First published in ITIJ 112, May 2010
Travel insurance claims have hit the headlines for all the wrong reasons in the past 12 months. Phil Peart investigates the dark and murky underworld of insurance fraud
With countless editorials and statistics published every other day on the subject, insurance fraud is a common topic of discussion. However, in real terms, no one really knows how deep or ingrained insurance fraud really is, and, in the case of travel insurance, this is even more of an unknown because so much fraud flies ‘under the radar’ or is deemed ‘not worth pursuing’, so the claim is paid.
A survey in 2008 conducted by the Association of British Insurers (ABI) indicated that around 4,300 travel insurance claims worth £5 million were detected the previous year – that’s an average of £1,162 per claim. In the same year, Direct Line Travel Insurance found that as many as 750,000 Britons had made a false claim on their travel insurance. These numbers just don’t add up and, consequently, the ABI statistics pale into insignificance because no one really knows how big travel insurance fraud is.
There has, and always will be, much hypothesising on the topic and how best to combat fraud, minimise risk and develop strategies to raise awareness, but there is no silver bullet in tackling fraud. Simply put, you don’t know what you don’t know, and this is the fraudster’s strategic advantage. Professional fraudsters pitting their trade against travel insurers have been at the job for a long time, and unfortunately many have honed their skills in third world countries where fraud, corruption and kickbacks are normal parts of everyday life.
When adding the Internet to the intrinsic skills of these modern-day fraudsters, we see fraudulent claims unfolding with monotonous regularity. Creating and forging documents, receipts, police reports and medical records is common practice within travel insurance.
With the insurance becoming more affordable, it is now viewed as more of a necessity product rather than a luxury one – the high cost of overseas medical services and increased crime in foreign countries means that most travellers will buy travel insurance for all the right reasons. In addition, increased competition amongst insurers has seen migration to an online claim lodgement process to speed up the claim decision-making process, with the hope of repeat business and brand loyalty.
Today, the primary focus for insurers across the board is controlling and minimising claims costs
However, there is a downside; this migration will make it even harder for investigators to review and analyse claim information by cross checking handwriting and signatures – an integral part of the initial phase of any investigation – and may, in fact, delay rather than hasten the claims settlement. There is no brand loyalty with the fraudster. Opportunistic or organised, their modus operandi is simple. Try not to use the same travel insurer twice.
Tricks of the trade
Opportunistic fraudsters fly under the radar by claiming a small amount, such as a mobile phone or camera, and select an area of the world for the claim loss that will make it hard for an insurer to send someone to investigate. The loss of mobile phones usually coincide with the release of new models, and laptops are often bought for family or friends residing overseas and conveniently ‘left’ there and then reported lost or stolen.
Organised fraudsters are more sophisticated, preferring to use ‘in-country’ resources to assist with the preparation and creation of fake receipts, affidavits and formal documents, either by forging signatures, obtaining blank letterheads or providing graft payments for the privilege of receiving ‘official documents’. Many of the cases handled by international insurance investigation firm Centricity evolve from African countries such as Nigeria, Ghana and Kenya, and the sub-continent countries of India, Pakistan and Bangladesh – the documents produced by claimants carry significant similarities, which can identify a fraudulent claim. However, not all fraudulent or embellished claims are connected with lost or stolen property, or dental and medical treatment.
Regardless of the type of claim, the speed at which it can be analysed and an investigation commenced is critical, particularly in large loss claims involving accidents and personal injury.
Early intervention not only identifies key factors in the claim, which may assist insurers with potential recovery, but it can also uncover inconsistencies in the original first notice of loss and, in some cases, provide factual evidence for a claim denial. Today, the primary focus for insurers across the board is controlling and minimising claims costs. Targeting fraudulent claims is just one area of focus, but early intervention investigations can save travel insurers potentially hundreds of thousands of dollars.
