of anti-fraud responsibilities within firms. firms tended to respond to fraud in an incident-driven manner. this is a recent improvement and needs to be sustained. There is increased co-operation within the industry.Frauds and scams in insurance action . the report warns smaller firms to analyse their vulnerability to attack and consider the threats to their business in a structured way because the impact of an attack or series of fraud events could be particularly damaging. Another firm stated that 8 per cent of potential hires were rejected after vetting Investment in systems and a focus on robust anti-fraud operational processes. as a result. the FSA said. assessing. Where firms are getting better at identifying. There was particular support for the lead taken by some trade associations and initiatives such as information sharing between firms. For example.was cited by firms as one of the most serious threats. Only a handful of firms were found to be developing formal risk assessment processes and. The report also found evidence of competing priorities between fraud mitigation and customer experience. Firms were found to be wary of putting customers off by implementing protective measures 50 .

Firms recognise that customer education and awareness is vital to reduce fraud. the report said. but they should ensure that sufficient resources are applied to these areas.Frauds and scams in insurance that risk causing inconvenience to them over and above what their competitors do. Securities fraud 51 .

lying to corporate auditors. Securities fraud includes outright theft from investors and misstatements on a public company's financial reports. securities fraud includes false information on a company's financial statement and Securities and Exchange Commission (SEC) filings. in violation of the securities laws. According to the FBI. also known as stock fraud and investment fraud.Frauds and scams in insurance Securities fraud. securities fraud consists of deceptive practices in the stock and commodity markets. Types of securities fraud Corporate fraud Fraud by high level corporate officials became a subject of wide national attention during the early 2000s. stock manipulation schemes. as exemplified by corporate officer 52 . frequently resulting in losses. Generally speaking. insider trading. is a practice that induces investors to make purchase or sale decisions on the basis of false information. and embezzlement by stockbrokers. including insider trading and front running and other illegal acts on the trading floor of a stock or commodity exchange. The term also encompasses a wide range of other actions. and occurs when investors are enticed to part with their money based on untrue statements.

It became a problem of such scope that the Bush Administration announced what it described as an "aggressive agenda" against corporate fraud Less widely publicized manifestations continue." They are sometimes used for fraud. internet boards and via email (spamming). criminals engage in pump-and dump schemes. Bulletin boards that often contain fraudulent messages by hucksters.[6] FBI Director Robert Mueller predicted in April 2008 that corporate fraud cases will increase because of the subprime mortgage crisis.Frauds and scams in insurance misconduct at Enron.[ The SEC says that Internet fraud resides in several forms:  Online investment newsletters that offer seemingly unbiased information free of charge about featured companies or recommending "stock picks of the month. founder of Purchase Pro in May 2008. Johnson Jr. realizing substantial profits before the stock price falls back to its usual low level. in which false and/or fraudulent information is disseminated in chat rooms. such as the securities fraud conviction of Charles E. Internet fraud According to enforcement officials of the Securities and Exchange Commission. E-Mail spams from perpetrators of fraud   53 . criminals immediately sell off their holdings of those stocks (the "dump"). Any buyers of the stock who are unaware of the fraud become victims once the price falls. forums. When the price reaches a certain level. with the purpose of causing a dramatic price increase in thinly traded stocks or stocks of shell companies (the "pump")..

Microcap fraud In microcap fraud. directors. Some insider trading is illegal. KPMG. Ernst & Young. Accountant fraud In 2002. Microcap fraud includes pump and dump schemes involving boiler rooms and scams on the Internet. an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation. Boiler rooms Boiler rooms or boiler houses are stock brokerages that put undue pressure on clients to trade using telesales. In several cases. In illegal insider trading. a wave of separate but often related accounting scandals became known to the public in the U. the monetary amounts of the fraud involved are in the billions of USD.S. Its prevalence has been estimated to run into the billions of dollars a year. usually in pursuit of microcap fraud 54 .Frauds and scams in insurance Insider trading Insider trading is the trading of a corporation's stock or other security by corporate insiders such as officers. key employees. All of the leading public accounting firms— Arthur Andersen. which trade for less than $5 a share. stocks of small companies of under $250 million market capitalization are sold fraudulently to the public. PricewaterhouseCoopers— and others have admitted to or have been charged with negligence to identify and prevent the publication of falsified financial reports by their corporate clients which had the effect of giving a misleading impression of their client companies' financial status. Deloitte & Touche. Many but not all microcap stocks involved in frauds are penny stocks. or holders of more than ten percent of the firm's shares. or otherwise misappropriated.

which was worth an estimated $64. are also considered securities fraud because they can drive down stock prices. D-Conn. said this was more than rumors and said.[17] The practice of spreading false information about stocks. non-existent. to drive down their prices. Among them were late trading and market timing. Morgan Chase in March 2008. stock is sold without being borrowed and without any intent to borrow.[15] Bank of America Capital Management was accused by the SEC of having undisclosed arrangements with customers to allow short term trading. Mutual Fund fraud A number of major brokerages and mutual fund firms were accused of various deceptive acts that disadvantaged customers. Some boiler rooms offer clients transactions fraudulently. is called "short and distort..P.Frauds and scams in insurance schemes. In abusive naked short selling. Securities sold in boiler rooms include commodities and private placements as well as microcap stocks. Various SEC rules were enacted to curtail this practice. or distressed stock and stock supplied by an intermediary at an undisclosed markup. reports swirled that shorts were spreading rumors to drive down Bear Stearns' share price. Christopher Dodd. such as those with an undisclosed profitable relationship to the brokerage. The largest instance of securities fraud committed by an individual ever is a Ponzi scheme operated by former NASDAQ chairman Bernard Madoff." During the takeover of The Bear Stearns Companies by J. "This is about collusion. Sen. rather than profit obtained through investment activities. 55 . including certain types of naked short selling."[18] Ponzi scheme A Ponzi scheme is an investment fund where withdrawals are financed by subsequent investors. Short selling abuses Abusive short selling.8 billion prior to its collapse. Some 'boiler rooms' are not licenced but may be 'tied agents' of a brokeradge house which itself is licenced or not.

having grown dramatically in the 1990s. and other market participants. while 200 million individuals owned securities indirectly. such as the 2006 backdating scandal and the 2007 subprime crisis. A study conducted by the New York Stock Exchange in the mid-1990s reveals approximately 51. The trading volume in the United States securities and commodities markets. as well as the tendency of many criminals to be profligate spenders. Securities fraud is becoming more complex as the industry develops more complicated investment vehicles.[ Recovery of assets from the proceeds of securities fraud is a resource intensive and expensive undertaking because of the cleverness of fraudsters in concealment of assets and money laundering.4 million individuals owned some type of traded stock.[22] Some manifestations of this white collar crime have become more frequent as the Internet gives criminals greater access to prey. Fraudulent schemes perpetrated in the securities and commodities markets can ultimately have a devastating impact on the viability and operation of these markets. white collar criminals are expanding the scope of their fraud and are looking outside the United States for new markets. These same financial markets provide the opportunity for wealth to be obtained and the opportunity for white collar criminals to take advantage of unwary investors. securities fraud class actions were driven by market wide events. Securities fraud lawsuits remained below historical averages. In addition. shareholders.Frauds and scams in insurance Pervasiveness of securities fraud Securities regulators and other prominent groups estimate civil securities fraud totals approximately $40 billion per year. and banking secrecy havens to hide unjust enrichment. new investors. according to the Stanford Law School Securities Class Acton Clearinghouse. A victim of securities fraud is usually fortunate to recover any money from the defrauder. has led to an increase in fraud and misconduct by investors. Class action securities fraud lawsuits rose 43 percent between 2006 and 2007. During 2006 and 2007. 56 . executives.

