Red Flags

Back to: TelaClaims Adjuster II- Customer Service, and Ethics

Red flags of Insurance Fraud may include any of the following:

• The claim is made a short time after the inception of the policy, or after an increase or change in the coverage under which the claim is made. This could include the purchase of a scheduled property or jewelry floater policy, or more than one during the time before the loss.
• The insured has a history of many insurance claims and losses.. Before the incident, the insured asked his insurance agent hypothetical questions about coverage in the event of a loss similar to the actual claim.
• The insured is very pushy and persistent about a quick settlement, and exhibits more than the usual amount of knowledge about insurance coverage and claims procedures, particularly if the claim is not well documented.
•  In a burglary loss, the claim includes large, bulky property that is unusual for a burglary.
• In a theft or fire loss claim, the claim includes a lot of recently purchased, expensive property, or the insured insists that everything was the best or the most expensive model, primarily if the insured cannot provide receipts, owner’s manuals, or other documentary proof of purchase.
• In a fire loss claim, property considered personal or sentimental to the insured and that you would expect to see among the lost property (such as photographs, family heirlooms, or pets) is conspicuous by its absence.
• A large amount of the property was purchased at garage and yard sales and flea markets, or otherwise for cash, and there are no receipts (the insured will be unable to recall precisely where these sales took place or by whom).
• The insured cannot remember or does not know, where he or she acquired the claimed property, especially unusual items, and he cannot provide adequate descriptions.
• On the other hand, the insured already has receipts and other documentation, witnesses, and duplicate photographs for everything; the claim is too perfect.

Documentation provided by the insured is irregular or questionable, such as:

