Fraud Awareness and Prevention C39

Chapter 9 – Initiatives and Organizations Against Insurance Fraud

Canadian Coalition Against Insurance Fraud

·         Public opinion polls have shown that Canadians hold insurers responsible for solving insurance fraud – not the police and not the government

·         The Canadian Coalition Against Insurance Fraud was formed in 1994

·         Three guiding principles underscore the Coalition’s efforts:

o    Keeping the needs of honest policyholders foremost

o    Cost effectiveness of all activities

o    Meeting the needs of all stakeholder

·         Targeted activities of Coalition:

o    Fully use all available resources in the prevention and detection of insurance fraud

o    Develop effective standards of practice in the insurance industry

o    Increase public awareness of the magnitude and effects of insurance fraud

o    Promote the resolve of the insurance industry to deal w/ fraud aggressively

o    Promote, develop and encourage anti-fraud tools and training

o    Develop strategic alliances to work out initiatives against fraud

o    Work for legislative action to prevent and control fraud

·         The coalition has improved the public’s awareness of the fraud issue

·         A newsletter, Challenges and Champions, keeps insurance people and other interested parties informed about issues about the prevention and control of insurance fraud

·         The coalition has an alliance with Crime Stoppers

·         The coalition developed a manual called Red Flags for Detecting Insurance Fraud and fraud indicator cards for police and fire service personnel

·         The coalition is a source of support, guidance, information on insurance fraud and co-ordinate of multi-jurisdictional efforts to fight fraud

Insurance Bureau of Canada

·         Insurance Bureau of Canada (IBC) is the national trade association of the private (non-government) property and casualty insurance industry.  Its main focus is to strengthen the business environment for the property and casualty insurance industry

·         It identifies and monitors key policy issues affecting the industry and develops appropriate policy papers and plans

·         IBC is involved in many loss-prevention issues including fraud prevention

IBC Investigative Services Division (ISD) – Insurance Crime Prevention Bureau

·         The ISD, also known as the ICPD, operates under then umbrella of IBC

·         It provides insurance crime investigation and information services to detect and prevent insurance crime

·         A data bank is maintained that helps insurers to anticipate and detect crime.  It is used to identify fraud b4 settlements are paid and it also provides valuable loss info to evaluate risks

·         Another division, the Canadian Automobile Theft Bureau (CATB) was organized to detect vehicle fraud.  Members can consult it about any suspicious vehicle loss

Other Associations

·         Many organizations are committed to advancing the educational standards of insurance people and providing timely information continuously to improve professionalism w/in the insurance industry.  The include:

The Insurance Institute of Canada

·         Makes a contribution to the control of insurance fraud through training and education programs

·         This course was developed as a result of direct participation by the Insurance Institute of Canada in the Canadian Coalition Against Insurance Fraud

The Association of Certified Fraud Examiners

·         The Association of Certified Fraud Examiners is an international organization that includes more than 10,000 members in 25 countries

·         The CFE diploma is given to individuals who have successfully completed a set of exams or have accredited experience in auditing and accounting, criminology, fraud investigation, or other related areas of legal practice

·         The association holds courses and conference on fraud-related issues and offers businesses specialized training in internal fraud prevention and detection

Canadian Association of Fire Investigators

·         Canadian Association of Fire Investigators (CAFI) is a national organization and it has chapters in most provinces

·         Membership includes police, fire and insurance personnel

·         Their objectives are:

o    To unite for mutual benefit those public officials and private persons engaged in the control of arson and kindred crimes

o    To provide for the exchange of technical information and development

o    To co-operate w/ other law enforcement agencies and associations to improve fire investigation and the suppression of crime

o    To encourage high professional standards of conduct among members

o    To strive to eliminate all factors that interfere w/ administration of justice

·         The key elements of these objectives are interaction, teamwork, and professional development

·         Membership in CAFI is available to representatives of a Provincial, Federal or Territorial Fire Marshal’s or Fire Commissioner’s Office, representatives of the IBC’s ISD or of the fire or police service and any independent adjuster or full-time employee of a Canadian licensed insurance company engaged in the investigation, adjustment or settlement of fire claims

·         Other associations w/ similar objectives include the Association of Fire Marshals, Fire Chiefs and Chiefs of Police

International Association of Auto Theft Investigators

·         The IAATI was formed to improve communication and coordination among auto theft investigators

·         It provides support and assistance to investigators whose resources may otherwise be limited