Frauds and scams in insurance Sometimes the losses caused by securities fraud are difficult to quantify. For example. but persons aged fifty years or older are most often victimized. and its failure demonstrates the extreme dangers of a culture of corruption within a publicly-traded corporation. Most spectacular failures of publicly-traded companies result from such innocent causes as marketing blunders an obsolete model of business inadequate market share or noncriminal incompetence Other effects of securities fraud 57 . Not only do investors lose but so can creditors. and employees. taxing authorities. thus decreasing overall economic growth. The rarity of such spectacular failures of a corporation from securities fraud attests to the general reliability of most executives and boards of large corporations. Characteristics of victims and perpetrators Any investor can become a victim. whether as direct purchasers in securities or indirect purchasers through pension funds. 2. overstate assets overstate revenues understate costs understate liabilities Enron Corporation exemplifies all four tendencies. Potential perpetrators of securities fraud within a publicly-traded firm include any dishonest official within the company who has access to the payroll or financial reports that can be manipulated to: 1. 4. 3. insider trading is believed to raise the cost of capital for securities issuers.

analogous to the practice of force-feeding livestock great amounts of water to inflate their weight before sale to dealers. 58 . Such fraud has been known as watered stock.Frauds and scams in insurance Even if the effect of securities fraud is not enough to cause bankruptcy. a lesser level can wipe out holders of common stock because of the leverage of value of shares upon the difference between assets and liabilities.

When an elderly victim reports fraud. 4. 3. if the person had an accent. Because these individuals tend to be too polite to say "NO" or just hang up the phone. elder victims of fraudsters often worry that their family members will began to think that they lack the mental capacity to manage their own financial affairs if they admit being defrauded. This is because in a country like America that has new medical breakthroughs in vaccinations to cure older diseases. Information about how many times the fraudster called. or they may not realize that they have been scammed or defrauded. older individuals often become the victim of health scams. 2. Hope that fraudsters use in their advantage as they promote their phony health improving or fake health insurance plans. longevity and cancer fighting products. some other reasons why seniors are targeted for fraud include: 1. they have a hard time admitting that they fell into a scam.Frauds and scams in insurance Reasons Why Fraudsters Target Seniors Con artists target seniors. The con artists knows the affects of age on memory and knows that by the time the victim realizes they have been defrauded. what the person promised. These are two positive traits. According to the FBI. Individuals who grew up in the 1930s to the 1950s were raised to be polite and trusting. Lastly. they often make poor witnesses. but can make an individual more vulnerable to con artists. it gives individuals new hope. Older citizens are likely to accumulate savings over the years and are likely to own their home and/or have a decent line of credit. particularly in insurance fruad and health scams because they are seen to be easily trusting and gullible. the last time they talked to the person. 5. if it was always the same person who called. the time of the day they called. 59 . etc. As well as. This attracts con artists who whip up new schemes and fake health products or insurances to scam the savings of the elderly. They often are in a financial stable position. Some of these reasons include they lack information on how to report a fraud. which may be weeks or months after the incident they won't be able to provide detail information to the investigators. Elder people are the least likely to report fraud for one or more reasons. promising improved cognitive functions.

Refuse to do business with door-to-door or telephone salespersons who offer free medical services or equipment. Among the reasons: Some older people have built substantial assets (including their own home and large savings accounts). procedure. and what you will need to pay out of your pocket. criminals are getting smarter and using technology to their advantage to commit fraud and other financial crimes. and they can be swayed by fears of losing their financial independence. Review your insurer's benefits statement carefully. Know if your doctor ordered special equipment for you." said Michael Benardo. despite the efforts of law enforcement. manager of the FDIC's Financial Crimes Section. such as identity theft.Frauds and scams in insurance How to Avoid Health Insurance Fraud For some tips on how seniors and other avoid health insurance fraud include:        Avoid signing blank insurance claim forms. m Frauds That Target The Elderly Beware of Strangers Bearing Gifts It's true – senior citizens are often the targets of fraud and financial crimes. 60 . "Also. Make note of all of your health care and medical appointments. Ask your health care providers what they charge for a visit. In 2003. Call if you have any questions or need clarifications. Give your insurance/Medicare number only to those who provided you with certified medical services. they're easy to find at home. treatment.

Frauds and scams in insurance The following are common cons designed to trick consumers – especially elderly people – into giving up money. At some point the seller takes the money and runs.S." Lois Greisman. an Associate Director in the FTC's Bureau of Consumer Protection. She said nearly 12. These scams often are committed by strangers posing as legitimate business people. government officials or other "trusted" individuals. Charitable Donation Scams: 61 . shipping and handling or other charges. Senate Special Committee on Aging in July. Justice Department. "Prize and sweepstakes fraud is more prevalent among older consumers than among the public at large. leaving the investor with a big loss. said in testimony before the U.000 older consumers complained to the FTC that they lost almost $35 million in fraudulent prize or sweepstakes promotions in 2004. "These frauds can be devastating to consumers who sometimes cash out retirement funds to claim their purported prizes. Of course. gems and other "no-risk" deals." Greisman said. business opportunities. These will sound attractive compared to what local banks are paying on deposits. with the median loss being about $2. But before any "winnings" are delivered.000. FDIC fraud specialists. The information is based on reports from the U. taxes. property or valuable personal information. (For a look at frauds committed by relatives or caregivers. Fraudulent Investments: A firm or individual "guarantees" fantastic returns on investments. and is particularly prevalent among consumers age 70 and older. the Federal Trade Commission (FTC) and other sources: Prize and Sweepstakes Frauds: This type of scam may involve a congratulatory phone call or letter informing a consumer that he or she has won a prize or a large sum of money in a lottery or sweepstakes. the prize never comes or any products that do arrive are essentially worthless.S. you are told you must pay for fees.

He or she then contacts the homeowners and offers assistance to prevent the foreclosure from taking place. including older homeowners concerned about paying bills. After you hand over the funds you discover the work hasn't been completed. Instead. While you think you're helping people in need. Victims often can't afford the loan.Frauds and scams in insurance Crooks disguised as charities collect donations or money for raffles. the homeowner is then tricked into signing documents that. you're really helping con artists pad their pockets. transfer the ownership of the property to the fraudster. Contact your local BBB as listed in the phone book or check out charities online at Home or Auto Repair Scams: Someone calls or knocks at your door offering a super deal to fix your roof or driveway or repair your car. bank security officer or police officer calls 62 . Help for Avoiding Foreclosures: The fraudster goes through records at the local courthouse listing homes facing foreclosure.. "I-Need-Your-Help" Scams: Unlike the previous scams that involve selling or giving something to the victim. and they may be pressured to refinance a loan repeatedly and pay high fees each time – a scam known as "loan flipping. which maintains reports on national and local charities. and in the process obtains account information or access to funds. Example: Someone claiming to be a bank examiner.. Loan or Mortgage Fraud: These typically involve unscrupulous "predatory" lenders (typically from the non-bank or home improvement industries) that use false or misleading sales tactics to make high-cost loans to consumers in need of cash. You should make donations only to charities you are familiar with or after consulting with the Better Business Bureau (BBB). in the fine print. here the con artist is asking to receive some assistance. Some scammers have billed consumers for maintenance or repairs that were never performed. is of poor quality or wasn't needed in the first place." Borrowers who pledge their house as collateral and can't repay the loan could lose the home in a foreclosure.

Counterfeit Checks: In one example. the bogus investigator can walk away with the money or use the confidential information to raid the victim's bank account. 63 . The buyer instructs you to wire the excess funds back. If you comply. you sell an item over the Internet and the buyer sends a cashier's check for more than the agreed-upon price.Frauds and scams in insurance asking for help investigating a possible fraud by withdrawing cash from your bank account or providing account information. If the trick works. you will most likely find out that the check you received is phony and the money you wired cannot be returned to you.

