The Federal Bureau of Investigation estimates that insurance fraud costs more than $40 billion per year, excluding health insurance fraud. These costs are borne by the insurance industry and its policyholders in the form of increased premiums. It is no wonder that insurance companies, consumer groups, and public interest organizations have invested an extraordinary amount of resources in education, investigation, and legislation to combat insurance fraud. Increasingly, such private insurers and public interest groups are partnering with law enforcement to identify and prosecute insurance fraud crimes. Cooperation with law enforcement and fraud prevention bureaus is critical to combating insurance fraud and inures to the benefit of law enforcement, the insurer, and the consumer.
A Natural Partnership
Insurers are often on the front lines of detecting insurance fraud. Insurance companies’ special investigative units are dedicated and trained to recognize fraud schemes. Being the first on notice of a claimed loss, they have the advantage of obtaining key information from claimants and witnesses, often times before they have “lawyered-up.” Computer based databases, such as ISO ClaimSearch® and the National Insurance Crime Bureau’s Questionable Claims database, assist in analyzing fraud indicators and claim histories.
Protected Disclosures
Recognizing the insurance industry’s unique vantage point and special skills in identifying fraud, many states have enacted anti-fraud legislation which requires insurers to formulate anti-fraud plans and provides methods for requiring or encouraging cooperation with law enforcement in cases of suspected fraud.
Investigators’ understanding of the legal requirements and protections for reporting fraud is vital to an efficient investigative and anti-fraud program for an insurance company. Uncertain about what is expected or required of them, investigators may have reservations about disclosing information; particularly, when fraud is suspected, but not verified. Fortunately, legislation in virtually every state provides significant protections designed to allow insurers and others to share the fruits of their investigations without the fear of a civil suit for defamation or libel. Statutes vary, but typically protect good faith disclosures to law enforcement and insurance bureaus concerning suspected, anticipated or completed fraudulent acts. Such agencies include law enforcement, state insurance departments, the National Association of Insurance Commissioners, the National Insurance Crime Bureau, federal or state bureaus established to assist in the prevention of insurance fraud, and even, in some cases, other insurance companies. Concerns about potential civil suits are natural and such risks cannot be wholly eliminated. However, these concerns can be lessened so as not to interfere with the investigator’s ability to objectively focus on critical facts, aggressively investigate claims, and cooperate with law enforcement.
Insurance companies and their investigators should be aware of disclosure requirements and protections in the regions in which they operate their businesses. Full knowledge will provide investigators with the confidence to aggressively focus on the investigation at hand while providing law enforcement the information they need to respond to fraud.
Untold Benefits
The advantage of sharing information is readily apparent when law enforcement brings justice and closure with a conviction. Additionally, an indictment or conviction by an independent authority can diminish the risk of a bad faith claim arising out of a denial of coverage based on fraud. However, the mutual benefits of information sharing are untold. A collaborative effort on the part of insurance fraud bureaus, law enforcement and insurance entities ensures that a multitude of resources, perspectives, and expertise is brought to bear against insurance fraud. The end result being that insurance fraud can be more readily recognized, deterred and prosecuted and, possibly, reduced.
— Karey P. Pond
