C39 - Fraud Awareness

  1. What are the effects of fraud?
    • Economic loss to individuals & their families through direct physical damage
    • Economic loss to the community (resources of fire, police, ambulance, & other public services used)
    • Opportunities to do business are lost
    • Death or physical injury to the public (harm to innocent victims, firefighters, police, their families)
    • Consumers must pay higher premiums
    • Emotional & psychological effects
  2. What are the 4 consumer attitudes?
    • 1. REALISTS: low tolerance for fraud but realize it occurs; do not want strong punishment
    • 2. CONFORMISTS: tolerant b/c they think many ppl do it; want moderate punishment
    • 3. MORALISTS: least tolerance, no excuses, want severe punishment
    • 4. CRITICS: very high tolerance, blame the ins industry b/c they think they are unfair, want little or no punishment
  3. What are some other consumer attitude factors that contribute to fraud?
    • Divergent attitudes
    • Age, gender and level of education also affect how ppl perceive things
    • Rising culture trend in N. America - loss of core values - "me" generation preoccupied with material values
    • Some consumers want tangible economic returns for their "investment"
    • Psychological justification; some think it's ok to increase amt of the claim to make up for premiums paid
  4. How are premiums affected by fraud?
    The cost of fraudulent claims are passed on to all insurance consumers as a component of premiums.
  5. What key tool is used raise awareness about fraud?
    • Education by providing information
    • Insurers must set up proper business practices to eliminate the opportunities
  6. What are the 2 general categories used to classify fraud?
    • 1. Opportunistic fraud: some form of dishonesty on a claim that has legitimately occurred (ie. exaggerate the amount claimed or claim for things that do not exist)
    • 2. Planned fraud: fabricating a claim for the purpose of defrauding an insurer (ie. inventing a claim, arson, staged mva)
  7. Who is involved in insurance fraud?
    • TP claimants
    • insureds
    • agent or brokers
    • insurance company staff
    • service suppliers
  8. Difference between Good Faith vs. Utmost Good Faith
    Good Faith: state of mind, fairness, fair conduct, reasonableness, decent behaviour

    Utmost Good Faith: legal principle that defines the standard of conduct involving insurance policy transactions. Carter v. Boehm (1766) acknowledged insurer's vulnerable position.
  9. What is the purpose of the Canadian Coalition Against Insurance Fraud?
    • to coordinate efforts, share resources, and make efforts more effective
    • formed as a framework to reduce and control insurance fraud
    • created by the Canadian Task Force on Insurance Fraud
  10. What 2 central techniques are used to control risk of fraud?
    • 1. Prevent *most desirable
    • 2. Reduce

    • - promoting fraud awareness in media
    • - teamwork (insurers, brokers, adjusters, experts, lawyers, police, fire, courts, public, etc)
    • - communication skills (be respectful & polite; delays may cause insd to seek "revenge" on insr)
    • - consumer hotlines (Crime Stoppers)
    • - detection strategies (red flags)
    • - reward good customers (lower premiums)
    • - train agents, adjusters, u/w's to investigate
    • - verify info
    • - data banks (created & shared)
    • - evaluate service providers & experts
    • - analyze scope & cost of repairs or treatments (only repairs or tx relevant to the claim to be paid)
    • - security systems & practice
    • - penalties for fraud (must be appropriate)
  11. What are "red flags"?
    • indicators or signals
    • items of info known about fraudulent situations
    • are not proof
  12. Define insurance fraud.
    any act or omission with a view to illegally obtaining an insurance benefit
  13. Describe misrepresentation
    • The insurer may be entitled to void the contract; treated as if it never existed
    • To void a policy the misrepresentation must be material - it must affect how an insurer would have judged the risk
  14. Describe material change
    • The insured must promptly report any material change in the risk while the policy is in force.
    • It is a serious breach of a policy condition
    • In common-law provinces the contract may be void as to the part of it affected by the change; in QC the entire policy may be voided
  15. Describe termination
    • Important distinction between a voided policy and a cancelled policy.
    • Only part of the premium (a pro rata amount) is returned to the insd when policy is cancelled.
