Securing Your Bottom Line: TPAs Can Help Shield Businesses from the Impact of Organized Insurance Fraud
Organized insurance fraud can have a devastating impact on large employers and their claim management service providers. It can lead to higher costs, financial hardship, lost resources and productivity declines for victims. Employers that fall prey to this type of crime may also find that recovering stolen funds is a challenging and time-consuming task.
To help avoid organized insurance fraud or minimize its repercussions, large employers who use third-party administrators (TPAs) for claim management services can benefit from knowing what to look for. According to Nichole Soriano, Director of Investigative Services at Constitution State Services (CSS), the first step to recognizing it is to understand it better.
The first step to recognizing organized insurance fraud is to understand it better.
Nichole Soriano
Director of Investigative Services at Constitution State Services
Distinguishing between organized and opportunistic fraud
In a recent CSS webinar exploring the characteristics of insurance fraud, Soriano described two types: opportunistic and organized. “When discussing insurance fraud, it’s crucial to distinguish whether the act is opportunistic or organized,” she said.
Opportunistic fraud, or “soft fraud,” often happens when someone takes advantage of a situation but without having planned it beforehand. This may occur due to a number of factors, such as economic hardship, stress, problems at work and more.
“Organized fraud is what we consider hard fraud,” Soriano said. “This is the orchestrated, planned, intentional act where everything seems to be coordinated. There’s more than just one claim involved in the fraud and it can take a very long time to unravel.”
Identifying patterns in fraudulent claim activities
Uncovering an organized scheme often relies on detecting patterns. But it can be difficult to distinguish legitimate claims from fraudulent ones. One way to begin seeing the patterns is to recognize when the same team of individuals is involved in similar claim scenarios over and over.
Organized fraud teams often include a number of players, including a leader, a runner who recruits participants, the fraudulent injured parties, medical providers and attorneys.
Nichole Soriano
Director of Investigative Services at Constitution State Services
Exposing a $31 million trip and fall scheme with astute claims management
To illustrate how organized insurance fraud may play out and how costly it can be, Soriano shared a case example in her webinar. This scheme – which was highly complex and sophisticated – ran from 2015 to 2018 and swindled businesses and insurers for more than $31 million.1
Exposing staged accidents and fraudulent lawsuits
The scam involved recruiting individuals who were vulnerable to manipulation – often due to poverty or drug addiction – to stage or falsely claim accidents at locations throughout New York City. Targeting common sites like cellar doors, cracked sidewalks and potholes, recruits were instructed to claim accidental trips and falls. The falsely injured parties were directed to specific attorneys who filed lawsuits against the owners of the accident sites, who then involved their insurance companies. Medical providers linked to the scheme further bolstered the fake claims.
Revealing a web of deception
Soriano and a team of Claim professionals and investigators unraveled this web of deceit by identifying suspicious patterns, including repeated claims involving the same attorneys and medical providers. A lack of police reports, witnesses and immediate medical attention raised further red flags. The investigative team then notified and collaborated with the National Insurance Crime Bureau (whose staff alerted the FBI), leading to the scheme’s unraveling.
Justice served, lessons learned
The FBI investigation led to indictments and convictions of the ringleaders – a pair of attorneys and a medical doctor. The doctor and one of the attorneys were sentenced to prison terms of 102 months each, while the other attorney pleaded guilty to a lesser charge and received 24 months.
“This case really put in perspective for us the importance of a communication system between our Claim professionals, claim centers and our Investigative Services Group,” said Soriano. “It’s all about sharing information and intelligence and speaking up. If something doesn’t sound right, it probably isn’t.”
The case serves as a stark reminder of the lengths fraudsters will go to in order to exploit the insurance system. Their scams can be elaborate and far-reaching, causing significant financial losses for businesses and insurance companies. By remaining vigilant, organizations and insurance carriers can work together to identify and thwart this activity.
Beyond detection: Strategies for TPAs to thwart fraudulent claims
Organized insurance fraud remains a constant threat for employers. While the tactics may evolve over time, so do the methods to mitigate them. Soriano recommends that risk managers and organizations strive to “become a harder target for fraud.” Knowing that the potential of being targeted is high for many businesses and insurers, Soriano offered this advice:
- Adopt the latest data analytics tools designed to help identify patterns that might indicate fraud.
- Build awareness among employees of what fraud is and describe fraudulent behaviors.
- Report insurance fraud to the National Insurance Crime Bureau so they can review and refer to law enforcement, if necessary.
By understanding the nature, styles and patterns of fraud, proactive solutions become possible. CSS is committed to leveraging data analytics solutions to enhance detection and prevention measures that help protect customers and the insurance industry.
To learn more, watch “Unraveling the White-Collar Criminal: A Comprehensive Look at the Forces Driving Organized Insurance Fraud,” a Constitution State Services and Travelers webinar, and connect with a CSS representative.