• Documents show signs of alteration in dates, descriptions, or amounts.  Photocopies of documents are provided and the insured cannot produce the originals.
• Handwriting or signatures are similar on different receipts, invoices, gift verification, or appraisals.
• The amount of tax is wrong, either for the price of the property or for the date appearing on the receipt.
• Receipts, invoices, or shipping documents do not have “paid,” “received,” or other shipping stamps.
• In a theft or loss away from home, the insured waits an unusually long time before reporting the theft to the police.
• The insured is able to give the police a complete list of lost property on the day of the burglary or shortly after.
• The amount of the claim differs from the value given by the insured to the police.
• In a business inventory or income loss claim, the insured does not keep complete books, or the books do not follow accepted accounting principles.
• The physical evidence is inconsistent with the loss claimed by the insured.
• In a burglary loss, there is no physical evidence of breaking and entering, or a burglary could not have occurred unnoticed under the circumstances.
• In a fire loss:  The apparent cause and origin of the fire is inconsistent with an accidental cause and origin, or there is evidence of the use of an accelerant.
• The remains of the property do not match the claimed property.
• The premises do not show signs of having contained the claimed property, or the amount of property would not fit into the space where the insured says it was.
• Physical damage to the insured’s car is inconsistent with its having been in a collision with an uninsured car.
• The insured has discarded the claimed damaged property before the adjuster can examine it.
• The cost of the claimed property, over the period of time it allegedly was acquired, seems to exceed the insured’s financial ability to purchase it.
• The insured refuses or is unable to answer routine questions.
• The insured provides supporting evidence and documentation that cannot be corroborated.
• Information on a life application is very vague or ambiguous as to the details of health history, such as dates, places of treatment, names of physicians or hospitals, or specific diagnoses.
• The applicant fails to sign and date the application.
• Pertinent questions on the application are not answered, such as income, other insurance carried, hazardous duties, or aviation or flying activity.
• The insured has “excess insurance,” either shown at the time of application or developed through an underwriting report of database information.
• Earned income does not warrant the amount of insurance being applied for.
• The applicant’s date of birth as shown on the application is much earlier than shown with other carriers or in previous applications or policies. 
• The agent is putting on a great deal of pressure to have the policy issued because of the large amount applied for but is going over the underwriter’s head in order to do so (working out of the system).
• The physician’s report is very vague on details of past medical history and does not coincide with the information shown on the application.
• A death claim is presented in which the death has taken place outside of the country.
• The signature on the application for insurance does not appear to be the same signature as shown on an authorization at the time of the claim.
• A claimant or a claimant’s attorney attempts to limit the type of information to be related by a signed authorization, which is a standard authorization used by the company.
• An attorney is immediately brought into a contestable death claim, attempting to interfere with the investigation and to withhold information required by the company.
• A contestable death claim is reported as an accidental death, but could possibly be a suicide (such as a fatal accident involving only one vehicle, a hunting accident, or an accidental shooting while cleaning or repairing a weapon).
• An autopsy report discloses a different height and weight than what is shown on the recent application (auto or house fire death). Dental records do not match the dental findings in the autopsy report.
• Records are missing on a patient who was confined to a hospital, or a patient’s medical records are missing from the physician’s office.
• The death claim package sent to the insurance company is too well packaged and complete in every detail with supportive documents.
• Documentation that was not initially asked for or required by the insurance company was voluntarily sent, such as newspaper reports, burial certificates, or shipment of the body from one country to another.
• The routine audit of a designated insured group shows a significant increase of added employees whose names do not show up on the payroll.
• Gunshot wounds or stabbings were inflicted by the insured as the aggressor or were self-inflicted.
• Police accident reports were submitted by the claimant.
• The claimant pushes for the claim to be handled quickly; for example, he wants to stop by the office to pick up his check “as we’re leaving for vacation in the morning.”
• Series of prescription numbers from the same drug store don’t coincide chronologically with the dates of the prescriptions.
• An automobile was destroyed by a fire in a very remote rural area with no witnesses; the driver claims an electrical shortage in the engine compartment caused the fire.
• Preliminary information for a business fire loss or home fire loss indicates considerable financial difficulties and financial pressures being brought upon the owner and the fire is suspicious in nature and or origin.
• An employee within the claims operations of an insurance company is known to have a drinking or drug problem, financial pressures, marital severe difficulties, or an affair and irregularities start to appear.
• On burglary losses from a business or especially a home, the investigator observes that the remaining contents at the scene are of much inferior quality than those reported stolen.
• There is no indication of indentation in the piling of the carpet where heavy items of furniture or equipment were to have been placed.
• There are no hooks or nails on the walls where valuable pictures might have been hung.
• Entrances or exits are too small to take a large item through without
• laboriously disassembling it.
• A claim contains false statements or it has been determined that there has been a deliberate cover-up.
• A disability income protection claim is filed and it is determined that the claimant had recently purchased numerous expensive items on credit and had them all covered by credit A&H insurance coverage.
• Public transportation accidents in which there are more passenger claims filed than there were passengers at the time of the accident.
• A witness to an accident or incident deliberately tries to hide from investigators rather than come forth and tell the truth.
• An official document of findings is in complete conflict with the facts in the case and there is no explanation for this conflict of facts.
• Photographs or other documents do not substantiate the reported findings.

Late Notice of Claim or Accident: In the case of a disputed liability, factors to consider include:

• Did the insured or insurer receive an adequate representation of counsel?
• Were all reasonably potential witnesses interviewed?
• Were all reasonably possible defenses pursued?
• Was the testimony of all key witnesses preserved?
• Was the insured or insurer provided with sufficient information from counsel to make an informed decision on whether to accept a reasonable offer of settlement?

Questionable Liability: If the insured willfully fails to appear for trial by failing to keep the insurer aware of where he may be contacted, substantial prejudice exists if:

Liability is disputed, the plaintiff’s and the defendant’s versions of the accident are equally reasonable;

Even if the insured was deposed, this alone does not negate the finding of prejudice, especially where no reasonable excuse for the absence is offered to the jury and all questioning of the insured at the deposition was conducted by opposing counsel.

