In order to apply force to far-reaching and ever-evolving schemes, insurers will also need to overcome some substantial impediments to investigation. Anthony Roman, head of global security and risk-management firm Roman & Associates, outlines 10 key obstacles that require careful consideration:
1. Inadequate resources. Generally speaking, the number of special-investigative personnel and support services is limited. Moreover, the flat-rate structure for investigation vendors can often lead to low-quality personnel and low-quality results
2. Inadequate prosecutorial and law-enforcement resources. If prosecution of insurance-fraud cases is minimal, then deterrence will be equally minimal. The issue of inadequate resources varies from state to state, but one common problem is that there are high monetary thresholds for district attorneys to accept—and be willing to prosecute—an insurance-fraud case. For example, some prosecutors may not be interested unless there is a loss of $100,000 or more.
With regard to insurance fraud, the resources are so few that many jurisdictions are simply not in a position to conduct ancillary investigations concerning the subject—causing successful prosecutions to be unlikely. Therefore, the insurer has to either complete the fraud investigation or hire a highly skilled vendor capable of preparing the case by securing pertinent information and presenting the evidence in a manner acceptable to district attorneys.
3. Privacy regulations. Prosecuting insurance fraud is clearly in the public’s best interest. Yet in some countries, there are many privacy regulations that inhibit successful fraud investigations and prosecutions. In the United States, privacy regulations are an important element; however, a balanced approach should be employed to keep those regulations from making cases difficult to prosecute.
Regulations in the U.S. often seem to be enacted as knee-jerk reactions to sensationalized media stories, without regard to their potential impact on future cases. Insurance crimes can then be more difficult to prosecute when previously public information becomes privacy-protected.
4. Lack of a clear industry standard for success. Statistics can be misleading. For example, if you have an effective fraud program with effective prosecutions, it may seem to some that your company has a higher degree of fraud occurrences than a company with a less-effective program.
By creating an industry standard of measurement regarding fraud deterrence, however, everyone is on the same playing field. Reported carrier-fraud savings will then carry a higher level of credibility. There must be a standardized economic measure to determine the success of a fraud program.
5. Emerging technology is fueling cyber fraud. There is a good deal of financial fraud, identity theft, credit-card fraud and security-system breaches relating to insurance fraud. Without specialized skill sets, it is much more difficult to investigate these cases successfully. For example, specialty units may include financial forensics, attorney investigators, former justice-department special agents, computer-forensics experts and other staffers to address the various types of fraud. Increasing the SIU budgets, and thereby the necessary resources, will enable insurers to achieve more success.
6. Organized crime is penetrating all levels and types of businesses. Crime rings have seemingly endless resources. There is active participation by a small percentage of corrupt attorneys and physicians and other health-care professionals who help propagate fraud against insurers and, by default, act against the public interest. Although their numbers are relatively small, their economic impact is incalculable.
7. More white-collar crime. New and evolving schemes often combine to some degree with cyber crime, including bankruptcy fraud, health-care fraud, hedge-fund fraud and mortgage fraud. Insurable commodities are often neither detected nor investigated fully by the government or insurers, due to a lack of resources.
8. Globalization. There are minefields of risk in conducting investigations overseas as a result of the different systems of law. If one is unfamiliar with elements of civil law versus common law—or lacks an understanding of local custom or civil regulations and stricter privacy laws—the result could be a severely diluted investigation or even regulatory violations that carry international corporate penalties.
9. Poor public relations. The public perception of insurers remains poor. Therefore, the public perception of insurance fraud as a socially acceptable crime remains unchanged. The Coalition Against Insurance Fraud’s investment in a public-awareness campaign is ongoing, but there needs to be more of a universal effort for the P&C industry to be successful in deterrence.
10. Adverse legislation. Many state laws and regulations are slanted in favor of the claimant. Therefore, the burden of proof for insurers is unrealistically difficult.
In some states, the level of benefit remuneration can be so high that an injured worker makes more money staying home than by going to work, leaving little incentive for that individual to return to the workforce.