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The way Tonnie Tolliver told it to the police, he was at a Wisconsin ATM machine when he was the victim of an armed robbery. He told police that he had lost cash and jewelry valued at $5,080. Three days later, he filed a loss with his insurer claiming all his scheduled jewelry -- valued at $33,390 -- was stolen. The claim was paid.
Sensing a scam, the insurance company's special investigations unit (SIU) contacted the National Insurance Crime Bureau (NICB) and the NICB contacted the local police. The police were investigating the armed robbery, but were unaware of the insurance claim. The police reviewed the camera footage from the ATM and hotel and found that the "robber" was none other than Tolliver's girlfriend. Tolliver was charged and pled guilty to insurance fraud in Milwaukee County, Wis., where he filed the claim. He is now serving an 18-month prison term and faces the possibility of additional jail time for filing a false police report.
There is no question that the current economic situation is causing financial stress to individuals and families throughout the U.S. As budgets get tighter and some families face the reality of not being able to meet their financial obligations, the thought of committing insurance fraud may become more acceptable to otherwise law-abiding citizens.
Recent news stories have suggested that the weakening economy and the mortgage meltdown will cause an increase in insurance fraud -- particularly home and vehicle arsons -- as some individuals may see them as ways to escape these obligations. However, the NICB's Questionable Claim (QC) submissions do not indicate a large increase of these types of claims over the past few years.
The NICB receives approximately 70,000 QCs each year from its member companies. A QC is a claim that does not appear to meet the requirements for a valid insurance claim. It may contain outright falsehoods, elements of exaggeration, or include one or more indications of insurance fraud.
A QC provides claim personnel, SIU agents, and law enforcement the opportunity to review claim patterns and claimant histories. Suspect offenders frequently switch insurers and cross lines of business or make small changes to their addresses and other personal identifiers to avoid detection. By maintaining the most complete and up-to-date database of all QCs, NICB helps prevent payment of illegitimate claims and keeps insurance costs down for all consumers.
While a current analysis of QCs does not yet indicate a significant rise in economy-driven fraud, it does reveal another kind of trend: Jewelry that is reported lost or stolen. Based on an analysis of 5,131 QCs involving jewelry and watches from Jan. 1, 2002 - Dec. 31, 2007, QCs for jewelry losses have increased each year.
In 2007, jewelry losses were up 17 percent compared to 2006, and they are up 75 percent since 2002. While these claims are typically of less value than a car or home, they often exceed $5,000 and, in a number of cases, jump to more than $20,000.
Although the volume of instances may appear small, jewelry losses can total up to some large numbers. Of the 5,131 QCs submitted by NICB member companies, only 12.8 percent of the claims had a reserve established (an estimated amount used to settle the claim) to cover the potential payout.
In California, insurance companies referred 934 QCs from 2002-2007, the highest reported number in the U.S. Right behind California and New York (922 QCs) was Texas (379 QCs), which had the highest percent of increase -- up 267 percent -- from 2002 to 2007.
It is important to remember that a QC is not always a fraudulent claim -- it is a questionable claim. Nonetheless, QCs tell investigators certain things about a specific claim or claimant, and that often leads to other significant acts of fraud.
The following examples are taken from the QC database and offer a typical look at some of the claims referred for closer examination:
?$22,000 diamond dinner ring reported lost by the same woman twice in two years.
?$27,000 loss of two watches from a car.
?$270,000 jewelry theft claim. The claimant filed for bankruptcy in 2005 and none of the missing items were listed in the bankruptcy filing.
?A $7,300 engagement ring was lost down a sink drain by the claimant's fianc?e. The claim was denied because the claimant, a doctor, did not have coverage on the ring. Ten days later, the doctor took out $8,000 in jewelry insurance. Less then a month later, the doctor reported that his fianc?e lost her new ring again -- in the sink drain.
?A policy opened less than 60 days receives a claim for lost earrings valued at more than $56,000; there is a demand for a quick settlement. The claimant has no visible means of income.
The NICB study found that rings (including diamond, engagement, or wedding) were the most common types of jewelry reported stolen; more than 739 thefts occurred within the study's time period.
The following examples from NICB case files illustrate some of what is occurring:
?An individual residing in Illinois claimed that he lost his $1,500 diamond ring. A description of the ring was provided to local police. His insurance company paid the claim and now had ownership interest in that ring. As police were looking through local pawn shop logs, they found that a ring matching the insured's description was pawned a day before the alleged loss. This insured faces charges of insurance fraud in Illinois once he is released from jail in Wisconsin for an unrelated crime.
?An insured claimed that during a residential burglary, he lost a $105,000 diamond ring that he had given to his wife. He produced a receipt for the purchase. An investigation quickly revealed that the insured was going through a divorce, and his wife denied knowledge of the loss. She also denied knowledge of an earlier $25,000 loss of a ring allegedly belonging to her. Moreover, she suspected her soon-to-be ex-husband of fabricating the claim. Armed with this information, the insurance company and local law enforcement went back to interview the insured. He withdrew the claim. As for the receipt, it was provided by the owner of a jewelry store who was a close friend of the insured.
Although there are thousands of examples like these in which insureds will attempt outright fraud, we must be careful not to unduly hamper the claim process. As NICB Senior Special Agent Jerry Dolan states, "If it's a meritorious claim, you have an obligation to settle that claim. If it's not a meritorious claim, you have an obligation to fully investigate and deny the coverage and prosecute the claimant, if warranted."
Kristie Dwyer is an NICB field information analyst for a 10-state region of the Midwest, where she identifies fraudulent schemes. She can be reached at 847-544-7094, email@example.com, www.nicb.org.
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