Insurance Scams and Fraud Trends to Watch in 2014

Medical, auto and workers’ compensation fraud are expected to be at the forefront of the National Insurance Crime Bureau focus on insurance fraud trends in 2014, according to Chief Communications Officer Roger Morris.

The medical and workers’ comp business is where most of the fraud occurs today, Morris said.

“The scheme is the same. It’s always been ‑‑ continuing treatment, malingering as we call it, without really needing it. That’s why there’s been quite a bit of analysis of provider bills lately,” said Morris.

Medical fraud is such a huge business that the NICB established major medical fraud task forces around the country starting in 2002. There will be eight by the end of the year – with the latest one in Chicago.

“We focus on strictly the medical component of the auto and the workers’ comp side, and we look at some of the fraud schemes that are being perpetrated particularly in states where there’s no‑fault or PIP coverage, personal injury protection coverage, states like Florida, New York, Michigan. We’re seeing some of that move into other states like Minnesota and Kentucky,” Morris said.

He said that staged accidents are a big component in PIP states where there is typically a huge industry of organized crime involving cappers, runners, doctors, chiropractors, physical therapists and lawyers. According to Morris, it’s “all in the name of generating claims, hitting that limit.”

PIP States Put Pressure on Medical Providers

Medical fraud in Florida became so pervasive the state began a major crackdown initiative in 2012.

“These states are ripe for fraud, and the criminals that have been doing this in Florida have seen a lot of pressure on them now because of the medical fraud task forces and the law‑enforcement action that we’ve had in Florida and recent changes, the tightening of the fraud laws there, the PIP laws. A lot of them are moving their operations or expanding them into states like Minnesota and Kentucky,” he said.

NICB has held fraud summits in Florida the past two years, as well as in Minnesota last year and in Kentucky last October.

“We need to tweak some of the laws and so forth to tighten that up because they know where the loopholes are. They go in there and open operations, and they’ll have a clinic going for a month or two billing millions of dollars and then shut it down and move it to another location before anybody has an idea of what was going on,” Morris said.

Auto Insurance Fraud Scams

Morris described two common auto insurance fraud scams.

“One of the common, pervasive auto scams we see is the crash‑and‑buy scenario. A person has an accident but doesn’t have the insurance or the right coverage, so they purchase insurance and then wait a day or two and submit a claim saying the accident happened after they bought the policy,” he said.

“This started very heavily during the recession and continues today, very similar to the hit‑while‑parked claim ‑‑ the insured has an accident, they don’t have the right coverage, or circumstances exist that they don’t want the insurer to know about. They park their car somewhere and they say that when they came back, they found someone had hit it and left, and then they filed a claim,” the NICB chief communications officer explained.

Property Insurance Fraud Scams

According to Morris, mysterious disappearance of property, usually jewelry or laptops, continues to be a common fraud scam. These disappearances happen frequently during the holidays or tax time, he said.

“Property claims spike in December, April and September ‑ tax time, school time, and holiday time ‑ and the average value of many items being claimed is more than twice the actual retail value,” said Morris.

Regional Fraud Scams

Though auto theft is down, according to Morris, law enforcement is seeing an uptick in organized criminal rings that are sophisticated enough to switch vehicle identification numbers (VINs) or export cars illegally. One such ring was recently uncovered in Los Anegles.

“We monitor exports of vehicles. We check the VINs and so forth for Customs and Border Control. We had a ring that was stealing cars from local dealerships, rental agencies or from parking lots, high‑end luxury cars, and they were loading them up on ships to be shipped out of the country overseas and labeling them as scrap metal,” Morris said.

“When we had those containers turned around, every one of those containers ‑‑ more than 25 of them ‑‑ contained two high‑end vehicles that had been stolen and were being shipped out of the country to be sold overseas for a much higher price. I think they sometimes get two or three times the price overseas that they get here.”

There was also a recent case in New York involving 46 high‑end vehicles. The vehicles, worth $2.4 million, were stolen from dealerships and other places and were being VIN‑switched and resold to supposedly unsuspecting buyers.

“In many cases, they were actually taking orders and selling the cars at a lower price once they had been stolen,” Morris said.

Cargo Theft Continues to Rise

Cargo theft is also a growing concern, Morris said.

“It’s easier to steal a load of valuables, such as cell phones, and make a nice profit on that than it is to steal a car and risk going to prison for more time than you would spend going for cargo theft. We’ve been focusing on that heavily, working nationally on that,” he said.

2014 Insurance Fraud Legislation

The NICB has a team that works on anti-fraud legislation. In 2014, the team plans to follow proposed legislation in the following states:

• New York, the runner bill – dubbed the “no cash for patients” bill by the NICB – is intended to help curb abuses in that state’s no‑fault system.
• Michigan, a fraud‑authority bill – which is intended to focus on the state’s efforts towards dedicated prosecutors related to the PIP issue. That bill was introduced this year, but no action was taken on it, so it’ll carry over into 2014, Morris said.
• Colorado, the NICB is pushing a felony‑fraud law.
• Florida, the legislature there continues to look at a potential no‑fault repeal.
• Minnesota and Kentucky— increased problems with both states’ no‑fault and PIP systems has officials and the NICB working on anti‑solicitation efforts to curb medical fraud.

Some of the property claims data reported was derived from a report by Enservio.

Listen to the podcast with Roger Morris: Fraud Trends in 2014