    • The entire premium must be returned when policy is voided ab initio (from the beginning)
  16. What are some requirements after a loss?
    Insurer has right to ask for detailed info as outlined by legislation; to properly document a claim the insd may be asked to provide a stat dec with the following:

    • - inventory of destroyed/damaged property w/ qty, cost, actual cash value
    • - how loss occurred
    • - that the loss did not occur through wilful act
    • - details of other insurance on the property
    • - location of the property at time of loss
  17. What are the insured's obligations to notify the police after a loss in QC?
    Insd is required to promptly give notice to the policy of any loss caused by criminal act. Requiring insureds to report crimes to police may deter insurance crime.
  18. Difference between waiver vs. estoppel.
    Waiver: the voluntary or intentional relinquishment of a known right; can be inferred through conduct (ie. an insurer knows certain facts that would deny insurance but continues to treat policy as though it is in force, cannot later avoid liability)

    Estoppel: principle where insr is not permitted to renege on its position when an innocent party has relied on it. (ie. if an adjuster leads an insd to believe that a claim will be paid, estoppel prevents denial of coverage at some later date)
  19. Define fiduciary duty
    position of special trust & confidence that one who holds funds or items of value for another; impliesa strong duty of responsibility on behalf of the holder
  20. Where are the 2 main areas in which good faith and bad faith claims arise?
    • Disclosure by an insured when applying for insurance
    • Handling of claims
  21. How may insurers possibly expose themselves to a bad faith claim?
    • - fail to properly investigate the event
    • - intentionally offer an amount that is substantially & - drastically lower than would be considered reasonable
    • - fail to settle in a reasonable period of time
    • - unreasonably denying the claim
    • - bringing unfounded allegations against an insured in a self-interested and callous manner
    • - ignore plaintiff's evidence that adequately responds to issues in dispute

    • Avoid bad faith lawsuits by:
    • - treat insd's fairly & w/ dignity
    • - conduct thorough investigation before taking action
    • - consider any alternative methods to handle the claim
    • - reassess positions as new evidence becomes available
  22. Define punitive (or exemplary) damages.
    • are meant to punish the defendant
    • when conduct is high-handed, oppressive, outrageous, wanton, or evil w/ malice towards the plaintiff
  23. Define aggravated damages
    • aim to compensate
    • take full account of intangible injuries (such as distress, loss of dignity, and humiliation caused by the defendant's behaviour)
  24. What are the 2 main categories of evidence that may be presented at trial?
    • 1) Direct evidence: proves the fact w/out the need to infer or make presumptions (ie. a witness saw an arsonist)
    • 2) Circumstantial evidence: based on making inferences from connected facts (ie. insd in financial trouble, only he had shop key, moved pets to another location prior)
  25. What are 6 types of evidence?
    • 1. Sworn statements - most common
    • 2. Expert evidence
    • 3. Testimony given under oath - by witness
    • 4. Documents - contracts, deeds, etc
    • 5. Experiments - judge decides if allowable
    • 6. Real evidence - photos, videos, physical objects
  26. What does spoliation of evidence mean?
    refers to its destruction
  27. What are 4 things/items that are considered privileged?
    • 1. Communication between solicitor & insured
    • 2. Settlement negotiations
    • 3. Evidence collected for litigation
    • 4. Reports from the ICPB (Insurance Crime Prevention Bureau)
