Private Investigations – Insurance Fraud

The scope of insurance fraud in Israel in the fields of auto and property insurance is at least 200 million shekels a year. This claim is based upon research of entities in the field, the findings of private investigations conducted for insurance companies being sued, and the statistics of the Ministry of Finance. 

The constant growth in the population of drivers and fleet of cars raises, in accordance, the amount of insurance claims filed. Alongside the legitimate claims, however, is a growing trend of filing either false or value-inflated claims. Those filing false claims intend to deceive the insurance companies in order to receive compensation for the following events: car accidents, burning of businesses, break-ins into residences, theft, etc.

The Insurance Supervisor in the Ministry of Finance has not been indifferent to this situation that threatens the stability of insurance companies. It is his obligation to act and be the stronghold in the battle against these “insurance criminals” by setting regulations and bringing about change in the legislation as a foundation for dealing with this threat.  Accordingly, in the beginning of 2003 a draft outlining the threats and dangers faced by insurance companies was published by the Insurance Supervisor.

This same document gave instructions to insurance companies on the following issues: appointing a supervisor for the prevention of fraud, the responsibilities of all insurance company directorates, and setting methods, procedures, and special preparation of information systems and improved internal control in order to deal with the fraud phenomenon.

The insurance companies were required to conduct a risk survey once every two years, in order to provide an updated picture regarding the fraudulent claims filed against the company.  We are not aware of what special preparation the insurance companies carried out in accordance with the detailed instructions of the Insurance Supervisor.

The direct result stemming from the requests and instructions of the Insurance Supervisor was the establishment of the ISO (Insurance Service Office) Israel Company. This company, whose main base is in the United States, was hired by the Israeli government in order to establish a database containing all the claims filed with insurance companies in Israel.

Based on the data provided by these claims, the company developed (over several years) computerized tools to locate fraud in the field of insurance in general, and more specifically in the field of auto insurance (obligatory insurance, comprehensive insurance, etc.).

The insurance companies had no choice but to act according to the instructions of the Insurance Supervisor which required them to hand over their claims files to the ISO database in order to, with the help of tools developed by experts within the ISO company, locate those involved with fraud.

In order to provide those insured with appropriate and professional service, the professionals who deal with handling a claim (such as private investigators, claims managers and appraisers) must be aware of the dangers involved in handling a claim based on fraud. Handling a claim that you suspect (without factual evidence) is based on fraud may cause unnecessary and unjust damage to an innocent and honest client.

Insurance companies that hire private investigators on a regular basis in order to examine the circumstances of claims filed would benefit from regularly informing the private investigators, claims managers and appraisers of the telltale signs of fraudulent insurance claims.

It should be emphasized, however, that the identification of either one or a combination of these telltale signs does not prove beyond a reasonable doubt that a knowingly false claim has been filed. The indicators of fraud are mostly intended to serve as a tool for investigators and prosecutors, and are meant to complement the professional consideration required in evaluating any claim.

We have prepared a short list of signs that may indicate fraud, for the convenience of those dealing with the execution of private investigations and verification of insurance claims. The list is divided according to branches, and may be of assistance to private investigators, claims managers in insurance companies, and appraisers:

Auto Accidents

1. There was a delayed reporting to the police of the accident’s occurrence.
2. All injured parties claim to have the same bodily injury.
3. The injured parties claim to have severe bodily injuries, but there has been very little property damage.
4. The injured parties all submit receipts for treatment from the same doctors.
5. The receipts for treatment are not originals, or they are illegible.
6. Continual reporting of identical medical treatments, despite the occurrence of accidents that took place at different times and places.
7. The car involved in the accident is old and not insured by obligatory insurance.

 Loss of Income

1. The business employing the person who filed the claim is unfamiliar.  There is no street address, but instead a postal office box address.
2. The submitted phone number of the business only records voicemail.
3. The income report is presented on paper with no letterhead or logo.
4. The person who filed the claim began work at the alleged business only a short time before the accident.
5. Inconsistencies between the seniority, time away from work and level of income reported by the person making the claim and his or her residential area and assets.
6. The person filing the claim receives guaranteed income from social security.
7. The person filing the claim has an especially high standard of living.

 Businesses set on Fire

1. The building foundation of the business is unstable and possesses defective engineering with expensive rates of repair.
2. The business is located in an area known for crime with very little clientele and is difficult to get to.
3. Signs that reveal that valuable items were removed from the place of business prior to the fire.
4. The fire took place on a weekend or vacation day when no employees were present.
5. The fire detector system failed despite the fact that during its last test it was found to be in order.  
6. The fire occurred right before the purchase of the business by new owners.
7. The whereabouts of family members or pets of the business owner during the time of the fire where unknown.
8. Testimonials claim that property was removed from the business right before the fire.
9. There is a familial conflict regarding the property.
10. There is a continual business conflict between the business partners.
11. The business owner tried to sell his business right before the fire.
12. The business’s inventory has expired.

 During Submission of an Insurance Proposal

1. The reported residential address of the candidate is incorrect.
2. The candidate submits a postal office box number instead of a full residential address.
3. The candidate paid the premium immediately and in cash.
4. The candidate only submitted a mobile phone number.
5. It is not possible to meet the candidate in person.
6. The insured does not answer the insurance provider’s questions correctly or fully.

 Auto/Property Damages

1. An enthusiastic witness volunteers to assist the person making the claim.
2. Claims of heavy damages to the property, with only marginal bodily harm.
3. Lack of a towing report in cases of heavy auto damage.
4. The involvement of vehicles purchased through a rental or leasing company.
5. The auto damage is repaired in a garage far away from the residence or place of work of the person who filed the claim.
6. All the vehicles involved in the incident were repaired in the same garage.
7. Delays prevent the examination by an appraiser.
8. The insurance was purchases only a short time before the reported accident.
9. The scope of the insurance policy was altered only a short time before the accident.

 Apartment and Business Property Damage

1. The insured is in the middle of divorce proceedings.
2. Unlikely absence of the insured person from the region where damage occurred.
3. The insured person emphasizes the value of the damage and reports that cash was stolen.
4. The insured actively attempted to sell the damaged property just before the incident.
5. The damaged items are no longer in style.
6. The business owner was carrying “dead inventory.”
7. The damaged items are either forbidden or permitted for use in a limited manner according to the law.
8. The place of business in which damage was reported suffers from difficulty in fluidity, credit problems, and order cancellations.  

Large and significant  frauds may expose insurance companies to risks that can damage their stability and credibility in the eyes of the insured public. We believe that insurance companies are preparing themselves to deal with the fraud phenomenon. Our times demand the improvement of tools and means that can combat “insurance criminals.”  And better sooner than later.

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