10 Steps to Detect and Prevent Insurance Fraud Whitepaper

10 Steps to Detect and Prevent Insurance Fraud Whitepaper

Free White Paper

Traditional fraud detection systems tend to focus on opportunistic or soft fraud – when an individual takes advantage of a situation to pay a lower premium or exaggerate a claim. But hard fraud perpetrated by organized crime rings is growing – and so is the sophistication and velocity of attacks.

Insurers that follow the 10 steps Stuart Rose outlines in this paper offer the best chance for detecting both opportunistic and organized fraud.

Fraudster sophistication is on the rise, as is the number of fraudulent claims. Just what should insurers do to prevent this barrage of attacks?

Be sure to read this white paper by insurance analytics expert Stuart Rose, who outlines 10 crucial steps to both fraud detection and prevention.

About SAS

SAS is the leader in analytics. Through innovative analytics, business intelligence and data management software and services, SAS helps customers at more than 80,000 sites make better decisions faster. Since 1976, SAS has been giving customers around the world THE POWER TO KNOW®.

 

 

Ever wonder why your car insurance fees are so high? We all pay the price for fraud

Lorraine Sommerfeld

What if I told you that between $116 and $236 per year of your insurance premium went to line some liar’s pocket?

It’s Fraud Prevention Month, and car insurance costs – especially in Ontario – continue to escalate. While the amount you pay is the usual calculus of where you live, the driving histories of those who drive your car, how difficult the car is to steal and how much it costs to repair, fraudulent claims remain a substantial portion of that bottom line you are charged each year.

Fraud rings are headline grabbers, as they should be. Sophisticated criminals often working quite literally from street level (those who stage crashes) on up through the ranks of tow truck operators, lawyers and medical providers cost us all.

But what about that time you had the front end collision and had the body shop take care of that older dent in your door while it was in the shop? What if your neck wasn’t really that sore anymore, but you had the chance to keep going to massage appointments for just a few weeks longer? When kids broke into all the cars in your neighbourhood and you suddenly “remembered” you’d left your camera in the car that night, instead of just a cupholder full of change? These opportunistic crimes also add a more substantial tally to insurance fraud than you might realize.

Dr. Yoel Inbar is an assistant professor of psychology at the University of Toronto, specializing in social and personality psychology. He focuses on moral decision making. What makes us tick. What makes us steal.

“There are several things at play,” he explains. “There’s an assumption this is a victimless crime. That the loss will be against a huge company, instead of against the collective, the other customers. We know, of course, that these costs all translate into higher premiums for all of us.”

People who would not steal a pair of boots from a retail outlet may not feel morally compromised tossing in a few older dings and dents to a larger repair job that has been warranted.

“There is an element of justification, in some cases,” Inbar explains. “You’ve been paying into this insurance pot for so long and not getting anything from it. Some people almost see it as a savings account.”

He also notes we take our cues from what is happening around us, what we come to perceive as norms. “The idea can develop that everybody else is doing it, so I can, too.”

The Financial Services Commission of Ontario (FSCO) states nearly 10 per cent of Ontarians admit committing auto insurance fraud, and 20 per cent know someone who has. The bad news for those contemplating sharing your stories? Fifty-eight per cent have no problem throwing a friend or acquaintance under the reporting wheels. The Ontario figures show males are significantly more likely to participate in fraudulent behaviour, as are millennials. Baby boomers have a better grasp (83 per cent) of what constitutes fraud over millennials (56 per cent), which perhaps explains the gap – sort of. “I didn’t know any better” doesn’t pass the smell test for this one, though.

You might read headlines of organized crime rings shaking down the auto insurance industry and wonder why you should be bothered if your neighbour scores a little extra body work on his or her banged up Impala. You should care because, while those scamming rings get a lot of media attention, in actuality, they aren’t the nuts and bolts of the fraud infrastructure. According to the latest figures available from the Insurance Bureau of Canada (IBC), a KPMG report put out in 2013 using 2010 figures estimates total fraud in Canada at between $768 million and $1.56 billion. They break that figure out into three types of fraud: organized (those headlines), premeditated and opportunistic; they peg the organized crime fraud at between $175 million and $275 million.

Premeditated involves things like treatment programs that never take place; parts of the medical industry capitalizing on either a patient’s lack of knowledge about what they are signing or simply having patients sign blank treatment programs. Opportunistic fraud is that phantom camera in the break-in or the additional mechanical claims.

Even if the organized component of that estimate is low, that still leaves a wide margin of insurance fraud that is being paid out to elements that you and I, average consumers, have much control over. We are ripping off each other. Don’t sign blank treatment schedules from healthcare providers, and make sure you understand just what is being proposed. I’ve had this happen and didn’t even realize until months later. The (now gone) provider had claimed treatments I’d never even heard of, much less received. In a post-crash fog, I’d just been desperate for someone to get me back to work.

Professor Inbar notes that human nature is flexible, and that “possessing salient information can have a surprisingly large effect on the decisions we make.” Small tweaks can lead to big change. Insurance fraud is very much about who is watching. He notes studies have shown people react differently with something as basic as a pair of cartoon eyes attached to their monitor, or a mirror. By now we’ve all grown used to the idea that we are constantly being monitored and filmed; maybe reining in insurance fraud will be an upside to that intrusion.

