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Insurance Law

Insurance Fraud -- Red Flags

When investigating a suspected insurance fraud case, investigators and lawyers look for red flags or indicators of insurance fraud. They are often contradictory and are never, standing alone, evidence of insurance fraud. They are indicators that, when present, require an insurer to investigate the claim presented thoroughly.

Here are some red flags or indicators of fraud that should raise concern if they appear during an investigation with any frequency:

• The claim is made a short time after 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 earlier asked his insurance agent hypothetical questions about coverage in the event of a loss similar to the actual claim.

• 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, especially if the insured cannot provide receipts, owner’s manuals, or other documentary proof of purchase.

• In a fire loss claim, property which would be personal or sentimental to the insured and which you would expect to see among the lost property—photographs, family heirlooms, or pets—is conspicuous by its absence.

• Documentation provided by the insured is irregular or questionable, such as: - Numbered receipts are from the same store and dated differently or sequentially. - Documents show signs of alteration such as dates, descriptions, or amounts. - Photocopies of documents are provided and the insured cannot produce the originals. - Similar handwriting or signatures—or the insured’s apparent handwriting—on different receipts, invoices, gift verifications, appraisals, etc. - The amount of sales 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. - The insured has discarded the claimed damaged property before the adjuster can examine it.

• Information on a life application is very vague or ambiguous as to the details of health history: dates, places of treatment, names of physicians or hospitals, or specific diagnosis.

• 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, etc.

• 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.

• Automobile fire in a very remote rural area with no witness, but the driver claims an electrical shortage in the engine compartment caused the entire car to be gutted by flames.

• 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 be having a drinking problem, drug problem, financial pressures, or is having serious marital difficulties or having a known affair with another and irregularities start to appear.

• 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.

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