Regardless of the type of claim, the speed at which it can be analysed and an investigation commenced is critical
Getting to the scene quickly is a must. The primary role is to interview witnesses, photograph the scene and obtain official reports, documents and supporting information – all of which are paramount to a proper assessment of the claim. Often CCTV footage can provide an indelible imprint on the circumstances surrounding a particular event, and this is regularly canvassed during every investigation. Recovery is always an option for an insurer if there is evidence of third party negligence. Such avenues of enquiry may come to light during an in-country investigation so it is therefore imperative that investigators gather evidence, including copies of all insurance coverage, regardless of parties involved.
During a recent investigation into a fatal accident in Thailand, the travel insurer accepted the claim, and during the investigation the tour company openly provided copies of all their tourist, vehicle and liability insurances and were fully co-operative in the proceedings. Although the insurer may not wish to proceed with recovery against the tour company given the sensitive nature of the claim, the family is in an informed position to seek an appropriate response from the company. Whether the claim has the potential for recovery, is accepted or denied, the task for investigators becomes much harder weeks, or even months, after the event.
Managing the process
Centricity has developed a number of key initiatives over recent years to better serve their clients and streamline the claims referral process. Like many companies, the use of a Web-based case management system allows not only investigators but also clients to access their case referrals as well as review the progress of the case in real time. Traditional email correspondence is still used, but the real value is being able to update clients on the road with iPhone and Blackberry devices.
The industry has seen rapid growth in data-mining technology and analytical solutions over recent years, but it has taken some time for insurers to take that leap of faith, due in part to the high cost of implementation, together with the additional ongoing management fees. Despite all the bells and whistles proffered by the myriad of applications, they will remain a tool to aid in the investigation, and are, for some, a very good tool. Identifying the fraudulent claims and controlling the associated costs is without doubt the catalyst for a profitable business.
As investigators, we rely on the expertise within the claims department to effectively analyse and evaluate each claim for potential fraud or inconsistencies. Some companies, such as the Cega Group, use a team of in-house fraud specialists to review each claim before referring it for investigation. A dedicated team can scrutinise each claim and only those that meet certain criteria are sent for investigation, saving unnecessary expenditure on random ‘hunch’ referrals. Europ Assistance and Global Response have similar teams, which review and analyse claims, providing an improved value-added service for their clients.
As investigators we rely on the expertise within the claims department to effectively analyse and evaluate each claim for potential fraud or inconsistencies
Conversation management is another tool used by in-house claims teams and investigators. A well-structured interview can often draw out inconsistencies in a claim and the circumstances surrounding the events leading up to the loss. These interviews can yield significant savings if conducted by well-trained interviewers.
Some of the more critical cases handled in recent years are all early intervention matters where there has been significant differences in the original loss notification and the findings of an investigation. There have also been tragic cases where the apparent negligent actions of a third party have resulted in serious injury and even death. From an early intervention standpoint, the key to gathering the evidence when investigating these claims is to be on the scene within 24 to 48 hours, no matter where the country or what the logistics.
There is overwhelming evidence that this strategy and commitment has saved insurers hundreds of thousands of dollars, and it's not a hidden agenda or looking for a loophole so the client can deny the claim – that argument does not carry any weight with professional investigators whose role it is to gather all available evidence, not make decisions and judgements on claims.
Creating and forging documents, receipts, police reports and medical records is common practice within travel insurance
Far too many personal injury cases result from excessive consumption of alcohol. Unfortunately, only when it's too late do the true facts begin to emerge, and that raises further issues for the insurer. Often key witnesses have left the area or the police file has been closed pending the outcome of court proceedings. Take the case of a claimant fishing in Eastern Europe. The first notice of loss indicated that he was electrocuted and killed while standing in water. However, the subsequent investigation found that he and his friend had entered a restricted area, out of bounds to the general public, a fact that was only discovered after an onsite visit two days later. The victim’s long fishing pole had, in fact, touched high-voltage wires as he was getting it out of the back of the car.