Coalition Against Insurance Fraud Details Rising Problems

The Coalition Against Insurance Fraud said with the economic crisis deepening, criminal insurance activity appears to be increasing and investigators worry that new schemes could flare up before long.

In its Winter Fraud Focus edition, the organization said that auto insurance crime is providing the clearest proof that fraud is rising.

In September the Coalition surveyed a dozen states and other locales around the country, and it said the data revealed that drivers increasingly "are torching vehicles or sinking them in waterways, then lying to their insurers that someone stole them."

In Florida, the Coalition noted, Miami's police chief recently reported an increase in phony thefts known as "vehicle giveups," and the crime is spreading elsewhere in the state.

It quoted John Sargent, director of MetLife's property-casualty special Investigation unit, to the effect that, "Florida is where we're seeing pressure."

The Coalition cited a New York State fraud bureau report that vehicle giveups in the state soared up to a third in 2008, and in Utah police recently found a pickup burning on a desolate road in Utah County that was traced to an owner who couldn't make payments after going on reduced work hours.

Giveups also are spreading in Wisconsin, the Coalition said, reporting that the National Insurance Crime Bureau now receives three to five inquiries a week about suspicious vehicle thefts, compared to around three a year normally.

One vehicle was found stuffed with newspaper and then burned in a park-ride lot, and so many vehicles were dumped into a quarry near Milwaukee that they were stacked on top of each other, said the Coalition.

Desperate consumers are also torching homes--seeking an insurance bailout from foreclosure or general financial distress. The Coalition said it had revealed the first signs of this trend in late 2006.

Mr. Sargent of MetLife told the Coalition, "As a precaution, any home fire in excess of $25,000 is being reviewed by the investigative unit."

More home policyholders, said the Coalition, also claim that expensive possessions have suddenly vanished and MetLife, knowing people's tendencies in this economy, says it's looking more closely at claims for "lost" or "stolen" possessions.

"We're seeing a lot of mysterious disappearances that we hadn't seen before," it quoted Mr. Sargent. "It's an easy claim to file. You don't even have to say it was stolen. You just have to say, 'I lost my $4,000 diamond ring.' It's tough to disprove."

Workers' compensation schemes are another potential problem area, said the Coalition, and it wondered whether more battered businesses will be trying to illegally avoid paying full premiums.

Typically employers hide workers in shell companies, for instance, or lie to their insurer that employees in high-risk jobs such as roofing are low-risk clerks. The Coalition noted that one premium scheme can steal tens or hundreds of thousands of dollars a year with many cons a part of America's vast underground economy, often illegally denying immigrant laborers vital comp coverage.

"Only after we get their [company] books and investigate do we know the true extent of premium fraud," said Neil Johnson, assistant vice president and manager of Liberty Mutual's premium-fraud investigative unit.

Louis Saccoccio, executive director of the National Health Care Anti-Fraud Association, told the Coalition, "I certainly think that if the economy gets worse and people keep losing their jobs, then we'll probably see more [company health program] enrollee fraud."

The Coalition noted that even as problems increase, the FBI has reduced white-collar crime investigations. Federal insurance-fraud prosecutions dropped 75 percent from 2000 to 2007, and nearly 40 percent of police departments in a survey said their budgets have shrunk.