Fighting Insurance Fraud: The “Fraud Dog” Talks Tactics

Linda Webb has a background in fighting crime and fraud. A stint early in her career as a white collar crime detective led in 1994 to a fraud investigator position with American International Group. Webb stayed with AIG, moving up the ranks, finishing as an assistant vice president of the global fraud investigation division. She left AIG in leaving in 2007 to work for Medicare as a private contractor.

Now, Webb investigates claims for workers’ compensation insurer Patriot National Insurance Group and conducts multi-line property/casualty investigations as the president of Contego Services Group.

Known as the “Fraud Dog“, Webb thinks the image of a dog fighting fits her.

“I’m always a dog with a bone. I’m never going to stop until I solve the crime,” Webb said.

The crime she wants to solve is huge. Insurance fraud is an $80 billion dollar a year industry, according to the Coalition Against Insurance Fraud (CAIF).

While fraud’s costly impact on the insurance industry can’t be ignored, it’s not the only industry affected.

“I think that it’s really important that we reach out and get everybody’s help because fraud continues to morph every single day and it’s going to hit every single business, not just the insurance world but every business,” Webb said.

She believes claims investigators need to keep up with the changing world of fraud. “We need to do a better job of link analysis and figuring those fraud patterns out, those fraud trends, and that’s the only way we’re going to be able to stop it,” said Webb.

To Webb, 9/11 was a turning point for insurance carrier special investigation units (SIU). In the years prior to the attacks on the World Trade Center, she said it became increasingly common to find links to outside companies in fraud cases. Some of the resulting claims from 9/11 showed links to terror cells, which she said was an eye-opening realization into the careful planning that went into some of the fraudulent claims.

Webb closely watches trends in fraud, including what is happening with shell companies, labor brokering, improper premium reporting, organized crime rings, and generational fraud.

Insurers should not underestimate organized fraud rings. They test and research to determine if insurers have an SIU unit and they can be persistent. To illustrate her point, she cited her work with an organized crime operation in Florida: “I shut them down by identifying the agents that were potentially involved. So then what they did is they went through the use of retail agents and then they spread…out so that I wouldn’t find the pattern and then they tried it again.”

Adjusters and investigators should consider that those engaged in fraud are likely to target several industries and have multiple schemes going at any given time, according to the claims expert. “I really believe that the fraudsters move faster, morph faster and they cross different businesses,” said Webb. “In other words, they might do insurance fraud one day, and then they move to mortgage fraud, and then they move to Internet fraud and cyber fraud.”

At the corporate level, Webb contends that the silo management ideology needs to go. “If you had fraud in one particular department, nobody…saw it. The ability to activate a department from any direction is key,” said Webb. “Front to back and back to front, in what I call the integrated team relationship.”

In her view, good fraud fighting team has a wide knowledge of diverse businesses and networks with other fraud investigators.

Drawing on her experience, Webb has developed a proprietary fraud-fighting system called SWARM — swift working assessment with rapid methodology.

SWARM reflects Webb’s appreciation of how widespread fraud is and that it demands a comprehensive attack. In her work with Patriot National, as soon a new claim report activates it, SWARM works to dispatch an integrated team with people from Patriot’s underwriting, premium, subrogation, claims and legal teams.

“Everybody from the front of the business to the back of the business is activated in the insurance world,” said Webb. “Then all of them collectively funnel information back to the SIU and the SIU goes out and investigates.”

In the past, the average dispatch time between when a claim was reported and a claims investigation was triggered could be up to three weeks. With SWARM techniques administered at Patriot National Webb said the dispatch time is approximately three minutes.

Faster response time is crucial when gathering facts and talking to witnesses, she said.

According to Webb, SWARM has also improved Patriot’s closure rating. In terms of tracking the workers’ compensation tail on catastrophic claims, Patriot National is trending toward a six to eight year tail versus the NCCI average of 16 to 20 years. Also, Patriot is managing an 86 percent closure ratio in the first 12 months, 92 percent closure ratio by 18 months, and a 99 percent closure ratio within 36 months. “That just shows you the fact that there’s not a long legacy tail in claims,” said Webb.

Her system also assesses how the fraud developed. “That is where you have to go back to the front end of the company, you have to go back to underwriting and say, ‘Where did we fail here? How did that happen in the first place?'” Webb said.

Finally, her system is geared to referring cases to law enforcement. “SWARM works because we don’t only identify the fraudster…we make the referral to law enforcement,” said Webb.