Money or Nothing

The war is on. Money for nothing is under siege.

Consider the increased press about insurance fraud. Recent media attention focused on two fall milestones: the release of the Anti-Fraud Task Force report and the Auditor General of Ontario’s report.

The former identified key issues that will go under the microscope:

• The licensing and/or regulation of health clinics, and other gaps in regulation

• The establishment of a dedicated fraud investigation and enforcement unit

• The development of a consumer engagement and education strategy

• The creation of a single web portal for Ontario auto insurance claimants

The first two were initiatives recommended by IBC. While that is reassuring, at the same time, it’s clear that government expects insurers to be more aggressive in their own efforts to identify and investigate fraudulent behaviour. Moreover, the government appears to be looking to insurers to better communicate to the public the steps they are taking to prevent, identify, and ultimately eliminate fraud.

The Auditor General’s report recommended that a comprehensive anti-fraud strategy be developed that would identify the roles of all stakeholders involved. It essentially supported the direction of the Task Force.

Another media event likely to attract attention will be the release of a KPMG report in early 2012. This report is intended to give an objective assessment of the cost and impact of accident benefits and service supplier fraud in the Ontario auto system.

Organized crime looks for maximum profitability

IBC is currently investigating multi-case fraud projects in the Greater Toronto Area (GTA). Cases may involve tens of millions in fraudulent, or potentially fraudulent, claims. While fraud is a cross-Canada activity, the GTA is the epicenter.

It’s no surprise that organized crime looks for maximum profitability. To that end, the criminal organizations often operate much as you would expect a mainstream business to do. Some of the most sophisticated groups are apparently adopting a business model called vertical integration.Vertically integrated companies seek to control and take profit from as many points as possible from one production process.

Vertical Integration: the criminal model

Take staged collision rings for example. At the collision scene, scheme organizers may control the tow operators involved so they gain some or all of the tow, storage, wait time, scene clean up, and hazardous waste disposal fees charged. Salvage vehicles that have been partially or mock repaired may be used in the collisions so that when they are settled as a total loss, more profit can be made than by using vehicles in good shape. The damage caused in the faked collision may never, on the other hand, actually be repaired even though it is billed for.

Occupants alleged to have been in the vehicle may actually receive only some or none of the benefits claimed in their names. Income replacement benefits, housekeeping, caregiving or attendant care fees may all flow to scheme organizers in part or in total. The injuries claimed by the occupants may be assessed and treated at scheme-involved medical facilities. Multiple assessments, extensive treatments and numerous assistive devices such as orthotics or pain management devices may be invoiced for not because they were ever provided but simply to add to the income flows.

In some cases, the cost of having real care providers involved in this process may be avoided by simply stealing the identities of practitioners and billing in their names. Alternatively, legitimate care provided may be exaggerated and overbilled without any knowledge on the part of the reported patients or providers.

Some organizations may control the legal service representatives involved in order to control insurer contact with claimants who are being duped or used in a scheme. In this way the criminal organization may maintain control of claims and payments for services and benefits made by reported claimants.

Increasing Sophistication

In the ever-changing business of insurance fraud, strategies and tactics are both becoming more sophisticated.

Schemes have evolved: from manually-caused damage being reported to insurers or reporting centres; to damage created by intentional low-speed impacts with stationary vehicles or objects in private locations; to low-speed impacts with two participating vehicles either at private sites or on public roadways; to current schemes where innocent and unaware drivers are brought dangerously into collision on public roadways. Not all groups operate at the same level of sophistication. Any one group may adjust their operation by borrowing from ‘old school’ schemes from time to time.

There is also a growing problem of fraudsters seeking out high-valued used or scrap cars to be used multiple times in staged collisions to claim replacement and refurbishment costs.

Experienced fraud rings know that insurance companies would notice if the same people repeatedly submitted claims for injuries caused by car accidents. Therefore organizers systematically recruit new people simply to be the names in different staged collisions. Recruits may be enticed by some promised portion or fixed amount from the planned fraud, or they may be promised some perk or benefit such as a rental car use or free massage. Often recruits get cheated out of even the minor share promised them after participating in the scheme. Other recruits participate to pay off debts, to support some cause or belief, or because of extortion.

Sometimes legitimate collision victims are recruited into schemes and agree to allow vehicle repairs, treatments, assessments and other services to be billed on their claim in order to gain personally from the scam. Other legitimate collision victims are used in schemes unknowingly when inflated repairs or medical attention costs are billed to their insurers.

Increasing fraud industry sophistication is also apparent in areas such as digital reproductions of benefit forms, false signatures, forged T-4 forms, fake pay cheques, medical provider identity thefts, forged Health Care for Auto Insurance (HCAI) signature cards and other new creative ways of gaining provider credentials.

Communication: front line weapons in the war on fraud

The war on fraud involves increased communication. This includes an IBC TIPS line (1-877-IBC-TIPS) for the public to submit information about auto theft or suspected fraud. Two videos have been developed by IBC that have been viewed on YouTube more than 47,000 times. Both social and traditional media, through press releases and opinion articles, are being used.

In 2011 IBC provided training sessions with numerous law enforcement agencies, authorities, and insurers on staged collisions and associated service provider fraud. These will continue throughout 2012. IBC and member insurers supported several significant law enforcement initiatives on fraud in 2011. Much more is expected for 2012 and into the future.

Co-operative investigations and increased communication are critical to continued success. The war is on.