The typical fraud in our study lasted two years from the time it began until the time it was caught by the victim organization. and the resulting losses were much larger commensurate with their resources.000. 64 . Upon completing its 2008 Report to the Nation on Occupational Fraud & Abuse. reported that businesses employing less than 100 persons "were the most vulnerable to fraud and abuse" by employees. "Participants in our survey estimated that U. organizations lose 7% of their annual revenues to fraud. Applied to the projected 2008 United States Gross Domestic Product. Texas. Emerging companies were the victims of fraud more often than large corporations. The median loss caused by the occupational frauds in this study was $175. the Association of Certifie Fraud Examiners (ACFE) in Austin. "Occupational fraud schemes frequently continue for years before they are detected. More than onequarter of the frauds involved losses of at least $1 million.Frauds and scams in insurance Employee Fraud Emerging businesses are much more vulnerable proportionally to employee theft.S. this 7% figure translates to approximately $994 billion in fraud losses. and are much less able to absorb these losses than large corporations. "Occupational fraud schemes tend to be extremely costly.

there were significantly lower losses when the controls had been implemented. and had internal audit or fraud examination departments. and 2006.000. controls or any other means. The most common fraud schemes were corruption. "The Report includes frauds that impacted organizations in a number of different industries. In every comparison. We found similar reductions in fraud losses for organizations that had anonymous fraud hotlines. which occurred in 27% of all cases. "The implementation of anti-fraud controls appears to have a measurable impact on an organization‘s exposure to fraud. our data shows that occupational frauds are much more likely to be detected by a tip than by audits. and other sources. 2004. For example. and fraudulent billing schemes. organizations that conducted surprise audits suffered a median loss of $70. Forty-six percent of the cases in this Report were detected by tips from employees.Frauds and scams in insurance "This Report focuses on 11 distinct categories of occupational fraud. provided fraud training for managers. offered employee support programs. Financial statement fraud was the most costly category with a median loss of $2 million among the 99 financial misstatements in this Report. The 65 . while those that did not had a median loss of $207. vendors. "Despite increased focus on anti-fraud controls in the wake of Sarbanes-Oxley and mandated consideration of fraud in financial statement audits due to SAS 99. which occurred in 24%. Tips were also the most common means of detection in 2002. We examined 15 specific anti-fraud controls and measured the median loss in fraud cases depending on whether organizations did or did not have a given control at the time of the fraud. customers.000.

Implementation of surprise audits was the next most common response.000). The median loss suffered by organizations with fewer than 100 employees was $200. banking ($250. This was higher than the median loss in any other category. which occurred in 56% of cases. Lack of management review and override of existing controls were each cited by 17% of respondents. The most common change was to conduct management review of internal controls. including the largest organizations. "Seventy-eight percent of victim organizations modified their anti-fraud controls after discovering that they had been defrauded. Thirty-five percent of respondents cited inadequate internal controls as a primary contributing factor in the frauds they investigated. and insurance ($216. government (12%) and healthcare (8%). "Small businesses are especially vulnerable to occupational fraud. "Lack of adequate internal controls was most commonly cited as the factor that allowed fraud to occur. "Occupational frauds were most often committed by the accounting department or upper management.000). Twenty-nine percent of frauds in this Report were 66 .000.Frauds and scams in insurance industries most commonly victimized by fraud in our study were banking and financial services (15% of cases).000). Among industries with at least 50 cases. the largest median losses occurred in manufacturing ($441. Small businesses also suffered the largest losses in our 2006 study. Check tampering and fraudulent billing were the most common small business fraud schemes. followed by fraud training for managers and employees.

Only 7% of fraud perpetrators in this study had prior convictions and only 12% had been previously terminated by an employer for fraudrelated conduct. These results are consistent with our 2004 and 2006 Reports.000. while 18% were committed by executives or upper management. the scheme often continuing for many years. "Occupational fraudsters are generally first time offenders.000 by salting checks drawn to himself in the piles of legitimate 67 . "Fraud perpetrators often display behavioral traits that serve as indicators of possible illegal behavior. The survey disclosed about 200 incidents in emerging companies where a "trusted" bookkeeper had simply stolen money from the firm. which tend to be the most costly. because of the closer relationship between the owner/managers and their employees. resulting in a median loss of $853. In financial statement fraud cases. Frauds committed by executives were particularly costly. The report describes one case in which a bookkeeper stole $150. "you generally have a higher degree of trust" that facilitates the fraud of the dishonest employee. The most commonly cited behavioral red flags were perpetrators living beyond their apparent means (39% of cases) or experiencing financial difficulties at the time of the frauds (34%)." Previous studies have observed that there are two general characteristics of emerging businesses that make them especially vulnerable to employee fraud: First.Frauds and scams in insurance committed by persons in the accounting department. excessive organizational pressure to perform was a particularly strong warning sign.

Any unaccountedfor time in the person's past must be acceptably explained. (The classic embezzlement is the handiwork of the trusted employee working long hours and never taking a vacation — most thefts would surface if the employee had to take their hands off the job. Each employee handling money should be removed periodically from their job so that any malfeasance may not be continually concealed. The owner/manager of the emerging business wants 68 .Frauds and scams in insurance checks presented for the owner/manager's signature. Even family members working within the business should be subject to the same checks and controls as other employees. To guard against bogus employment references. The most critical measure is to undertake meticulous background checks on all new employees. And an independent audit at least annually is an expense the smaller business cannot afford not to incur. The refined security and audit procedures found in the large corporation do reduce the level of fraud significantly. And second. However. the emerging business can employ some low-cost weapons to combat employee fraud. The emerging business often cannot survive the losses of significant employee theft. a prospective employer should never rely on the resume as the source for the telephone number of an applicant's previous employer. the financial controls in the emerging business are generally casual and unsophisticated. The owner/manager of the emerging business must exercise some simple precautions to thwart employee fraud. Resumes should be checked thoroughly to ascertain that the applicant did graduate from the schools claimed. reliance was placed on this trusted employee and the checks were not scrutinized carefully.) It is essential that other employment and business relationships of all key employees be known fully. this can be accomplished through required vacations and short-term job rotation. Invariably laid before the owner/ manager at the busiest periods.

prudence demands that procedures and practices be established to preclude the possibility of any employee fraud. Recognizing that even the "nicest" employees may be subject to temptations and failures of character. but must have his/her eyes fully open and not be gullible. The survival of your business depends upon it! 69 .Frauds and scams in insurance to be trusting.

Say some. The investigative arms of insurance companies are perhaps the most effective scam fighting machines on the planet Earth. it seems a more sophisticated scam specialist springs up--to extend their challenge. if at first you don't succeed. cash in on their insurance coverage. tells it like it is: If you think the problem is bad now. you'll never succeed. and will have to cough up $340. Their rating for the number of con artists convicted is about the highest for any group of crime fighters. instead. Says he was seeking a dowry for his sons. for every con artist nailed. is serving a 5year stretch. Epstein's Law. Purpose? To shake down restaurants and other food providers.Frauds and scams in insurance Scams at their Most Elaborate: Insurance Fraud --Newest "Hall of Shame" entries put a Truly Bizarre Touch to Con Games A real down-home hunk of logic. swallows broken glass.000 in restitution. and make it look like a hate crime. a wedding dancer. But. Yet. From the Archives of the Coalition Against Insurance Fraud. just wait till you've solved it. here are some examples (from their "Hall of Shame"): A self-proclaimed gypsy. Florida gay man torches his home after painting "Idle Fag" across it's front steps-in order to collect the insurance money. 70 . He gets 18 months in state prison to contemplate the wisdom of this approach.