  28. What type of business has the greatest risk?
    New business
  29. What are some claimant background red flags?
    • has no prior carrier
    • is new to the broker
    • is new to the area
    • is "walk-in" business
    • is not known to anyone at the brokerage
    • asks too many questions about claims process
    • is very knowledgeable about insurance terms or procedures
  30. What are some contact pattern red flags?
    • applicant is never available to meet - only deals by phone
    • comes in at noon, at end of day, or on a Friday when staff may be rushed
    • is in a hurry to complete the app and interview
    • has never been insured before
  31. What are some application red flags?
    • does not live or work nearby
    • has an address that is not consistent w/ employment or income
    • has a PO box as their address
    • lived at present address less than 6 months
    • only has a cell number
    • does not have drivers license or any other id
    • requires high limits of coverage inconsistent w/ income or lifestyle
  32. What are some red flags that underwriters must take note of?
    • Moral hazards: insd's character
    • Morale hazards: careless attitudes towards security & loss prevention
    • Type of risk more susceptible - ie. large public company less risk of arson than small business w/owner as only employee
    • Loss history - u/w should verify by calling previous insurer
    • Numbered company
  33. What are some financial red flags?
    • applicant is deeply in debt
    • significant decreasing sales
    • significant decreasing profits
    • prior bankruptcy
  34. What are some property inspection red flags?
    • housekeeping & cleanliness
    • storage & disposal of waste
    • storage of combustible material
    • obstructions on staircases & corridors
    • security systems
    • business operating from a home
  35. What are some location red flags?
    • area has newer more attractive retail space available (building is in danger of losing income potential & arson-for-profit)
    • is isolated
    • not located close to a fire station
    • served by a volunteer or a part-time fire dept
  36. What are some business operation red flags?
    • business is less than fully active
    • has seasonal operations
    • has areas that are open to traffic but should be closed to the public
    • has a high staff turnover rate
    • has employee disputes over working conditions
  37. What are some appraisal report red flags?
    • fee was calculated based on the valuation amount (a fee based on a % of the valuation would tempt the appraiser to increase item's value)
    • limiting conditions & basic assumptions are not stated
    • appraiser did not physically view or inspect the piece
    • valuation procedure is not described
    • valuation method is not stated
    • an effective date is not stated
    • the purpose of the statement is not stated
  38. What role does a deductible play in reducing fraud?
    a large deductible is an effective method of having insured maintain care for the property
  39. Define phantom vehicles.
    do not exist or are already wrecked
  40. What are some premium red flags?
    • cash payment made but for only minimum amount required
    • wants to buy insurance and cost not important
    • premium payment is late
  41. What are some automobile red flags?
    • applicant's income inconsistent w/ value of vehicle
    • applicant has not owned a vehicle for a while
    • age of applicant suggest that he likely owned a car before
    • no previous insurance carrier
    • full coverage requested for older car
    • older vehicle reported to have no existing damage
  42. What areas should be considered when reviewing renewals?
    Renewal is an excellent time for underwriters & brokers to consider if accounts have become susceptible to fraud. Good to review:

    • - economic downturn in the neighbourhood or insured's class of business
    • - major personal changes such as divorce or job loss
    • - policy has been cancelled several times for non-payment of premium
    • - number of claims is higher than average
    • - an increase in limits is requested
    • - insurance is taken out on items that in the past did not warrant insurance
  43. How can economic conditions affect insurance fraud?
    • When policyholders are thriving economically, it is assumed that the risk of insurance fraud is low.
    • Overall economic conditions in the country are significant
    • The specific industry that the insd is in may be going through turbulence (ie. business needs new equipment but needs capital)
  44. What type of things in the environment in which insurance people operate can affect insurance fraud?
    A very competitive insurance industry may adversely affect those writing insurance. It may encourage a more quantity over quality emphasis on writing business, which may increase potential for fraud.
  45. Why is it important that brokers/agents are aware of changes in the lives of their clients on a personal level?
    Marital breakdowns, etc present a time of upheaval in insured's life. This may materialize in greater moral hazards where insd is more susceptible to fraud.
  46. Give an example of a change in an exposure or a new exposure and how it can lead to insurance fraud.
    • Insured is obligated to report anything that is material to a risk. Ie. whether actual principal driver has been listed on policy.
    • Potential for fraud increases when insd does not abide by policy conditions and a claim occurs.
  47. Why is it important to review claims history when a policy is being renewed?
    • some ppl make a living through insurance fraud
    • u/w should review if claims rate is higher than average or if there is a pattern of claiming on multiple policies
  48. Why must insurers and brokers carefully evaluate any requests for increases in coverage?
    When an insd requests increases in coverage or lowered deductibles for no apparent reason question whether loss has already occurred or is being planned.