·         Cooperation among its member is an actively pursued goal

·         Members are provided access to training opportunities and APB, a quarterly news magazine that contain updates on vehicle theft issues, current court decisions dealing w/ auto theft and upcoming training info

Special Investigation Unit

·         SIU are staffed w/ investigators who have specialized training in statement-taking and in preserving evidence for litigation

·         Advantages to establishing an in-house SIU:

o    Is dedicated to a single insurer

o    Permits workloads to be more easily controlled

o    Has continuous access to internal expertise and insurance-related experience

o    Operates in the context of its company’s philosophy

o    Adds a special layer of expertise in criminal law and evidence

·         Part of an SIU’s mandate should include an education component to ensure that knowledge and goodwill is shared.  Keeping other departments infomr3ed on the latest trends in fraudulent claims, fraud indicators local crime statistics and successful police investigations

Defining the role and philosophy of your SIU

·         The SIU’s main roles are as follows:

o    Provide the company w/ timely and accurate investigations so that prompt and fair decision can be made

o    Provide the necessary investigative expertise to create consistency in the handling of suspicious fraudulent arson and other large loss claims

o    Assist in the training of claims personnel to recognize and react to the various types of insurance fraud

o    Assist in the training of underwriting personnel in defensive underwriting

o    Ensure the proper reporting procedures are in place both w/in the company and through retained independent adjusting services to assure reporting to maintain claim database

o    Establish and maintain working relationships w/ law enforcement, fire official, registered insurance brokers, insurance industry organizations, government and any other organization concerned w/ the investigation of insurance fraud

o    Provide fraud intelligence, develop tools and procedures in order to enhance the abilities of front line claims staff to identify and properly handle suspicious losses

·         Adoption of an in-house SIU or use of outsourced SIU services should not be confused w/ adjusting claims

·         The major value that an SIU can add is in raising fraud awareness, gathering and preserving evidence and coordinating the insurer’s activities w/in the industry and other authorities

·         One of the basic roles of any SIU is to assist company personnel to recognize and identify ‘red flags’ or fraud indicators and to educate all appropriate claims and distribution staff w/ respect to these indicators

·         Depending on company philosophy SIUs will investigate suspicious fraudulent claims w/ a view to protecting company assets – controlling premium dollars – w/ only a secondary emphasis on ‘enforcement

·         Other insurers take the view that their SIU emphasis will be on enforcement and prosecution w/ only a corollary issue being the saving of premium dollars

·         Some insurers do a mix of the above two situations

·         Insurers must choose the direction of the SIU to be either the investigation of internal fraud or external fraud or both

·         SIU personnel will find a major part of their role in liaison w/ the ICPB and various police force and fire departments

·         The effectiveness of the SIU and of ICPB are both enhanced by working for a common purpose

·         A properly staffed SIU may also assist in preparing a case for prosecution where that option is being pursued

·         SIU personnel will need to take on the responsibility of self-education, taking part in a variety of training course and joining networking organizations

·         SIUs should actively participate in the training and education of all insurance personnel and the public

·         In addition to conducting direct investigations, SIUs will work closely w/ line unit claims personnel to direct or coach claims personnel in those claims where fraud is suspected

SIU staffing issues

·         It must be determined whether the nucleus of the unit should be made up of ex-police officers, fire investigators, private investigators, or senior adjusters trained in the detection of claims fraud

·         Fraud investigation requires a certain expertise and aptitude which is sometimes not available in a normal claims department b/c of the orientation of adjusters towards customer service and claims settlement rather than fraud investigation and evidence preservation

·         The investigators must be skilled in the arts of diplomacy, tact and leadership, which enhance teamwork and team spirit

·         An ideal situation is to have one form each of the categories mentioned above which would give a well balanced team

Police services

·         Municipal and provincial police forces are typically involved when a fraud is to be investigated

·         The larger urban forces have a dedicated ‘fraud squad’

·         The RCMP is renown for its expertise in criminal intelligence and in forensics

·         The RCMP and the US Federal Bureau of Investigation (FBI) are developing a link b/w the Canadian Police Information Center (CPIC) and the FBI’s National Crime Information Center to enable reliable and efficient telecommunication

Crime Stoppers

·         An international non-profit program that assists police in solving crimes through tips reported by ordinary citizens

·         If the tip helps the police or your insurance company catch an insurance fraud you may be eligible for a cash reward

·         It has an impressive track record in helping solve all types of crimes b/c it allows ordinary citizens to protect their anonymity while helping investigators