in fact.000 in insurance proceeds for a man who 71 . A Texas couple digs up the grave of an elderly woman and dresses her in the husband's clothing. and is now serving 1 to 3. He's still at large. This guy's luck holds. stuffs her body in his car. A Manhattan Stock Market Day Trader has an effective scam going. poses as a Princess. yielding $40. New York woman.000 in insurance proceeds. DNA gives them away. then moves to New Hampshire to try a repeat performance. she is exposed. pleads guilty to insurance fraud and attempted grand larceny. Must have had a sharp lawyer. (This sounds about as challenging as trying to tune a bagpipe. all-expenses-paid stay in a Texas slammer. Object? To collect the insurance money. absolute power is pretty neat though. a guy who could probably jump start a car without cables. Third time around. Almost sounds like political influence. He's serving a life sentence--more than enough time to pray for forgiveness of his sins.000. Claims he lost his right eye on 3 different boat cruises. Second claim is for an exploding champagne bottle on another cruise. and fakes their deaths so he can collect $1. member of the Saudi Royal Family. First time is allegedly the result of a sun filter falling off a ship's telescope while he's looking through it. Power corrupts. Sounds like an unusually talented con man.Frauds and scams in insurance A New York school teacher fakes cancer to collect the insurance money. makes a small fortune. hoping the blackened body would obscure identity. he is supposedly hit in the eye by a flying toy disc. She's able to trade down from a 15-year sentence to 1 year in a psychiatric facility.) Finally. (Why is it everyone seems normal--until you get to know them?) Illegal meth lab blows up. A new way to celebrate mediocrity? A life insurance agent kills 4 homeless people. When her valiant struggle makes the local newspaper. and they are now serving a long. and pushes it over a cliff. on still another cruise.

steer clear. But insurance fraud. Washington. we submit. But. his brother borrows the car and blows himself up instead. plenty of space to think about his mistake. are clear evidence of this. if your handle on life breaks. at one time or another. Where the blind leadeth the blind. always seems to come back to haunt the con artist perpetrator. The man is now serving 32 years of hard time in a 6 x 9 cell. like the return trip of a boomerang.Frauds and scams in insurance says his severe burns occurred while he was working in his mother's bakery. Good maxim is: Live your life so that. the preacher will not have to lie at your funeral.000. D. Obviously ignored by this physician. it's best to have a positive attitude about the con man's destructive habits.000 in Medicaid payments. and. then consistently fail to meet them. you are capable of coming up with some very zany ideas on how to scam the system to make yourself rich. An insurance adjuster rams a huge chunk of tree through a hole in his roof in order to inflate an insurance claim. Doctor performs 750 worthless heart operations on homeless people to collect $2. when you die. Pickings in this area of scamery are slim indeed. We can only assume that. Slight exaggeration of insurance claims are common. an insurance "reward" being his goal. man tries to blow up his father by wiring his SUV to explode upon entry. But when it comes to the elaborate. He is nailed when it comes to light that a nosey neighbor had videotaped everything. it's best to merely get out of the way. Anyone can set low standards. Just about everyone participates in mild insurance fraud. in a wide arc. These examples. 72 .C. big time stuff.

Firms need to determine proportionate key risk and key control indicators that are appropriate to their business. to address their financial crime risks in a proportionate way and prevent financial crime from occurring. In other words. Product proofing. Management Information should be qualitative. adequate customer due diligence (CDD) as well as 'Know Your Intermediary' procedures are absolutely key for the insurance sector. in response to this increasing risk of information security. and at how information on financial crime risks is captured and presented to senior management and to the board. regular and appropriate management information to enable them to monitor the firm‘s performance on fighting crime. with a clear and consistent lead being given from senior management and a clear allocation of responsibility for the day to day management of risk. So what does this thematic work tells you? Well that a 'clear allocation of responsibility' is crucial to fight financial crime risks. we're interested in how you think managing risks in your firm makes the most sense in relation to your products' vulnerabilities or your firm's specific channels of business for instance.Frauds and scams in insurance What the FSA expects insurance firms to do? The FSA regulates over 29. advocate a 'one-size fits all' approach. The risk-based approach will only succeed if the use of judgment by senior management prevails over a box-ticking approach. as well as quantitative. the FSA is moving increasingly to a principles-based approach to regulation. and take financial crime issues seriously – but not just when a financial crime incident is discovered! Senior management need to ensure that they receive timely. What we seek to assess when we visit a firm is whether a firm has a strong anti-fraud culture. We look at the staff training arrangements. adequately designed and effectively implemented. And senior management must play an active role in establishing the right cultural ethics and policies within their firm. other firms and their customers. As many of you will be aware. Intermediaries 73 . We do not. For instance. One of the FSA divisions carried out in 2006 some thematic work on claimant fraud in both the life and non-life sectors. We require firms we regulate to have effective systems and controls in place. therefore. firms need to ensure that customer personal data is stored safely to reduce the risk of financial crime being perpetrated against them. which would be overly burdensome for most firms.000 firms. Some of the weaknesses this work identified included a lack of management information as well as over-reliance on front line staff to report fraudulent activity.

.Frauds and scams in insurance cannot consistently meet their financial crime responsibilities if it is unclear whether they act for the customer or the firm. Being aware of specific fraudulent patterns. And we look into these reported frauds carefully. Under the new system. we can then disseminate information to the relevant sector about these risks. we launched a streamlined system for reporting financial crime in the insurance industry. consumers and very importantly firms themselves. In March of this year. law enforcement. This may arise. since it is often difficult to identify who the customer of the insurance contract really is. when an insurer terminates an agency agreement with an intermediary where they see doubtful practice or suspect misconduct. We want to foster an environment where information sharing is not only encouraged. And KYC on third parties receiving payments would be no easy task. so we REALLY need the insurance industry to work with us to turn this project into a useful and successful initiative in the fight against financial crime. which party has responsibility for performing customer due diligence.g. I am not trying to say that this is an easy route. 74 . Firms also have a duty to report significant frauds to us. As this is a voluntary initiative. but perhaps the ability to perform this type of 'reverse' CDD could greatly improve the transparency of the payments system. for instance. who encompass organisations and bodies including government. Complex distribution channels (eg. falsifying customer details to obtain insurance business that would otherwise be turned down or be more expensive. sub-delegation) and multi-national transactions require a particularly robust anti-financial crime control environment and adequate audit arrangements. and Firm behaviours of this kind have led us to take action against a number of insurance intermediaries. And this remark leads me to address some of the challenges we see in tackling financial crime in the insurance sector. Obviously. but actively seen by all as a means both to reduce crime and to increase profitability. Examples of possible financial crime involving insurance fraud include: misappropriation of client money or money held under risk transfer agreements. We have long recognised that the most effective way to tackle fraud is by working in partnership with our stakeholders. insurance firms and intermediaries are being called on to tell us when they suspect criminal behaviour may be taking place. since individual incidents may be indicative of more general and pervasive trends. Insurers and brokers need to be clear on where they have responsibility – e.

but are going through with it. 1. feigning illness and then conning doctors into providing them with medical certificates to verify their "illness". according to the Association of British Insurance. And before you jump to 75 . It may sound like a victimless crime. but some of the insurance fraud being committed is actually dangerous – "crash for cash" accidents staged by motorists planning to claim on their car cover are apparently putting other drivers at risk. Apparently that makes a total of almost 5 million of us that do not think making a false claim is wrong.Frauds and scams in insurance The acceptable face of fraud?  How much battering would your finances have to take before you would consider breaking the law? "I'd never do that!" you are no doubt crying. Holidaymakers were pretending that expensive cameras and iPods had been stolen. Typical examples of insurance fraud include failing to disclose motoring convictions or previous claims when applying for cover. or exaggerating claims by adding extra items to a genuine claim. More drastic examples include people hiding their valuables and staging a burglary in an attempt to claim thousands on their insurance policies. Other travellers who suddenly realise the holiday they booked in more buoyant times is going to be unaffordable have been cancelling trips.4 million of us consider insurance fraud more acceptable now than we did 12 months ago. There are signs that people are not just considering fraud. Fraudulent travel claims were up 80% by the end of last summer. or were upping the value of what had been stolen in the case of genuine theft. or dropping their old television down the stairs so they can claim for a new flat-screen model. But according to a survey from Royal & Sun Alliance.

