International Insurance Fraud

International Insurance Fraud

Although the use of insurance fraud to fund terrorist organizations has been well known by those involved in attempts to reduce insurance fraud for decades, the mainstream media is beginning to wake up to the problem. For example, the Washington Post reported that North Korean insurance managers prepared a special gift for their Dear Leader. In Singapore, they stuffed $20 million in cash into two heavy-duty bags and sent them, via Beijing, to Pyongyang.
 
More investigation is needed into international insurance fraud without limitation to the North Korean Government.  Insurance fraud investigators believe that, for many years Iran, Hamas, Hezbollah, the Palestine Liberation Organization, the IRA, Armenian Genocide groups, and people of every political stripe have supported their terrorism operations with insurance fraud including staged auto accidents, fake thefts, arson-for-profit schemes and other insurance fraud techniques. The money is good and the risks small. Insurers who do not want to be involved in long term litigation will pay off frauds to avoid paying their attorneys.
 
The $20 million birthday present for Kim Jong Il, and the gratitude of its recipient, were annual highlights of a sophisticated global insurance fraud that North Korea has concocted to provide its communist leadership with hard currency. According to those who managed the state insurance company in Pyongyang, and worked for a year at its banking subsidiary in Singapore before defecting to South Korea, have made public the scam. North Korea’s international insurance claims, as well as those of other governments and illicit non-governmental organizations, have not made the news, in part because they have been cloaked in legal settlements by firms with no interest in highlighting their losses and the gullibility of insurers faced with local prosecutors and police agencies who do not want to get involved in major insurance fraud cases because they believe no one – except a rich insurance company – is being harmed. The word must get to prosecutors, US Attorneys and the courts so that these people can be stopped.
 
Some details about the Korean fraud emerged in London last year when lawyers for German insurance giant Allianz Global Investors, Lloyd’s Underwriters and several other reinsurers disputed a North Korean reinsurance claim for the 2005 crash of a helicopter into a government-owned warehouse in Pyongyang. According to court documents, the companies alleged that the helicopter crash had been staged, that a North Korean court’s decision to uphold the claim had been rigged and that the North Korean government routinely used insurance fraud to raise money for the personal use of Kim Jong Il. A British appeals court allowed the case to go forward, but as it went to trial in December, the insurance companies agreed to a settlement that amounted to a nearly complete victory for the North Koreans: The insurers retracted all allegations of fraud against Korea National Insurance Corp. (KNIC) and paid out about $58 million, or 95 percent of the North Korean claim for the crash.
 
Hopefully, once fooled will be twice warned. The insurance industry should avoid dealing with North Korea and other criminal or totalitarian regimes. Putting assets in the hands of a court system controlled by a dictator or megalomanic is not just poor insurance judgment it is plain stupid.