  49. What are the basic functions of an adjuster?
    • investigate
    • determine policy coverage
    • negotiate
    • adjust
    • settle
  50. What do independent adjusters require to legally operate?
    • they are subject to provincial legislative requirements
    • must be licensed to operate
    • completion of a number of Insurance Institute of Canada courses
    • oral examination
  51. What are 7 red flags common to all types of claims?
    • 1. clmt presses too strongly for quick settlement
    • 2. too familiar w/ insurance terms & claims process
    • 3. going through financial problems
    • 4. willing to accept low settlement to avoid providing documentation
    • 5. called the broker just before the loss to confirm coverage
    • 6. was separated or divorced shortly before the loss
    • 7. claims for very expensive items inconsistent w/their lifestyle or cash flow
  52. What policy timing pattern has been associated with fraudulent claims?
    • just after policy inception
    • after an increase in coverage
    • just before policy expires
  53. What provides protection to an insurer w/out prejudicing its rights?
    a non-waiver agreement permits adjuster to maintain contact w/ insd throughout the investigation without fear of creating an estoppel
  54. What does a typical non-waiver agreement include?
    "it is agreed that the insurer may investigate circumstances of the claim, carry on negotiations, make a settlement, defend any actions brought against insd or insr without prejudice"
  55. What is a reservation of rights letter?
    • a unilateral notice by the insurer asserting that it is preserving its options and waiving none of its rights
    • does not bind the insured or acknowledge coverage
    • confirms that all rights will be retained under the policy while claim is investigated
    • could also draw attention to insd's duties and obligations
    • if insured refuses to sign the non-waiver agreement, this letter may be sent
  56. What type of documents requires the insured's permission to be released?
    • financial
    • employment
    • medial
  57. Why are photographs important to an investigation?
    • inexpensive way to combat fraud
    • may show that no physical damage exists
    • demonstrate the type and quality of contents
  58. What is an interrogation?
    an investigative interview where the known facts are matched to a particular suspect for the purposes of obtaining a confession

    *adjusters conduct investigative interviews - not interrogations*
  59. What are 8 useful points to remember about the interview process?
    • 1) Plan: know the file, prepare a checklist to be done
    • 2) Listen: do not interrupt, let clmt ramble or vent
    • 3) Do not use threatening language or gestures
    • 4) Maintain composure: don't get upset, even if they are lying
    • 5) Ask one question at a time: don't confuse them; wait for answer
    • 6) Evaluate body language: a person in distress shows it
    • 7) Ask for an explanation: if the answer is not clear; don't worry about looking foolish
    • 8) Make notes: show them your notes after the interview, permit them to make initialed changes
  60. Why are statements useful?
    • are a valuable and permanent record of an individual's recollection at a time when the incident is still fresh in the mind
    • can be used to damage credibility of the stmt giver should any inconsistencies arise in the testimony
    • a person may refuse to sign a stmt
  61. What can a policyholder do if a claim is not paid within the mandated time period after submission of a proof of loss?
    • for fire, payment must be made w/in 60 days after submission of proof of loss
    • insd has option after this period to launch a lawsuit against the insurer
  62. What are the 3 stages to a polygraph test?
    • 1) pre-test interview
    • 2) collection of data
    • 3) analysis of data
  63. Why is polygraph testing controversial?
    • no agreement in scientific or legal circles as to the reliability
    • possibility of "false positives" where someone being truthful can be deemed lying
    • submitting to a polygraph is entirely voluntary
  64. Give 10 examples of types of experts.
    • 1) origin & cause specialists
    • 2) appraisers
    • 3) electrical, mechanical or chemical engineers
    • 4) accident reconstruction specialists
    • 5) investigative specialists
    • 6) surveillance specialists
    • 7) photographers
    • 8) doctors
    • 9) accountants
    • 10) lawyers
  65. Define forensic.
    • used with or connected to a court of law
    • forensic experts must be prepared to appear in court as witnesses
  66. Discuss coverage-related fraud indicators of particular interest to an adjuster.
    • coverage arranged shortly before loss (1 or 2 months)
    • increased or added shortly before loss
    • property is heavily over-insured
    • shortly before policy expiration or cancellation date
    • many documents were destroyed in the fire except for the insurance policy
    • duplicate or multiple policies with different brokers
    • misrepresented or misleading facts in app
    • extensive claims record
    • called broker shortly before loss to check coverage
  67. What factors in the insured's personal life may motivate a crime of arson?
    • recently separated or divorced & disputes over property have arisen
    • alimony or child support obligations
    • employment probs - strike, layoff, business closing
    • gambling problem
    • bank threatening to foreclose on property
    • high debt load
    • other criminal activities (ie. extortion or drugs)
  68. What right of access does the adjuster have to property?
    policy stat conditions allow access to the property but do not allow the insurer to exercise any control over the property
  69. What was decided about access in Regina v. Ouida (1996)?
    • Ontario fire marshal needed a search warrant to enter the scene b/c it was believed that the owner was engaged in arson. A search warrant was not obtained and as a result, incriminating items discovered were not admitted into evidence.