In most states, an insured’s failure to attend the deposition or trial does not constitute actual and substantial prejudice because the absence of the insured does not affect the outcome of the insured’s liability. In a few states, the failure of the insured to attend trial is, per se, evidence of prejudice and creates a questionable and arguably presumption of prejudice. A default judgment may be entered due to the insured’s failure to forward the summons and complaint.

However, this does not void coverage because cooperation by the insured would not have changed the outcome on liability. The insurer is still required to establish actual prejudice.

Willful and material misrepresentations by the insured regarding the circumstances of the actual loss constitute a breach of the cooperation clause.

Knowing the Policy and its Language

It should go without saying that all those involved in the claims handling process should possess a thorough knowledge of the policies upon which those claims are based. This knowledge allows the claims professional to make prompt, intelligent decisions about policy coverage while at the same time effectively explaining the basis for those decisions to insureds and claimants to ensure that they are satisfied that they are being treated fairly.
When dealing with suspicious claims, a thorough knowledge of the policy is extremely important.

The decision to conduct a claim investigation may subject the insured or claimant to intense scrutiny and may even lead to criminal charges being brought. Either can expose the insurer to retaliation in the form of a civil action for bad faith and other torts.

Clearly, decisions involving suspicious claims must be made carefully. Making these decisions requires knowledge of what coverages are provided by a given policy and what rights and duties the policy gives the parties to it.
The policy, whether property, liability, or workers’ compensation, is a contract, and is thus subject to certain rules of contract law.

Taking a Statement/Recorded Statement: What is the Scope or Areas of Questioning?

Generally, questioning is tailored to specific facts of each case; however, each examination will probably cover:

• General identifying information
• Background information, such as marital and family history, residential history, military, and criminal records, and job history
• Identification and verification of all information contained in any documents or records that are produced
• Circumstances surrounding the obtaining of the policy and any changes, endorsements, or increased coverage/limits made to the policy
•  Information necessary to do a financial reconstruction of the insured’s debts and assets for the period leading up to and including the date of the loss
• Verification of loss and damages, to include the description of items claimed and the facts and circumstances surrounding their purchase/acquisition
• Identification of any documentary verification (i.e., photos, receipts, or canceled checks)
• Facts and circumstances surrounding the loss
• Specific areas of inquiry uncovered by the company’s SIU personnel or outside investigator

What the Adjuster Should Do to Prepare the Claim File for the Examination Under Oath

• Verify coverage
• Examine the policy for coverage dates and amounts, and policy exclusions, limitations, and deductibles
• Obtain the underwriting file and examine the application and any change requests or endorsements
• Obtain a non-waiver or send a “Reservation of Rights”
• Inspect the loss location
• Verify insurable interest
• Order a title search—Check the title holder, identity, and the number of mortgages and existence of other liens on the property (i.e., foreclosure, demolition, the health of building department, mechanics liens, or money judgments)
• Take the insured’s statement, preferably handwritten and signed
• Ascertain prior claim history
• Obtain police, fire, or other investigative reports
• Interview responding officers and investigating detectives (official reports are often silent regarding the investigator’s opinions or feelings about a case; these can provide the company with valuable investigative leads—any delay here can be fatal.)
• Solicit a proof of loss and detailed loss inventory from the insured Attempt to verify purchases with the retailers of the larger items
• Determine the insured’s financial condition
• Solicit input from the outside counsel who is to take the examination
• Refer file materials to outside counsel in a timely manner in order to assist them in conducting the examination
• Don’t wait until the last minute; referring the complete copy of the file to the attorney prior to receipt of the proof of loss is appropriate and very helpful when it is obvious that an examination will be required
• Send original photos, receipts, etc.
• Practice Points and Practical Considerations
• The thorough analysis of facts and circumstances.
• The close partnership between the SIU investigator and the attorney.
• Insist on getting what is asked for—production of documents.
• Follow up.