Staged accidents are on the rise globally. While the insuranceindustry has always been a magnet for fraud, the ability to stageaccidents (and successfully get paid) makes it amulti-billion-dollar proposition.

According to a May 2009 study by the Insurance InformationInstitute (I.I.I.), U.S. insurers incurred $30 billion in losses and loss adjustment expenses (LAE) as theresult of fraud, which accounts for about 10 percent of allclaims.

One of the most effective scams has been variations of staged accidents. These types of claims are tough to fight.Insurers often end up making payments because they simply lack thetime or resources to prove the fraud. In states such as Florida, insurers are further hamstrung bybad faith laws that can impose significant financial penalties inthe event of a wrongful denial.

The reality is that staged auto accidents have been around foras long as auto insurance has existed. Speaking from experience, myintroduction came the first day on the job as a youngadjuster handling claims in south central Los Angeles, an areanotorious for insurance fraud. While L.A. has long been a staged accident hotbed, these scams are happening in localesworldwide.

Riding Dirty

Before going into steps to upstage the staged accident, it isimportant to understand the variations that are being played out.Some involve a complex cast of characters organized by a capper whoorchestrates the entire charade. He or she will direct an “insured”to obtain a cheap policy on a car, which may or may not exist. Thiscar will then be run into another in an alley or parking lot andthe “injured” occupants will be directed to an attorney forlegal representation and a medical provider for treatment.

Other variations, such as a 'swoopand squat,' involve unsuspecting drivers where one vehicle willsuddenly pull in front of an inattentive victim and slam on theirbrakes, causing a rear end collision.

Another variation is the 'drive down,' where a seemingly honestdriver will wave a person merging into traffic through only toaccelerate right into them, denying they ever waved them on. Thiscan also occur in parking lots or left turn situations.

As I have discussed previously, a rock-solid investigation is critical to upstaging staged accidents. Claimsadjusters need to take the time to physically inspect all vehicles,not only to verify their existence but also to photograph andmeasure the damages in search of clues, such as painttransfers, mismatched damages, or metal striations.

They also need to meet and conduct interviews, in person, withall parties involved in the accident. During theinterview, the adjuster should formulate a line of questioning thatonly people involved in the accident and subsequent medicaltreatment could answer correctly. Obtaining descriptions of bothcars, other occupants, the responding police officer, the treatingclinic, and medical providers is a great start.

As a young claims adjuster, I often carried pictures of randompeople in medical garb and would ask those being interviewed ifthey could identify anyone. Invariably they would point to someoneas their doctor, lawyer, or physical therapist.

Get specific details, such as directions from their home totheir physical therapist or clinic. Ask questions such as, “What does the waiting room look like?” and be sure to obtainsign-in forms and all medical records associated with thetreatment. Review the appropriate CPT codes and compare them to thetreatment being described.

Also, ask about the directional force of the occupants. If theywere rear-ended, then consider the laws of physics if they claim tohave flown forward.

Perhaps most importantly, look for the script that may have beenprovided by the capper, which is usually nothing more than a handwritten piece of paper instructing a person about what to say tothe insurance company.

Conducting physical inspections of clinics can speak volumesabout a claim, especially when one arrives only to find a vacantlot or a mail drop. Researching state-specific databases on medicalproviders and attorneys can turn up valuable information about theveracity of the players involved.

While these are just a few of the many steps that can be taken,the one certainty is that no stone should be left unturned. Asavvy investigator recognizes the time that it takes to conductsuch thorough investigations and employers should provide them withthat latitude. It is fair to say that staged accident participantsknow which carriers pay and which ones will fight them. Earning areputation as the latter will serve to mitigate potential futurefraud.