    • The law provides that process is important when evidence is gathered - the ends do not justify the means
    • The rights of private citizens must be protected whether or not fraud is suspected
  70. What is a trailer?
    • the link intentionally established to distribute fire from one area to another
    • elongated burn patterns may be visible afterwards between burn areas showing that a trailer was used
    • any type of ignitible material may be used as a trailer
  71. Why would a house that is listed for sale possibly be an arson red flag?
    • may be listed with no offers or activity for an extended period
    • need to sell for money
    • may need of substantial maintenance
  72. What business factors may be signs of a fraudulent claim?
    • economic recession
    • new highway has significantly reduced traffic to insd's retail store
    • ruthless competition
    • insd's product no longer competitive
    • insd wants to get out of business quickly b/c of disputes w/partners, labour probs, health probs, decision to emigrate
    • insd cannot fulful contracts b/c of inadequate equip, materials
    • seasonal business
  73. What is a burn pattern?
    • the shape of the charred areas
    • depending on the shape \/ or /\ could be normal or chemical burn
  74. What might a vee burn pattern indicate? an inverted vee pattern?
    • \/ = normal burn w/out accelerants
    • /\ = usually chemicals used to accelerate fire
    • Irregular burn patterns may also suggest that a chemical was used
  75. What is a public adjuster?
    • represent insureds for a fee (usually a % of the insureds settlement which may inflate claim)
    • subject to same licensing requirements as independent adjusters except they are restricted to certain types of claims
  76. List some fire scene indicators.
    • multiple points of origin
    • trailers
    • odor of flammable liquid, empty fuel containers
    • an explosion or series of explosions
    • timing devices near point of origin
    • contents removed from building prior to fire
    • signs of tampering w/ gas or sprinkler systems
    • unusually fast spread of fire
    • unusual coloured flames were observed
    • things out of place (ie. propane tank in kitchen)
  77. If an arson fire is suspected who will the fire dept call to investigate the cause of fire?
    the Fire Marshal's Office (FMO)
  78. What does the criminal code item that concerns arson for fraud cover?
    • Arson is a crime against society
    • Disregard for human life: up to life in prison
    • Damage to property: up to 14 yrs
    • Own property: up to 14 yrs
    • For fraud purposes: up to 10 yrs
    • Negligence: up to 5 yrs
    • Possession of incendiary material: up to 5 yrs
    • Prevention Non-compliance: inferred by court
    • Insurance policy: inferred by court
  79. What may a judge order when sentencing an insd on an arson conviction?
    may order the accused to make restitution (repay the insurance money to the insurer)
  80. What 3 key elements must evidence of a defense against arson show?
    • 1. fire was set
    • 2. insd had motive to set fire
    • 3. insd had opportunity to set fire
  81. Financial problems create motive to commit fraud. Name some deceptive practices used to disguise the poor financial condition of a company.
    • financial statements cannot be produced
    • fictitious invoices
    • sales made after fiscal year included in financial statements to show a stronger financial position
    • the year-end cut off is manipulated
    • expenses are understated
    • many creditors have not been paid
    • purchase invoices have been suppressed
  82. What kinds of questions may arise regarding inventory?
    • the inventory is obsolete
    • the inventory is over-valued
    • large stock purchases made in cash just before claim
    • new & better products available at comparable cost
    • low rate of turnover for inventory
  83. Discuss aspects of establishing motive in an arson fraud.
    • Financial problems (business & inventory indicators)
    • Opportunity (insd has only key to premises
    • Credibility of Witnesses
  84. Describe the formal appraisal process for a claim.
    • appraisals can be done by either the insurer or insured
    • the dispute is settled when the 2 appraisers agree with eachother, or when the umpire agrees w/ one of the appraisers
