Fraud Trends to watch in 2021
Recent global events like the COVID-19 pandemic and the historic Atlantic Hurricane Season in 2021 are among the many forces driving the environment and current economic state. In this context, insurers are streamlining their Fraud Detection Programs and working to identify new operational efficiencies. This effort results in new fraud prevention and detection actions to combat the historical increase in Insurance Fraud.
The New Hampshire Insurance Department defines fraud as a situation that happens “when a person attempts to obtain a benefit they are not entitled to or when an insurer knowingly denies someone’s legitimate claim.” According to a recent report presented by the department, “over the past twelve months, a total of 18 insurance fraud cases were investigated and submitted for criminal prosecution.”
Experts argue that to stop Insurance Fraud and prevent becoming a victim, the first step is to be able to detect it. Today, we will analyze the current trends in Insurance Fraud by examining the most relevant cases of Insurance Fraud that took place this year. In general, the cases involve:
- False claims of food poisoning.
- Dishonest claims of disability.
- Workers’ compensation fraud.
- Buying policies after a loss occurs and making a claim.
- A mysterious disappearance of jewelry & other expensive items.
- Cases involving fake medical records.
In the coming months, insurance professionals will find themselves battling fraud and focusing on developing strong cases around instances of fraud.
Insurers can commit Insurance Fraud against Claimants
Yes, Insurers can commit fraud against claimants. From 2013 to 2020, an insurance agent in Pensacola (Florida), was charged with selling fraudulent insurance policies to clients. The agent took part in “premium diversion” where he collected premiums and instead of producing insurance policies, kept the money for personal gain. He convinced customers with fake insurance documents.
Another similar case took place in Louisiana where an agent was suspended in June of this year for submitting fake Certificates of Insurance (COIs). Certificates of Insurance are documents issued by an insurance provider that provide essential information from an insurance policy.
The takeaway from this case is that COIs are often confused with an insurance policy. Producing and submitting fake certificates of insurance gives third parties the idea that somebody they are working with has the required insurance coverage when, in fact, they do not.
These illegal practices are not exclusive to insurance providers or fraudsters posing as one. In Massachusetts, a vehicle repair shop owner plead guilty to insurance fraud where he inflicted further damage to clients’ cars to collect more money from insurance providers. This allowed him to increase the prices charged to customers and what insurers paid out. Instead of using the extra insurance money to properly repair the vehicles, he pocketed the leftovers.
Insurance Fraud in Work Environments
As you can see from these examples, while it is most often an insurer’s job to spot insurance fraud, it is also an important skill for employers to have. Here are the most useful tips for employers looking to spot insurance fraud trends this year:
- Does the employee have a history of filing claims?
- Is a claim filed shortly after the policy is put in place or right before it expires?
- Increases in coverage before a claim is filed.
- No emotion when submitting life-altering or costly claims.
- Reluctance to file a report of any kind (i.e., police reports).
- Somebody who has enough coverage but wants to add more for no apparent reason.
- Delayed claim reporting.
While traditional fraud prevention and detection technologies are here to help, insurers are now looking at advanced analytical techniques to better identify new and emerging threats. Knowing these red flags we just listed and how to analyze them will help employers develop a plan to mitigate fraud risks.
Deter Insurance Fraud from Third Parties
If an organization often works with third parties, it is a good idea to require them to carry insurance coverage. While this will not eliminate all cases of insurance fraud, it will help keep people honest when making a claim. This action will force insureds to rely on their policy and premiums that could increase with added claims.
Finally, tracking coverage is the best way to remain protected and track insurance compliance. To ease this task, technology is here to help! Sign up for a demo here to see how SmartCompliance works!
The Future of Fraud in Insurance
As a general conclusion, keep in mind that insurance fraud is constantly evolving. As criminals devise new ways to deceive insurance companies, and the public for illegal financial gain, the only constant in the field is change.
Although some behaviors have remained consistent over the years, the industry is now undertaking the task of predicting future trends in fraud. The good news is that with developments in technology, security is just one click away!