But would you consider trying to get one over on your insurer? Have you perhaps added an iPod you never owned to your genuine theft claim. told the Telegraph: "Often they are middle-class families who are looking for a way of getting extra money to help with the mortgage or to service other debts.6bn every year. Richard Davies. straight on to your insurance policy." Fraud costs the insurance industry an estimated £1. perhaps? Or does the idea of this "middle-class theft" just appal you?  76 . adding £40 to the average annual household premium. the group fraud risk manager for Axa. And where does this extra cost go? Yep.Frauds and scams in insurance conclusions about who is behind these crimes. no it is not necessarily the "Shameless" demographic. an expensive camera to your stolen suitcase.

investment scams. New writers should be aware that publishing requires a lot of research from writing a good proposal to finding out what a publisher or agent is looking for. internet scams. Literary scams include everything from scammers persuading potential writers to purchase pointless services to surrendering their legal rights by providing false information and promises of publication. Not even writers.Frauds and scams in insurance Various types of scams There are many types of scams you need to watch out for. How to Avoid Literary Scams Writers can avoid scams in the literary world by simply being aware of the telltale signs of the scams. These signs include:  Recommendations of all and any sorts: 77 . lottery scams. It seems that scammers spare no one. These scams include:     literary scams poetry scams jury duty scams credit card scams Literary Scams: Writers Watch Out! Credit card scams. and adding to this quite endless list of scams are even literary scams. domain name registration scams. Also susceptible to these literary scams are writers who have been submitting their works for years with no or little success. Victims of Literary Scams The victims of literary scams are often new writers' eager to enter the publishing world with little or no idea about how the publishing industry works.

or contract fee—upfront. Do and Don't  Real publishers don't tell writers to pay for services to polish their work before publication. Successful literary agents never have to ask for submissions.  "Co-publishing" or "Joint venture": Beware of publishers asking you to share the risks and rewards of publishing and/or publishers willing to publish anything backed by a cheque for a huge sum of money. Poetry Scam: The Facts 78 . Or at the very least give writers and poets a free copy of their published work. is only interested in your money and not your work.  Good literary agents don't charge fees upfront.  "Purchase this and you're in": Be cautious of literary agents asking you to pay to receive a copy of the book that features your writing. marketing.  Requests for a fee: Any agency requesting a fee—a reading.  Real publishers pay writers and poets for their work.Frauds and scams in insurance A red flag should be go up if you send your work to an agency or small publisher and receive a reply praising your work and recommending you to pay a certain agency to "fix-up" your work before publishing.  "We're looking for writers…": Regard these advertisements from literary agents with skepticism.

they may ask contestants‟ poems to be a maximum of 20 lines. thrilled contestants will continue to receive prestige letters nominating them as the „Poet of the Year‟ and telling them how they could attend an award ceremony for about $475—a small price to pay for prestige.000 and also having their poems published in an anthology.Frauds and scams in insurance Perpetrators of these poetry scams attempt to appear legimate by quoting credible sources and previous “winners” of their international contests. Poetry Scam in the Media Barbara Walters in a 1998 episode of ABC‟s 20/20 showed how reporter Arnold Diaz put one nationwide poetry contest to the test with the help of second graders. in newspapers. However.95 shipping and handling.95 plus $4. that increases with more promises of greater rewards. you have to pay $49. However. got right down to the task. to receive a copy of the anthology. not knowing that all contestants receive the same letter and that their poetry would not have been published if they didn‟t buy a copy. and publications. and on their websites. How Poetry Scam Contests Work Often these deceptive poetry contests place no restriction on the types of poetry contestants can enter. 79 . They often post calls for submissions through emails. The letter also told students by sending in $50 they could receive a copy of the anthology that featured their poem. If you follow the requirement you‟ll likely receive a letter in the mail in a co uple weeks congratulating you as the semi-finalist. These scam artists lure writers to submit poems for a chance of winning $1. Despite that. Contestants are often all too thrilled after reading how their poems will be published to spot the scam. A fee. The letter will go on to tell you how your poem will be published in an anthology. More than often theses awards are never delivered and the contestants‟ poems are never published without a fee. Contestants may end up buying numerous copies of the anthology for friends and family. Diaz asked a class of second-graders at Thomas Jefferson Elementary School to compose a poem with a maximum of 20 lines about their pet. All the students received a letter in the mail a couple weeks later announcing them as award-winning poets. Poetry scam artists rake up to $10 million a year from poetry contestants with promises of cash and prizes and publications affecting millions of hopeful poets and writers. The eager beavers even without ever studying poetry in school.

I. If the caller insists that you give him or her your personal information. You quickly give out your personal information. Regularly monitor your monthly credit card bill and bank account activities. a court official might phone is after you completed and mailed back your juror questionnaire. If you spot unauthorized charges made to your credit cart bill contact your credit card company immediately to stop becoming defrauded by credit card fraud. everything from your home address to your S.I. This represents one way millions of people a year become victims of identity theft. The court official may then apologize or ask you to pay a fine with your credit card if your refuse give out your personal information. social insurance number. over the phone to protect yourself from identity theft. Caught off-guard. Only time. The jury duty scams give con artists an easy way to rob you of your identity and/ or your credit card information. So. He asks you for your birth date. and your credit card information for a verification process. But. You pick up the receiver thinking it may be a friend or another telemarketer trying to sell you unwanted services. He says a warrant has been issued for your arrest. Instead it‟s a court official saying in a stern voice that you failed to show up for jury duty. but rarely. to sort out this unbelievable mistake. credit card number.N. prevent falling victim to jury duty scams and other scams that affect today‟s society by staying alert and learning how to spot scams. You insist that he has gotten the wrong person. The word arrest makes your heart pound faster.Frauds and scams in insurance Jury Duty Scams: How Scammers Catch You Off-Guard Your phone rings. always refuse to give out your personal information like you S. You know you tend to forget things. get the caller to read you the data so you can answer „yes‟ or „no‟ to their questions.N. you do whatever he requests so could hang up and go on with your daily activities. Learning to Spot Jury Duty Scams Stop yourself from falling victim to jury duty scams by knowing the following:    Court official never telephone to notify that you have been selected for jury duty or that you failed to show up for jury duty. Never give out your social insurance number. but jury duty? How did you forget that? Or did you subconsciously try to get out of jury duty? The official continues unflustered by your protest of not receiving a letter about jury duty. and other personal information over the phone even if the caller claims to work for the government or an official bank. 80 .

credit card fraud prevention and even the history of credit card fraud.particularly when it comes to using you credit card. as technology advances. However. 81 . despite the fact that credit fraud continues to rise. What's more. statistics show the price of credit card fraud is high . Indeed. fraud is becoming an ever more common threat to consumers . That's why it's important to learn as much as possible about credit card fraud.forcing cardholders and credit card issuers as much as $500 million a year. be sure you know how to handle it. many consumers are still unsure of how to protect their information. scammers acquire increasingly sophisticated ways of stealing our personal information. Learn what's involved in reporting credit card fraud will help you take the best and most efficient steps possible towards regaining control of your information.Frauds and scams in insurance Credit Card Fraud Unfortunately. If you are hit by credit fraud.

or glass company phone solicitors are not giving you false information to make fraudulent insurance claims.telephone and driver’s license numbers. AUTO GLASS FRAUD: Auto glass fraud comes in many forms.Frauds and scams in insurance TYPES OF INSURANCE FRAUD AND WHAT YOU CAN DO ABOUT THEM STAGED AUTO ACCIDENTS: Some people actually cause automobile collisions to collect insurance payments for injuries that are either nonexistent or greatlyexaggerated. Check out the information they give you. apply the brake. If you are in a collision. door to door solicitations. 82 . Or the bill to your insurance company could be for replacement rear wind shieldglass (which is more expensive) when the front windshield was replaced. If possible. and laterclaims to be injured and denies it was safe for you to proceed. count the number of passengers in the other cars. Make sure that auto glass salesman at carwashes. In one form of staged accident. There have even been cases where prior work orders from glass companies were stolen or sold as leads toother glass companies so they could file false claims on your policy. take photographs of the damage to the other car(s) to help your insurance company dispute high auto repair bills to low impact damage. What You Can Do: Watch out for windshield repair scams. the car in front of you stops suddenly so you can’t avoid a collision. and if possible. The fraud criminal indicates it’s safefor you to proceed. He or she then intentionally smashes into your vehicle. even if thereis little damage. Often more people will file claims than were actually in the vehicle. Customers may bebilled by a glass company for a windshield replacement when only a chip repair was done. Check with your insurance agent on your claims history periodically to make sure you are not a victim of these type of scams. Another version of a staged accident occurs when you aremerging into traffic or pulling out of a parking space. There have also been cases where a person’s insurance information was stolen out of their vehicle and false claims were made on their policies for glass repair. Don’t tailgate. What You Can Do: If you see traffic slowing. Call the police to the scene and get a police report. get names. Staged auto accident soften are caused by organized fraud rings that include an attorney and a medical care provider.