  85. What were the details of D'amico v. General Accident Assurance Co. of Canada (1977)?
    • insurer denied claim
    • insurer showed evidence of insd's dire financial situation to support motive; insd was not credible as a witness; and evidence shown to prove opportunity
    • insd deemed responsible for fire, ordered to repay insr
  86. What characteristics associated with receipts would be deemed to be suspicious?
    • insd has no receipts or credit card slips
    • receipts are photocopied, handwritten, from the same store, consecutively numbered, in whole dollars, show no tax or incorrect tax
    • receipts are presented immediately after loss, very neatly
    • the store does not carry item on receipt
    • items stolen were just purchased
  87. What parties are generally involved in a liability claim?
    3rd parties
  88. What difficulties may arise when the insured is a friend of the TP claimant?
    Insured may be sympathetic and therefore tempted to enhance a TP's claim by accepting responsibility for the accident.
  89. Where are 'planned' accidents typically staged?
    public places, such a mall, restaurant, store or supermarket
  90. What type of symptoms are easy for a fraudster to feign?
    Psychological, ie. major depressive disorder, post-traumatic stress disorder
  91. Explain how fraud claims may arise out of a disaster.
    The # of ppl involved in a disaster provides a screen for the fraudster who hopes that individual claims will not be looked at too closely.
  92. What is the special focus of liability claims investigation?
    the insured & claimants, witnesses, statements, scene photographs, weather conditions
  93. What are some red flags associated with injury claims?
    • Witness is very eager to provide info to help clmt
    • Property does not appear to be recently damaged or is inconsistent w/ the accident
    • injury is difficult to measure as only subjective complaints are raised
    • medial tx appears inappropriate or excessive
    • out-of-pocket expenses were not incurred even though the injury claimed is a serious one
    • the recovery period is unusually long for the type of injury claimed
  94. What are the red flags associated with a wage verification check?
    • named employer cannot be easily verified
    • employers business phone is an answering machine
    • employer is evasive
    • employment record is handwritten
    • claimant will not authorize access to employers records
    • clmt is self-employed or related to the employer
    • income is not consistent with occupation
    • wage statement appears altered
  95. What red flags regarding lawyers?
    • repeatedly associated with dubious or questionable claimants
    • lawsuit launched same day that person was injured
    • lawyer and doctor have paired up consistently
    • extensive legal action undertaken
  96. For what type of activity would experts be hired? Name 5 main areas.
    To develop, record, or to preserve evidence in 5 areas

    • 1. Determine how accident occurred
    • 2. Preserve objects related to the event
    • 3. Perform testing on objects
    • 4. Produce or analyze medical reports
    • 5. Conduct surveillance & interpret results
  97. Why is surveillance important?
    to establish how active the claimant is and provide evidence that the claimant has full range of movement
  98. Define kinesiology.
    • the study of human movement
    • multi-disciplinary science involving: anatomy, biomechanics, physiology, and psychomotor behaviour
  99. How would you complain formally about a medical doctor?
    applicable colleges administer a public complaints process; legislated by province
  100. What red flags are associated with medical reports?
    • medical report seems to be a template; all reports are very similar
    • tx for various claimants w/different injuries are the same
  101. Why are subjective complaints difficult to deal with?
    • no clear and objective way to measure it
    • relies heavily on subjective reporting
  102. What is malingering?
    • intentional feigning of mental or physical illness to gain insurance money or to avoid returning to work
    • person is consciously aware that nothing is wrong
    • generally considered to be fraud
    • most common type of abuse in claims
  103. Name 4 diagnoses re illnesses that do not fit criteria for fraud, but pose difficulty for adjusters b/c the diagnoses are vague and often related to psych.
    • 1. Somatoform pain disorder: aka myofascial pain syndrome or fibromyositis; preoccupation w/ pain (at least 6 months); absence of mechanism that accounts for the pain; or pain grossly in excess of expected
    • 2. Psychogeneic pain syndrome: caused by emotional problems but pt's express the pain they feel by complaining about physical symptoms. Illness behaviours becomes a "sick role" that blocks recovery and active lifestyle.
