Insurance fraud is an issue of global concern that makes demands on the resources of travel insurers in all parts of the world. In the UK, the BBC has devoted a sixth documentary series to uncovering and exposing insurance scams and fraudulent claims activity. Claimed and Shamed, as the series is called, shows that insurance claims are becoming increasingly ‘complex, sophisticated and devious’, with travel insurance claims in particular following this pattern – no longer are fraudsters simply claiming for a lost mobile phone that never existed, now they are claiming for fictitious deaths and cosmetic surgery posing as emergency medical treatment. However, the programme also highlights the work carried out by insurers to tackle such criminal activity. “The message to travel insurance fraudsters is clear,” says Simon Cook, head of special investigations for UK assistance provider CEGA, who appeared in the most recent Claimed and Shamed series. “We will go to great lengths to investigate suspicious claims all over the world – however complex and distant they may seem.”
A 2013 survey by UK comparison website Gocompare.com found that seven per cent of 18-to-34-year-old UK holidaymakers admitted to exaggerating a claim on their travel insurance policy, or to making up the claim in its entirety. In the UK insurance industry as a whole, in 2015, insurers uncovered 350 cases of fraud worth £3.6 million every day, according to the Association of British Insurers (ABI).
However, it’s not only insured individuals who commit fraud – many unscrupulous hospitals are all too willing to over-bill, over-treat or even perform cosmetic – or other – procedures instead of those covered under a travel or health insurance policy. “Incidents of fraud in this industry are unfortunately common and some treating facilities or doctors don’t always follow impeccable medical ethics,” said Mathew Crawford-Thomas, fraud manager at Intana, part of the Collinson Group in the UK.
Even travel organisations have been known to commit insurance fraud: in 2010, it was reported that six travel agencies in Florida had been charged with using unlicensed agents to sell bogus trip insurance policies. Then, in 2012, a travel agency in Los Angeles was reportedly accused of ‘defrauding at least 30 people by pocketing money meant to purchase insurance and plane tickets’.
US market participants have been developing a USTIA-sponsored application that allows subscribers to share data and real-time fraud-related communications
As Dennis Jay, executive director of the US-based Coalition Against Insurance Fraud (CAIF), said, today’s travel insurance fraud perpetrators are ‘policyholders, medical providers (sometimes in co-operation with policyholders) and agents selling bogus travel insurance’. Each carries a unique set of challenges for insurers, and ultimately costs travellers in terms of higher premiums. According to the Coalition’s website, it was as early as 1993 that insurance scams were beginning to ‘spiral out of control’ in the US, forcing consumers’ premiums higher and higher as a result. It seems that little has changed today.
Trends and developments
While insurance fraud trends are rarely recorded, there are identifiable collusions and hotspots that are known about by the global travel insurance industry. As Crawford-Thomas explained, in tourist areas, for example, medical facilities sometimes work with local hotels and resorts to potentially steer clients their way, ‘irrespective of whether they are ultimately the right facility for the client’s medical needs, or even in the best location’. Some of these facilities may even provide treatments that the assistance provider considers to be unnecessary, for instance hyperbaric oxygen therapy, said Crawford-Thomas.
Along with unsuitable or unnecessary treatment come fictitious treatment and other types of fictitious claims. “Accompanying the claims for high-end bag snatches, the industry is seeing very legitimate-appearing receipts, airline tickets, bank statements and police reports,” said Adele Fui, a freelance private investigator and fraud detection trainer based in Queensland, Australia. She also explained that while such trends may be caused by the prevalence of scanners and cut-and-paste computer programs, ‘organised insurance fraud that is breaching provider security from the inside’ could also be a key factor. “It could be as simple as hotel staff collecting discarded receipts from hotel room trash cans,” she said.
In the UK, Larus Consulting’s Gary Sommerford is in the process of co-founding the Travel Insurance Counter Fraud Group (TICFG), a brand new UK-based initiative focusing specifically on the travel insurance sector. “Aside from the fraudulent baggage claims, lost or stolen gadgets, and missed or cancelled flights, recent trends are leaning towards more planned frauds and organised crime,” he said, going on to describe some examples of potential frauds. These include ‘policyholder collusion with providers to disguise non-covered treatments as treatments that are covered [and] private hospital scams involving tour reps and taxi drivers in holiday resorts’, as well as fake policies for non-existent individuals, providers and websites, and even fake medical reports.