S. contact the Fraud Unit as soon as possible. often in a washroom. These organized medical fraud rings are operating in several states at this time. Injuries may be exaggerated or nonexistent. What You Can Do: Business owners should notify their insurance companies of all claims. Make sure the treatments you were billed for were actually provided. Your identity being stolen out of medical clinics and fraudulent billings are then made to your health insurance company by non-existent medical centers and/or doctors. If you have questions about the billings possibly being fraudulent. What You Can Do: Review your medical bills. notify your insurance company. Although the following practice is common and may be legitimate.Frauds and scams in insurance IDENTITY THEFT: Someone using your identity to seek medical attention and your health insurance company being billed for the treatments. you have no knowledge of the medical clinic doing the billing and never seen a doctor by that name. Be skeptical if your medical provider is prescribing excessive treatment for muscle sprains. in which a person pretends to slip and fall to the floor. What You Can Do: Check your explanation of benefit forms your heath insurance company sends you to make sure you are aware of those billings and they are not fraudulent. usually with no witnesses.costing $95 billion a year in losses. WORKER’S COMPENSATION FRAUD: 83 . Some provides bill your insurance company for treatments not performed. be wary of medical providers who direct patients to a specific attorney and vice versa. check with your insurance company. If not. If you’re a customer who witnesses a slip-and-fall and are suspicious of its authenticity. SLIP-AND-FALL FRAUD: Small businesses and fast food restaurants are targets of this form of fraud. notify a store employee.October 2009 MEDICAL PROVIDER FRAUD: This is the largest single fraud activity in the U. or misrepresent the true cost of such services. identifying those they believe are suspicious.. If you know the billings are fraudulent such as you never were treated on those dates.

which is a felony. check with the Arizona Department of Insurance to see if the company is licensed (602-364-2499. the high costs associated with this fraud have forced layoffs and resulted in companies going out of business. In other owner give-ups. a real injury is exaggerated. or 1-800-325-2548 in Phoenix area only). the vehicle is sold to a chop shop for its parts. What You Can Do: If you suspect a co-worker of faking an injury. OTHER FRAUD CRIMES OWNER GIVE-UP FRAUD: An individual reports his vehicle stolen when in fact. What You Can Do: If you accept the offer. notify your employer. in fact. Worker’s Compensation Fraud costs Americans $5 billion a year. Politely decline the offer. At other times. the injury occurred outside the workplace.Frauds and scams in insurance Some employees falsely claim to be injured on the job when. Never sign a blank check. dumped or burned the vehicle. AGENT FRAUD: Unscrupulous insurance agents collect your premium payment and fail to forward it to the company responsible for paying your future claims — leaving you uninsured. the owner and a co-conspirator have sold. The owner may collect twice: once on his insurance policy and then on the proceeds from the sale. you would be committing insurance fraud. In some instances. the shop owner over-bills the insurance company. If you are unfamiliar with the company named in the policy. then notify the insurance companyresponsible for payment. PHANTOM REPAIRS AND ESTIMATES: Crooked auto body shop owners offer to inflate the extent of damage to your vehicle to cover your deductible. and the dishonest employee receives benefits while sometimes working a second job. In doing so. ARSON-FOR-PROFIT: 84 . What You Can Do: Never make a check payable solely to an agent.

insurers can deny or adjust claims and cancel policies if there is misrepresentation. 85 . POLICY MISREPRESENTATION: Some individuals misrepresent information on an application to obtain lower premiums.). and then reports an item stolen or destroyed collecting on all policies without disclosing the multiple coverage when the claim is filed. home or vehicle for the purpose of collecting on an insurance policy. etc. FALSIFYING THEFT REPORTS: A property owner falsely reports items stolen or exaggerates the value of items taken in a burglary.Frauds and scams in insurance An owner deliberately burns (or hires someone to burn) a business. However. artwork. MULTIPLE POLICIES: An individual buys numerous policies insuring the same property(vehicle.

The crime is Insurance Fraud Insurance Bureaux estimate that Insurance Fraud involves about 15% of Insurance Claims. medical clinics. Often white-collar criminals. This kind of theft is occurring in automobile repair centers. That estimate does not take into account the exaggerated claims which have come to 86 . The billon dollar disaster Billions of dollars are picked from Consumers' pockets each year by what many people consider a "victimless" crime. have the quickest hands and generate the largest cash flow from unsuspecting Insurance Companies. which is thought to be a conservative estimate by Special Investigation Units which investigate insurance fraud.Frauds and scams in insurance Insurance fraud…. including doctors and lawyers. Most people are not even aware that it is happening. law offices and at your next door neighbor's house.

Most Individuals never consider the consequences of Insurance Fraud or exaggeration.Frauds and scams in insurance be an accepted practice in North American Society. the Policy Holder.l An exaggeration is paramount to a lie. doctors. the events of September 11 and various natural disasters in the last few years have certainly contributed. If your claim isn't worth all that much you may not suffer a huge consequence. Your next used car purchase could be a stolen vehicle. chiropractors. YOU will end up paying for the uninsured motorist. That is why you should heed the advice under the category Used Car Buyer Fraud on this web site. Insurance Companies do not want to sell insurance to fraudsters. Organized Crime is involved in the staging of motor vehicle accidents and making false bodily injury claims which involve everyone from car thieves to lawyers. physiotherapists and various other medical professions which can treat or 87 . Have you ever wondered why your Insurance rates continue to increase even though you have not made a claim? Of course. but what if a diligent Adjuster decides to question and investigate your Claim? An Insurance Claim can be denied if you misstate a fact. who is helping to pay for the fraud that is a common occurrence in the Insurance Industry. But when the premiums are more than they can afford to pay some of these Drivers choose to drive without insurance and when they are involved in additional accidents without insurance coverage. family members and acquaintances do you know who have stretched the truth when submitting an insurance claim? Perhaps you have even convinced yourself that it is acceptable to exaggerate. but if your Claim is worth thousands of dollars what would the consequence be then? You will probably lose your entire claim. and you may be denied insurance in the future as a result of having a denied insurance claim. How many friends. exaggerate or attempt to commit a fraud. but by and large fraud has a big impact on the rate increase of Insurance Policies worldwide. a lie is an intent to deceive and that constitutes a fraud. and it is you. Organized Crime is also involved in Insurance Fraud? Organized Crime is involved in the theft of vehicles and replacing the VIN tag on the dash with one that is from a similar model vehicle that has been written off and salvaged as a result of an accident. Some Drivers are paying exorbitant premiums for car insurance due to the number of accidents in which they are found to be at fault.

you should be able to make a report to your local Police TIPS line. Have we considered the consequence of this? What can we do? For starters we have to change our attitudes. If you know of someone who has committed a fraud or is about to commit a fraud. Noted below are two web sites where you can report information and tips. Or. 88 . you should report it. Insurance fraud is not acceptable and everyone who pays insurance premiums will pay more due to the cost of fraud.Frauds and scams in insurance give expert opinions on physical injuries and post-traumatic stress syndrome. your children may not be able to afford the premiums for Insurance which protects them and their families. Are you starting to realize why Insurance Fraud has been referred to as a billion dollar disaster? If Insurance Fraud is not controlled in the next decade.

