Insurance Fraud, Waste, and Abuse: It’s not just Medicare and Medicaid…


When someone says Fraud, Waste, and Abuse (FW&A), you immediately think of Medicare and Medicaid. It is rampant there, but it occurs throughout the insurance industry.

The NAIC had this to say about insurance fraud:

Insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling or underwriting insurance. Insurance fraud may fall into different categories, from individuals committing fraud against consumers to individuals committing fraud against insurance companies. Insurance fraud, estimated at over a hundred billion dollars per year, not only imposes costs on insurance companies and threatens their competitiveness and future viability, but it is also financially damaging to consumers and can be detrimental to the economy and society as a whole.

FW&A can occur among agents by falsifying or misrepresenting information to obtain coverage when the client would normally not be eligible, taking a bribe or kickback, selling nonexistent policies, or taking premiums and depositing them into a personal account rather than forwarding the money to the insurer.

When I worked for an insurance company, I assisted the Special Investigative Unit on a case involving an agent who was found guilty of having pocketed premium checks in her personal bank account rather than an insurance company business account. When asked why she did it, she said she intended to pay it back; she just needed the money temporarily. Insurance companies are not lending institutions.

Recently I was searching various state departments of insurance websites and found the example below. Many insurance departments report these cases to the public. Interesting read, but shocking.

This was from the AZ Department of Insurance:

Phoenix, AZ – Robert Atlas falsely reported to an insurance company that he had crashed his 2012 Corvette Stingray while exiting the I-10 freeway, on the exit ramp at Wild Horse Pass in Chandler Arizona. Robert was paid $61,465.11 by the insurer for the loss of his Corvette. It was later discovered that on 10/10/2015, Robert Atlas had actually raced his Corvette Stingray at a drag racing event at Wild Horse Pass Motorsports Park. He subsequently lost control of his corvette during the race and crashed into the concrete barrier totaling his Corvette Stingray. This crash was captured on a Go-Pro video and published on YouTube. The policy does not cover damage caused to the vehicle if it was involved in drag racing. Robert was later shown the video footage and he admitted to making the false claim to the insurance company.

On 1-25-17, Robert Atlas pled guilty to Insurance Fraud as a Class 6 Undesignated offense and as required by the Plea Agreement he paid the entire amount of restitution back to the insurer prior to sentencing. He was sentenced to two years supervised probation and was assessed $1,560.00 in court costs.
The case was investigated by the Arizona Department of Insurance Fraud Unit and prosecuted by the Arizona Attorney General’s Office.

This case brings up the topic of how law enforcement and investigative units now use social media to monitor criminal activity and provide evidence in a case. Legal experts say that public information sources such as Facebook can be legally used in criminal or other investigations. Workers compensation investigators use social media, as do public adjusters. Health insurance companies can determine if you are a smoker when you claim you aren’t. If you are applying for life insurance and you are a thrill seeker, you may receive higher premiums or no coverage at all. When people put their lives on social media, they open themselves up to a world where nothing is sacred.

What is the moral of this story? Ensure your insurance agent is indicating the correct information on the application for coverage and that you are giving correct information to the agent. If you haven’t received your policy within 30 days, call the company directly and ask why.

And above all, watch what you put on social media. You never know when it can be used against you in a court of law.

This is a public service announcement brought to you by VUE Software. The most flexible, scalable configurable technology available in the insurance industry.


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