With the recent economic crisis, claims have reportedly become so complicated that insurance companies can expect anything. Megan Freedman, executive director of the US Travel Insurance Association (UStiA), for example, described ‘a false medical provider claim that may include the lack of a provider website or no provider details on invoices’. Email addresses can be from free domains, or ‘with an extension inconsistent with the originating country’, and there can be ‘requests to send payments to a country other than the domicile country of the provider … pressure to send payment quickly because of religious considerations [and] charges inconsistent with services provided’.
One of the key factors in the perpetration of – as well as the detection of – insurance fraud is technology
Tackling medical fraud is still in its infancy, however, explained Crawford-Thomas of Intana, since not all insurers have the resources to identify if they may be paying over the odds for medical treatments. However, insurers have been able to identify other types of fraud and where they most often occur, citing a number of recent trends. According to Freedman, UStiA member companies have witnessed an increase of both customer and medical provider fraud originating from Latin America and the Middle East, and experts such as Fui have noted the previously mentioned high-end bag snatches as a specifically European phenomenon. The region of Mount Everest in Nepal, where there has been an increase in the number of helicopter evacuations in recent years, has reportedly become a hotspot for a different type of travel insurance fraud committed by helicopter companies carrying out unnecessary airlifts from the mountain area. Pushpa Das Shrestha, director of international relations at Global Assistance Nepal Pvt Ltd, Kathmandu, told ITIJ that ‘most of the climbers come with travel and medical policies and rumours are that the airlines are charging up to 40 per cent higher for those with insurance’. People are being rescued by some of the region’s 15 helicopters and five airlines at ‘a high rate of often US$2,500 per hour’, he added.
Wider anti-fraud initiatives
In the meantime, insurers and organisations around the world are continuing their fight against travel insurance fraud with a variety of initiatives – and degrees of success. National and international co-operation is key in such endeavours. Following the UStiA’s inaugural conference dedicated to detecting and fighting travel insurance fraud in June 2015, US market participants have been developing a UStiA-sponsored application that allows subscribers to share data and real-time fraud-related communications.
Meanwhile, more and more anti-fraud alliances such as the CAIF are being established. Executive director Dennis Jay, who explained that the Coalition uniquely comprises insurers, government agencies and consumer groups, attributes its success to advocating anti-fraud legislation and raising the profile of fraud with the public.
The UK insurance industry has also invested considerably in solutions tackling the issue of fraud estimated at over £200m per year and in January 2015 the UK government launched the Insurance Task Force. Its membership, which includes the Association of British Insurers (ABI); British Insurance Brokers’ Association (BIBA); Financial Ombudsman Service (FOS); and Insurance Fraud Bureau (IFB), is intended to ‘represent the industry, its regulators and consumers’. It, too, recognises that the sharing of information is key. At a recent British Insurance Law Association (BILA) lecture held at Lloyd’s, David Hertzell, president of BILA and chairman of the Insurance Task Force, said: “Lots can be done against fraud with effective use of data. Much of this data is in silos or held in-house for competitive advantage; however, in combatting insurance fraud, sharing of data is going to be key.”
The government is also responsible for the Insurance Act, which comes into force this year. As legal firm K&L Gates explained, it will clarify the remedies available to insurers in the event of fraud: “Where fraud is committed, the insurer will now not be liable to pay any part of the claim, regardless of whether only part of the claim is fraudulent … The Act also enables any fraudulent member of a group policy to be separated from the other members … The aim is to ensure that innocent members of the group are not unfairly prejudiced.”
Also in the UK, a specialist police unit with a dedicated team of detectives and financial investigators has been set up to tackle insurance fraud across England and Wales. The Insurance Fraud Enforcement Department (IFED) works closely with the insurance industry and is funded by the ABI and Lloyd’s of London. So far, since its inception in January 2012, IFED has recovered more than £1.3 million from fraudsters, and over 200 people have been convicted.