mortality charges. they would take straightaway Rs 2. it would be too late to recover the money. Then the balance amount they would invest in some useless untold sinking funds all at the client’s risk. robbing their money by their planned. If you pay Rs 10 lakhs. You will be attracted by such false guarantees by the area managers and the advisors that your money would be doubled at the end of 5 years if you pay lump sum amount for three consecutive years (For example Rs 2 lakhs in 2007+ Rs 2 Lakhs in 2008 + Rs 2 Lakhs in 2009). etc. They do the canvassing just to get their salary or commission which ICICI Prudential pay them for this FRAUD You will be made to believe falsely that this is purely an investment scheme and you will be guaranteed for the money you invest would be doubled within five years by the Advisors and the local area Managers. You will lose that money completely. then they deduct as per their will. The policy is written in such a professional cunning manner that you would not get any single rupee from the money you invested.5 lakhs as such charges. ICICI Prudential is running professional fraudulent scams cheating innocent people. They also would not tell the fact 89 . 25% of that money would be deducted from your amount as premium allocation charges. You would be made to believe that this is totally an INVESTMENT DEPOSIT SCHEME similar to any bank fixed deposit or like INDIRA VIKAS PATHRA and ICICI Prudential is marketing this under the cover of some false name including free insurance policy etc. policy administration charges. Then by the time you realize this. service charges etc. cunning and heinous activities. The entire money would be lost. You will be made to believe that ICICI Prudential guarantees 100% the money doubling in 5 years When you pay the first installment of such a huge amount that is it. All your money would be totally taken up by ICICI Prudential Advisors or the Local Area Manager would never tell the facts that 25% of the money you invest at the first instance would be taken as some PREMIUM ALLOCATION CHARGES. Advisor would himself guarantee the amount getting doubled within five years and he would even call the local area Manager who is well trained to be a part of this fraudulent scam and to cheat the client by confirming him the same as Advisor said The details & facts of the actual policy will not be shown to you till it becomes late for you to get the refund. Public should be warned not to make investment or take any such policy from this company.Frauds and scams in insurance ICICI PRUDENTIAL FRAUDULENT SCAMS ICICI Prudential cheats the people systematically and robs the money from innocent customers through their clever and cunning methods. These advisors themselves do not know the details of such investment policies. They lure people by attractive offers that too approached by your own relatives and friends so called Advisors who are out-sourced by ICICI Prudential.

etc." Everyone in ICICI Prudential is a Manager. There are professional cunning people in ICICI Prudential trained for answering the clients’ queries and e-mails. RICH. There are some Process Leaders who act as though they are the bosses for the Managers. we wish to inform you that every customer is entitled for a free-look period of 15 days from the date of receipt of the policy document. from the balance amount and further reduce your available amount to the least possible amount These cunning people make the clients to cancel this policy once they realize that this is a FRAUD. They are all MANAGERS called Customer Relations managers and some are PROCESS LEADERS. This also well planned and anticipated by ICICI Prudential and to cover this they have written in the policy rules " No surrender value if policy called at the end of first year or second year or third year" and thereby rob all your money This has to be brought into light and this FRAUDULENT SCAM should be exposed to all people and to Indian Government and proper disciplinary action should be taken against this company. There is no level junior to Manager. we are unable to comply with your request for policy cancellation" " Further. OPTIMISER. The sample replies are " We wish to inform on investigating the case with the relevant department. they deduct again SERVICE CHARGES. Aashik Hamad. He would lose the entire amount he invested in the first year.Frauds and scams in insurance that the balance amount would be invested in some fancy funds . Umapathy Iyer. All BOGUS Not only that. They switch over time to time and change by shift in answering and replying the clients to fool them. A client would never get his money back. These people are well designated to do this crime of cheating people and doing FRAUD and cheating Indians in a professional way. You would never come to know of these until very late when you realize that you are trapped by these people. Teena Katyal. just to attract you. etc. Some well trained crooked & professional people are there who will act as though they are investigating the matter for the first time and later they reply with the standard replies very cunningly all well preplanned Some of those people are Ritu funds they call . Umashankar Chary. POLICY ADMINISTRATION CHARGES etc. 90 . They have their standard replies to the customers .totally at client's risk Giving nice fancy names like MULITIPLIER. Then you will find these such different fund names and you would never know what these funds are and which companies they invest. ICICI Prudential knows that the client would not normally invest further similar amounts in the second year and the third year to lose still higher amounts. By the time it would become too late. This is a very well planned professional way used by ICICI Prudential in cheating innocent people including NRIs and making money. MORTALITY CHARGES. LIFESTAGE etc.well planned and systematically executed by the company. Prince Sharma.

the report said." Joshi said. which often motivates them to exaggerate their claims.Frauds and scams in insurance The insurance sector seems to be the most vulnerable to frauds as companies are losing a whopping over Rs 15. Frauds can also be committed through mis-appropriation (agent advisors depositing the premium cash money after a delay or not depositing the premium cash money at all)." said Indiaforensic Research founder member Mayur Joshi.171 crore due to different frauds every year. research and due-diligence. Joshi said. These are followed by driving license and FIR related papers." it said. has revealed that insurance companies in India bear a loss of about Rs 15. customer nonexistence (false policy sold to a non-existent customer) and through fraudulent claims (fake claims being submitted by customer’s with or without agent connivance.000 crore every year due to exaggerated claims by customers or agents. external parties like agents and claimants pose the biggest risk of frauds before the insurance sector. "There is a perception among customers that the insurance company always pays less than what you claim even if it is true damage assessment. The report said that one in every two persons exaggerates their insurance claims. a survey has found. The report was made on the basis of a case study and meetings with managerial personnel from insurance sector as well as large number of individuals from 23 out of 37 insurance companies working across the country. the report said. Majority of the respondents believe that most of the frauds are caused by insurance agents who are the critical interface between customers and companies. A latest survey conducted by the India forensic Research. "Customers often approach them to seek advice when filing claims who in turn forge details and commit the fraud. Motor and health insurance are the most prone to insurance related frauds followed by life and property insurance. "The survey states that unlike other industrial sectors. 91 . Documents such as fake medical bills and certificates are commonly used to cheat insurance companies in the country. which is a Pune-based consultancy firm for fraud investigations.

about 87." The insurance sector in India is growing with a consolidated turnover of nearly Rs 2.33 per cent of frauds were committed by individuals and the rest were done by syndicates.000 crore every year. 92 . According to the report.Frauds and scams in insurance The study reveals that 88 per cent of the respondents agree that insurance sector is prone to external risks of frauds and "every insurance company loses 8.57 per cent of its revenues to the frauds." Joshi said. "Use of fraud analysis software and stringent laws for punishing fraudsters and adequate awareness among them can help in keeping a check on insurance frauds. Central Bureau of Investigation has in June this year arrested a senior manager of a nationalised insurance company here for allegedly collecting money from customer.00.