    • 3. Factitious illness: self-induced injury (more psychopathology than malingering)
    • 4. Symptom magnification syndrome: self-destructive behaviour pattern consisting of self reports & displays of inappropriate disability; produced consciously or unconsciously; reinforced by family, cultural, vocational & financial facilitators
  104. Why is the overseas black market trade of vehicles a draw for fraudulent activity?
    leased luxury vehicles ares sometimes "stolen" and shipped overseas where they are resold for up to 3x the manufacturer's retail price
  105. What is a phantom or paper car?
    • the ownership is purchased for an unrepairable salvage vehicle
    • the non-existent vehicle is re-registered
    • the new owner then reports the phantom vehicle stolen and submits a claim
  106. How have kidnapping and car-jacking figured in insurance fraud?
    • creates sensationalism
    • to divert attention from an attempt to defraud
    • may also evoke sympathy from the public
  107. What is a Mareva injunction?
    a civil procedure used to freeze known assets when strong evidence suggests proceeds of a crime have been converted
  108. What are the 4 branding categories of stolen or salvaged vehicles?
    • 1. irreparable - total loss; may be sold for parts or scrap only
    • 2. salvage - total loss; can be repaired (rebuilt) or used for parts or scrap
    • 3. rebuilt - declared to be salvage but now repaired, inspected and approved for registration & use
    • 4. none - may have been branded outside ON
  109. What types of locations are generally used to commit auto arson?
    isolated locations where there are no witnesses
  110. What are 2 types of possible motives for an auto arson claim?
    • 1. Financial
    • 2. Expensive maintenance required
  111. Name 4 policy-related indicators of suspicious claims for an auto claim.
    • 1. claim reported shortly after policy inception
    • 2. insd has no other automobile, property or business with the company
    • 3. comprehensive coverage recently added to policy
    • 4. collision coverage not purchased
  112. Why are V.I.N. searches important?
  113. What are 8 possible circumstances that would create suspicion about an auto theft claim?
    • insured cannot produce a duplicate set of keys
    • vehicle was a gift
    • vehicle was purchased shortly before theft
    • insd works in an auto-related business
    • insd has a record of prior claims, particularly thefts
    • theft not reported to police
    • police report different from insured's report
    • theft did not occur at insd's home, business or usual venues
  114. Describe how a staged auto mva may occur.
    • a recruiter will gather AB claimants
    • each claimant pays a fee for a seat or to be named as a passenger in the accident report
    • the recruiter plans the accident & works out the details
    • claimants info is sold to and intermediary who relays it to lawyers who will represent the claimants
    • typically staged at night behind buildings
    • often a rental vehicle; driven into a wall at low speed to keep damage under $500 so police don't come to scene
    • clmts begin "treatment" at clinics
    • insurers frequently agree to cash settlements to stop paper flow and payments
  115. What other types of activities have those involved in insurance fraud rings also been involved in?
    • welfare fraud
    • workers comp fraud
    • unemployment insurance fraud
    • smuggling of illegal immigrants
    • illegal firearms
    • narcotics
    • home invasions
    • prostitution
    • money laundering
  116. When do staged mva's typically occur?
    • evening or after midnight
    • Sunday afternoons
    • non-rush hour
  117. What guiding principles for the Canadian Coalition Against Insurance Fraud?
    • 1. keep needs of honest policyholders foremost
    • 2. cost effectiveness of all activities
    • 3. meeting the needs of all stakeholders
  118. Where has the coalition concentrated its efforts?
    • increase public awareness
    • promote and develop anti-fraud tools
    • work for legislative action to prevent and control fraud
  119. Name a program developed to improve the public's awareness of fraud.
    The Great Canadian Scruples Challenge (national tv program)
  120. How is the IBC's ISD involved in the fight against vehicle theft fraud?
    • "Investigative Services Division (ISD)"
    • provides insurance crime investigation and information services to detect and prevent insurance crime
  121. What is the role of the IBC?
    • main focus is to strengthen the business environment for the property and casualty insurance industry
    • involved in many loss-prevention issues including fraud prevention
  122. What is the role of the Insurance Institute of Canada?
    • to contribute to the control of fraud through education and training of brokers, adjusters, lawyers, and all insurance personnel
    • this course is a product of the institute and the Cnd Coalition Against Insurance Fraud
