After many decades of being on the receiving end of customer scams, the insurance industry is on to you. Maybe not you personally, but insurers are on to your co-worker whose car mysteriously "disappeared." And that neighbor who loaded his new TV into his truck just before his house burned.
And now that the foundering economy is leading to more attempts to score free money with fraudulent insurance claims, insurers are becoming more vigilant. A well-established list of red flags -- known to insurance insiders as "suspicious loss indicators" -- helps the industry zero in on potentially bogus claims.
Insurance companies are using everything from software that spots suspicious patterns in claims to -- get this! -- real people who review your files.
"The industry has many, many, many years of experience in detecting insurance fraud," warns Tom Welsh, the vice president of training for the National Insurance Crime Bureau, a suburban Chicago not-for-profit organization that works with insurers and law enforcement to detect insurance crimes."Don't try it, because it's just not worth it."
Why should you care if your neighbor is scheming?
Insurance fraud is big business in the United States. Excluding health care fraud, insurance fraud exceeds $40 billion a year, according to FBI statistics. You pay that price in the form of higher insurance premiums, which cost the average family $400 to $700 annually.Fraud bureaus around the country reported a spike in the number of fraud cases in 2009 compared with the previous year, according the Coalition Against Insurance Fraud.
At the same time, two-thirds of the country's fraud bureaus said home insurance companies received more claims due to arson in 2009, according to the coalition.
That's suspicious!
Since its creation in 1992, the crime bureau has developed 23 "suspicious loss indicators." It's going to need them all: In 2009, the bureau's 1,000 member organizations -- which include insurance companies, self-insured organizations and transportation-related businesses, including car rental companies -- made about 143,000 requests to the bureau for help assessing suspicious claims.According to Welsh and representatives of other insurance-related organizations, tip-offs that a home or car insurance claim could be bogus include:
- High debt or financial distress on the part of a claimant, detected by insurance company investigators through forensic accounting.
- Adding or increasing home insurance or business insurance coverage shortly before damage or theft occurs.
- Lack of police reports.
- Damage or theft of old, obsolete items or inventory, or of multiple family heirlooms for which it's difficult or impossible to establish accurate value.
- A history of losses and previous claims.
- A claimant who's unusually calm after a major loss.
- Suspicious-looking or handwritten receipts for repair or replacement of covered property.
Arson alert
The National Fire Protection Association estimates that 300,000 intentional fires occur in the United States each year, causing 400 to 500 deaths and $1 billion in property damage. But only 5% to 7% of arson offenses result in convictions, according to the FBI.The U.S. Fire Administration says these signals indicate that a fire should be further investigated:
- It occurred during a renovation or to a structurally damaged building.
- Valuable or sentimental property, personal items, important papers or pets were removed from the premises.
- There are no accidental or natural causes at the point of origin.
- There's an unusual presence of combustible materials or multiple separate fires.
- The fire started immediately after a family argument or shortly after family members left the premises.
- The fire spread unnaturally or caused excessive damage.
- Firefighters' access was blocked by vehicles or by contents pushed up against entry doors.
- The homeowner's movements are unaccounted for.
- The value of damaged items seems improbable, given the policyholder's income.
Continued: Suspicious injuries