 Always pay by check or credit card. the credit card company might reimburse you in the event of fraud.Frauds and scams in insurance Additional Tips to Prevent Fraud  Beware of unreasonably low premiums. an attorney. and make sure you verify that the company and agent are licensed. Many schemes promise extensive coverage at a very low price. but be cautious of any plan or policy that costs significantly less than others you’ve priced. This can make shopping for insurance easy and convenient. be sure to get a receipt that shows the name of the company. Consult with your family. However.  Get information from TDI. If you must pay cash.  If you buy insurance over the Internet. If you pay by credit card. 93 .  Take your time. Legitimate agents will respond to your questions and concerns and allow you all the time you need to make your decision. Don’t let an agent or company representative pressure you into making a hasty decision. The complaint index and financial rating help indicate whether a company provides good customer service and is financially stable.  Be cautious of policies sold door to door or over the phone. Many legitimate companies have websites that allow you to purchase insurance online. be suspicious. or a financial adviser if you’re unsure of any details. or payment arrangements. Check and credit card payments can usually be traced and verified. If an agent is evasive when you ask about prices. take the same precautions as you would for any insurance purchase. Even though policies sold in this manner are sometimes legitimate. Insist on knowing a company’s physical addr ess. Be especially cautious of insurance that’s offered through unsolicited e -mails. the date. Take as much time as you need when buying any type of insurance. coverage. t he Internet provides the anonymity that also can allow illegitimate companies to flourish. Unauthorized companies often use these methods to market their products. You can usually save money by shopping carefully. and the amount paid. In addition to license status. their rates are often higher and they provide less coverage than policies sold by traditional agents or brokers. TDI can provide you with an agent and company’s complaint index and financial ratings.

Frauds and scams in insurance  Keep and protect your insurance documents. and details of any claims submitted. receipts. Also keep notes of any telephone or in -person contacts with the company. the date. keep a copy of any correspondence between you and the insurance company. In addition to the actual policy. including the name and title of the person y ou spoke with. and what was said. Good recordkeeping can protect you in the event of a broken promise. including advertisements. 94 .

You’ll have to make sure that you’re completely aware of what these things are. you will want to know what would happen with your potential policy that will end up benefiting you. This is certainly not something anyone would want to deal with. You should be absolutely certain that all of your questions have reasonable answers that you can make use of. then you may securely move onto the next company.Frauds and scams in insurance How to avoid insurance fraud Scams are definitely among the most frightening and unfortunate things that you can experience in your financial life. Everything in the process should remain transparent. you should be doing this from the very start of the buying process. and of course. This "if. designed to protect you and your family in the event that you should pass away. First and foremost. the more questions you have agents answer. especially when it has to do with life insurance. which is why you need to do everything in your power to combat this discerning situation from the very beginning. The following includes some helpful suggestions about how you may avoid scams and cash in on the protection and services you pay for in the first place. after all. Life insurance is. Don’t ever let fraudulent agents take advantage of you. Asking questions and voicing any possible concerns that you can think of keeps the communication open between you and the agent. You rely on them for assistance and at the time you find yourself needing them most. they are missing in action. it is crucial to ask as many questions as possible when looking into a potential life insurance policy. it’s good to know that insurance companies do expect things out of you. This is obviously one of the best options you should use. then you’ll be able to know if it’s some ridiculous request or not. as well as puts to rest any potential worries. Next. You should not be getting the short end of the stick 95 . they should be working for your business. Secondly. the more the business model and conduct of that supposed company becomes clear. If you have good idea about what you have to do in certain situations. Doing this would give you a surefire way to catch a potentially fraudulent agent off guard. and anyone who refuses to answer questions should raise an immediate red flag. your money. and your financial security and ruin the progression of protecting yourself and your loved ones. After all. If they can’t give you answers that you’re comfortable with. Furthermore. then" situation is a two way street. You trust these "life insurance agents" with your money in order to ensure that their efforts and services safeguard you in some way. and how your potential insurance agent will handle the situation.

and if they don’t do that. In the end. ever. as it is your own insurance that you pay for. and your family they should be most concerned with. There is too much at stake to risk losing it all . 96 . An agent’s job is to match you with the best life insurance for your many needs. Most times in life if you rush into things. you should be the one giving and receiving the fair amount.Frauds and scams in insurance on this one. and also make the agent in question aware that you are going to take your time. and it should be helping you. your future. Don’t ever give an insurance company an opportunity to make you do something you are not comfortable with. do not make any decisions too quickly. they don’t turn out as well as they could have had you taken the proper time to evaluate everything. Those fraudulent agents who are trying to sell you fake low cost life insurance will present the situation as if you have to act now to get the great deal offered. Lastly. walk away with no worries. not hurting you. It is your money. you’re the sole decision maker with regard to insurance. you let them win. Make sure you take all the time you need. The moment you feed into their pushy and insistent nature and rush against your better judgment. In theory. Do not be fooled into rushing.

• facilitate the development of quantitative risk tolerance limit son fraud. • remuneration and promotion policies. In determining its risk profile as well as its vulnerability to fraud. • distribution modes. • organisational structure. A sound and prudent fraud management strategy must be compatible with the risk profile of the strategy and objectives. and • provide direction to the overall fraud management plan. • products and services offered. The fraud management strategy should form part of an insurer’s business strategy and be consistent with its overall mission. insurers should consider the following factors: • size. To ensure its relevance and adequacy. the strategy should be 97 . composition and volatility of its business. and • market conditions.Frauds and scams in insurance Conclusion How insurer should manage a risk management strategy An insurer should have a sound strategy to manage fraud risk arising from its operations. It should: • include a clear mission statement to indicate the insurer’slevel of tolerance to fraud. • complexity of its operations.

reporting and investigations. policies and procedures. This function would be primarily responsible for the compliance with the insurer’s fraud management policies and procedures covering fraud identification. The organisational structure should facilitate effective management oversight and execution of its fraud risk management and control processes. The strategy should also be properly documented and effectively communicated to all relevant staff.sufficient resources and be able to raise issues directly to the Board or relevant Board Committee. The structure should facilitate communication between departments and to senior management and/or the Board of Directors to ensure prompt responses to instances or suspicions of fraud. The Board should approve the fraud management strategy and ensure that adequate resources.Frauds and scams in insurance reviewed regularly to ensure that it continues to be effective. this function should have the requisite authority. It should recognise and understand the risk of fraud and its potential impact on the institution. expertise and support are provided for the effective implementation of the insurer’s fraud management strategy. especially when there are material changes to the insurer’s risk profile. An insurer should consider establishing a fraud management function if warranted by its risk assessment. In order to be effective. and systems and controls to detect unauthorized deviations. The Board is ultimately responsible for the sound and prudent management of fraud risk. 98 . There should be a process to approve proposed deviations from the approved strategy. How insurer should build a structure An insurer should adopt a risk management structure that is commensurate with the size and nature of its activities. Any deviation from the approved strategy and policies should be subject to the Board’s review and approval.

The insurer should specify in its policies and procedures in respect of record keeping the following: • information and analysis to be recorded. as well as adequate or the nature and complexity of its activities. The insurer should retain records of all reported cases of suspicion/incident of fraud together with internal findings and analysis done in relation to them. • reporting of suspicions of fraud to designated person(s) for review and investigation.Frauds and scams in insurance How insurer should frame policies and procedure An insurer should establish clear policies and procedures for the management of fraud risk. and • relevant initial and ongoing training on fraud matters for its directors. policies and procedures. 99 . management and staff. and • staff access to records based on their confidentiality classification. • retention period. These include: • the roles and responsibilities of the fraud management function or staff assigned to execute the insurer’s fraud management strategy. • record keeping of suspicions of fraud and fraud cases. It should establish standards relating to the turnaround time for the assessment of fraud. • measures to monitor and detect instances or suspicion of fraud. These policies should be well-defined and consistent with the insurer’s fraud management strategy. • measures to identify and mitigate the risk of fraud. documentation of analysis. and keeping of records on suspicions/incidents of fraud.

The insurer should have in place proper and effective reporting systems to satisfy the requirements of the Board with respect to reporting frequency. Policies and procedures should be documented and set out in sufficient detail to provide operational guidance to staff. 100 . There should be clear guidelines on the type of information to be reported to the Board on a regular basis as well as when certain information or development ought to be communicated immediately to the Board.Frauds and scams in insurance The insurer’s anti-fraud policies should be communicated throughout the organisation. level of detail. usefulness of information and recommendations to address issues of concern. An insurer should also review the effectiveness of its policies. taking into account changing internal and external circumstances as well as identification of lessons from incidents of fraud or suspicions of fraud to enhance its management of fraud risk.