Insurers urged to step up anti-fraud efforts

THE BIGGEST obstacles in suppressing fraud or limiting its impact on the insurance industry are in identifying it and finding trained resources to investigate it.

“As it stands now, fraud is identified in most claims departments by less than 10% of your workforce,” Economical Insurance Group investigative services unit corporate technical analyst Dan Little said last week during the 43^rd annual joint conference held by the Canadian Insurance Claims Managers Association/Canadian Independent Adjusters Association Ontario Chapter in Toronto.

The theme of the conference was fraud.

“In my experience, it is usually the same adjusters notifying our Investigative Services Unit about incidents where fraud is present,” Mr. Little said.

“We ask ourselves, ‘What are the other 90% doing?”

He said if companies are lucky, 10% of their adjusters will identify and report potential fraud cases, “If 10% of your adjusters in your claims operation are motivated to identify fraud, but nothing is done with those files, I can guarantee that the identification of fraud by the original 10% of your adjusters will decline.”

Companies need to have two things in place if they are serious about suppressing fraud.

“At a minimum, you need ongoing fraud awareness training to help adjusters recognize files where further investigation may be required.

“You must have internal or external resources available to respond as soon as possible to those files requiring additional investigation.”

One of those external resources has historically been private investigators.

“They usually assist us in areas where surveillance is required. This is for the most part will be in the area of losses involving personal injury.”

And, of course, independent adjusters continue to play a necessary role in the adjustment of claims, including investigations of losses where fraud may be suspected.

“They usually assist (Economical) when there is an increase in the volume of new claims, catastrophes or where a specific skill set is required due to the complexity of the loss.

“(We) recently identified a number independent adjusters who we felt had the requisite skill set, to assist our ISU when claims volume levels began to impact our team’s availability.”

Legal counsel is another team player.

“The point at which a lawyer is retained to assist an insurer, is now the time where the plaintiff’s lawyer suggests an insurer formed their opinion on the legitimacy of a claim. It is important to recognize that the time you decide to retain counsel, becomes equally as important as the time you decide to utilize surveillance or other experts.”

Mr. Little said there are several things that companies should keep in mind when it comes to fraud.

“Investigation, in some form, must be an integral part of the claims process. This is not only for fraud detection but also to identify coverage issues and subrogation opportunities. How your organization accomplishes that will depend on your priorities.

“If fraud is detected, you must be prepared to spend money at the front end of the investigation. This must be done so that an objective assessment of the validity of the claim can be completed. In addition, a court will scrutinize the decisions made early in the life of the file. Being seen as being objective in your deliberation is a key to success.

“It is recommended that you conduct due diligence of the professionals you choose to do business with. Make sure you’re paying for the best and most qualified partners.

“Treat those who you choose to partner with as partners and not adversaries in the claims process. Too often we can be quick to criticize their contributions. These individuals are professionals in their area of expertise and offer valuable assistance to insurers when we need them the most.”

Article appeared in Thompson's World Insurance News - February 8, 2010

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