Insurance companies, too, are finding ways to deal with fraud internally. “More and more companies are implementing teams to focus on fraud investigations and creating databases of documents from around the world as a reference tool,” said Fui, explaining that claim levels are increasing, with more pressure on frontline staff to deal with this appropriately. CAIF’s Jay, meanwhile, said that ‘insurers generally are enhancing anti-fraud training throughout their companies, using more technology to detect fraud and working closer with fraud bureaus and law enforcement to prosecute fraud’.
insurers generally are enhancing anti-fraud training throughout their companies, using more technology to detect fraud and working closer with fraud bureaus and law enforcement
To help in the detection of any potentially unnecessary (or sometimes unsuitable) medical treatments, Intana, for example, prides itself on a robust fraud-detection and case-management system. This includes direct contact with the treating doctor to obtain a diagnosis and treatment plan.
One of the key factors in the perpetration of – as well as the detection of – insurance fraud is technology, and experts from the Association of Certified Fraud Examiners (ACFE) in the US are worried that technology will ‘give fraudsters an edge [and] provide new tools for organisations and investigators’. “Our members report that while the practice of insurance fraud is continuously evolving … the use of technology in developing countries probably ranks as one of the most significant,” said Freedman. “UStiA member companies note that the fraudsters’ ability to use sophisticated imaging software to forge both travel and medical documentation … has become prevalent and impressive.” As a result, she said, the global industry must improve its advanced imagining technology to assist in spotting fakes, utilising tools such as reverse-image searching software, including functionality for detecting images with corruption or tampering.
For Adele Saunders, investigations case manager for Allianz Global Assistance in the UK, the success of fraud detection lies mainly with a company’s claims handlers. Therefore, the benefits of one-to-one coaching, interviewing techniques and being ‘on top of current scams’ should not be underestimated. Allianz works closely with IFED, and Saunders said that in order to identify fraudulent claims when interviewing policyholders, it is vital to ‘understand how and when to use open questions in order to obtain as much information as possible’.
Another effective way of reviewing claims information is the wider use of desktop investigations, she explained. “Websites that offer ‘open source information’ such as Company Check and 192.com have become much more functional in terms of their search abilities,” she said, and case studies have also proven useful: “By looking at previous examples, claims handlers are able to build up knowledge of what fraud looks like and how to prevent it going forward.” In addition, cognitive interviewing techniques, investigation by overseas agents and medical assessments can all be used by companies to assess the validity of a claim. “Insurers will check every detail of a dubious claim, from the authenticity of a doctor’s bill handed out on the other side of the world to the validity of a witness statement in a foreign language,” said CEGA’s Simon Cook.
The way forward
Overall, it is argued that the money invested into detecting fraud is paying off. In 2015, the UK’s ABI announced that the insurance industry was showing improvements in both fraud detection and pushing for prosecution, and experts such as Crawford-Thomas are hopeful about the IFB’s 2020 vision to extend its remit to include travel insurance fraud as a key area to target. He also cites as a positive the fact that ‘industry bodies such as the Insurance Fraud Investigators Group (IFIG) meet regularly and upload industry alerts surrounding known offenders’.
“Global collaborative working within the travel insurance sector will provide crucial advantage in the fight against fraud and abuse,” said Sommerford, whose own TICFG’s longer-term strategy is to form a European travel group and establish a global travel insurance network to share information on fraudulent activity.
Although much of the success of the combined international efforts still needs to be realised, Freedman reports that UStiA member companies have already seen ‘tremendous value in the sharing of best practices, particularly between countries’, while Fui explains that, at a company level, a fraudulent claim can be declined, or settled at a more realistic figure, or a claimant may even be blocked. The key to successfully combating fraudulent claims, she said, is to ‘ensure frontline staff are as up-to-date on trends and red flags as the investigations department is’, and for an insurer to ‘inform an organisation like the Insurance Fraud Bureau of Australia [so that they may] co-ordinate information exchange between providers and initiate a law enforcement enquiry’.
Intana’s Crawford-Thomas asserts that ‘speaking with industry professionals, attending key strategic fraud conferences and a close working relationship with relevant authorities including the police and the media’ are all paramount in bringing the issue of travel insurance fraud to the fore; while for Sommerford, the value of hiring a fraud specialist should not be underestimated either.
The overall message: travel insurance fraud is a serious issue, but the industry is pursuing initiatives and actions in order to deal with it effectively and – perhaps most importantly – is constantly evolving to meet the changing demands associated with fighting fraud.