  123. What is the function of the Association of Certified Fraud Examiners?
    • an international organization that includes more than 10,000 members in 25 countries
    • CFE's typically include forensic accountants, fraud investigation specialists, law enforcement, professors, sociologists, and lawyers specializing in fraud and white-collar crime
  124. What are the objectives of the Canadian Association of Fire Investigators?
    • a national organization
    • includes police, fire and insurance personnel
    • strives to eliminate all factors that interfere w/ justice
    • arson control initiatives
  125. What benefit is the International Association of Auto Theft Investigators?
    • to improve communication among auto theft investigators
    • training and resources, such as technical developments
  126. What info do insurers send the Canadian Auto Theft Bureau?
  127. What is a Special Investigative Unit (SIU)?
    • deal with claims where fraud is suspected or requires special investigation
    • are staffed with investigators who have specialized training in statement-taking and preserving evidence for litigation
  128. When would SIU refer a claim to IBCs ISD for handling?
  129. What are the main roles of the SIU?
    • timely & accurate investigations
    • investigative expertise
    • assist in the training of claims & underwriting personnel
    • protect company assets
    • protect employees & adjusters from clmt harrassment
    • ensure proper reporting procedures in place
    • establish & maintain working relationships with law enforcement, gov't, brokers, etc.
    • provide fraud intelligence
  130. What type of professional background is useful for an SIU member?
    ex-cops, fire investigators, private investigators, senior adjusters
  131. How does Crime Stoppers operate?
    • international non-profit program; hotline
    • assists police in solving crimes through tips reported by ordinary citizens
  132. What are the 2 essential functions of insurance?
    • 1. insurers reimburse and indemnify policyholders under the terms of their policies
    • 2. by providing this protection and indemnity in the community at large, insurers help to maintain economic stability and confidence
  133. What are 5 issues dealt with in the standing instructions of the Claims Agreement?
    • 1. Advise adjusters of their limits of authority to settle claims
    • 2. have adjusters carry suitable proof of identity
    • 3. adjusters will provide reasons for denials
    • 4. adjusters will advise TP claimants in the car of insured's insurance info
    • 5. adjusters to observe federal and provincial laws and regulations relating to unfair and deceptive acts & practices
  134. What is the Claims Agreement document?
    • produced by the IBC
    • governs the conduct and procedures of staff/telephone adjusters
  135. Name 6 activities that adjusters must NOT engage in according to the Claims Agreement.
    • 1. not seek secret profit
    • 2. not offer public inducement to public officials
    • 3. not exceed their authority
    • 4. not advise clmt to refrain from seeking legal counsel
    • 5. not deal directly w/any clmt known to be represented by legal counsel (except w/permission)
    • 6. not offer legal counsel more $ in return for a lower settlement
  136. What organization has produced a Code of Ethics for independent adjusters?
    the Canadian Independent Adjusters Association
  137. What should the adjusters position be with respect to legal advice?
    • shall not give legal advice
    • shall not discourage clmt's from seeking counsel
    • shall not deal directly w/clmt who is represented w/out consent
  138. What should happen if an adjuster's office receives assignments from several conflicting interests?
    • shall represent only one interest
    • immediately inform his principals of any potential conflict of interest
  139. What is the purpose of the Canadian Independent Adjusters Association?
    to promote and represent common business interests of licensed independent insurance adjusters within the industry
  140. What conduct would encourage fair and prompt claims handling?
    • appropriate language
    • do not consider race, sex, religion, ethnic group in deciding whether to pay a claim
    • keep promises that you make
    • do not deny a claim b/c of a minor technical objection
    • make fair offers to settle claims
    • don't ask insured to submit same info more than once
    • don't harass the insd or conduct unwarranted surveillance
  141. Highlight some Unfair and Deceptive Acts and Practices according to Ontario legislation.
    • 1. unfair discrimination in rates
    • 2. literature that misrepresents the benefits of a policy
    • 3. gifts or $ that induce someone to buy a policy
    • 4. unreasonable delay or resistance to settlement
    • 5. making selling a policy conditional on insd having to purchase another policy
  142. What does IBC privacy guidelines say about gathering and retaining personal info?
    shall be considered confidential and protected
Card Set
C39 - Fraud Awareness