Make a plan for what you will do in the event of a crash, like where you’d have your vehicle towed. Demand detailed medical and repair reports. Don’t sign blank authorizations. Ask for help if you’re unsure.

You can anonymously report suspected insurance fraud. In Ontario, contact FSCO (855-5TIP-NOW) or for all of Canada IBC (877-IBC-TIPS), or Crimestoppers.

Source: Driving.ca

Alberta insurance broker accused of defrauding $540K from employer

LETHBRIDGE, Alta. — A former insurance broker in southern Alberta has been charged with defrauding his employer of more than $540,000 over a period of almost nine years.

Police in Lethbridge say an investigation began last October after an employee at Schwartz Reliance noted discrepancies in accounts managed by one of the partners.

Investigators allege that between January 2008 and last September someone created fake accounts and altered existing accounts to generate higher commissions for personal gain.

Police say no clients suffered any losses.

Stephan James Evanson, who is 36 and from Stirling, Alta., is charged with fraud over $5,000 and money laundering.

He has been released from custody and is to appear in court on March 27.

Claims: Is my nephew committing insurance fraud?

Claims: Is my nephew committing insurance fraud?

BY JASON TCHIR | The Globe and Mail

My nephew had his car broken into and he lied and claimed he’d had a brand-new MacBook in it. He doesn’t think it’s wrong since insurance companies charge so much and make a lot of money. This is fraud, right? I’m trying to scare him. Dan, Toronto

Insurance fraud is, well, fraud – but for some, it’s considered a matter of just getting back a small chunk of what you’ve been pouring in for years, a researcher said.

“People think of insurance policies as a savings account – the more they’ve paid in, the more entitled they feel to take something back,” said Dr. Yoel Inbar, assistant professor of psychology at the University of Toronto. “If you’ve never filed a claim, it almost feels like you’re getting a bad deal.”

In several studies involving about 1,000 people in the United States and the Netherlands (“there’s no reason to believe this isn’t true for Canada”), Inbar found that people rationalized acts of fraud such as getting the body shop to fix existing damage along with claim-covered accident damage.

They didn’t see it as stealing, he said.

“People don’t understand how insurance works – they think it’s a big faceless corporation and it will come out of their profits,” Inbar said. “So they don’t realize that what it actually does is make it more expensive for everybody.”

The Financial Services Commission of Ontario (FSCO) referred to Inbar’s research when it released an Ipsos survey of 1,052 Ontarians.

In that survey, about 10 per cent said they had submitted an exaggerated or false claim.

Plus, 35 per cent said they didn’t know that defrauding an insurance company is an offence under the Criminal Code of Canada – and 25 per cent said they didn’t know auto insurance fraud affects auto insurance premiums.

“People don’t understand the basic idea of risk pooling,” Inbar said. “If we ask people to describe what auto insurance is, they say, ‘You pay into to it so eventually you can take something out.’ ”

Inbar said “a small minority said what an economist will tell you: that it’s a mechanism for risk hedging.”

In 2010, KPMG estimated that insurance fraud cost companies $768-million to $1.56-billion.

That same year, Ontario reduced benefits paid out to people injured in accidents – and it saved insurance companies $2-billion.

In 2015, the Ontario Trial Lawyers Association released a report by two York University professors showing that Ontario insurance companies made big profits – as much as an 18.5 per cent return on equity.

What if you get caught committing insurance fraud? The claim could get denied, your insurance policy could be cancelled and, if it’s more than $5,000 and you’re convicted, you could get up to 14 years in prison.

Less than $5,000? Up to two years.

Top 10 most stolen vehicles in Vancouver – Did yours make the list?

Top 10 most stolen vehicles in Vancouver – Did yours make the list?

By Eric Zimmer | Daily Hive

Got an older Honda Civic currently sitting in your driveway?

You might want to double check.

The Vancouver Police released their list of the top 10 most stolen cars in Vancouver, and not only is the Honda Civic a popular car to own, it’s the most popular one to steal.

Other popular choices for car thieves include Ford F-150s, Toyota Camrys, and Jeep Cherokees.

Top 10 stolen vehicles in Vancouver

  1. Honda Civic (pre-2000)
  2. Ford F-150 (pre-1999) and Ford F-250 trucks (pre-2007)
  3. Honda Accord (pre-1998)
  4. Dodge/Plymouth Chrysler minivan (1991-2000)
  5. Jeep Cherokee (1993 to 1999)
  6. Ford Econoline van (2000 to 2007)
  7. Toyota Corolla (1990 to 2004)
  8. Chevrolet/GMC Silverado/ Sierra Trucks (1992 to 2006)
  9. Acura Integra (1990 to 2001)
  10. Toyota Camry / Solara (1989 to 1999)

If your car made the list, but anti-theft devices cost more than your ride, the VPD may have a solution for you.

The detachment is giving away wheel locks at four different locations while supplies last.

Get your own Plymouth (or whatever thief-prone vehicle you own) protector at these community police centres:

  • Collingwood – 5160 Joyce Street, Vancouver
  • Hastings Sunrise CPC – 2620 East Hastings Street, Vancouver
  • Kerrisdale Oakridge Marpole – 6070 E. Boulevard, Vancouver
  • Granville Downtown– 1263 Granville Street, Vancouver

Source: Dally Hive

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