Fraud news: It`s the recession, stupid

1st Quarter • 2009
Fraud news: It’s the recession, stupid
With layoffs, foreclosures and other Misery Metrics piling up as the recession grinds on,
reporters keep asking if insurance fraud is spiking.
Are stressed-out consumers trying to bilk their insurers for convenient bailouts? So far, this
has been the big insurance-fraud story for 2009.
Reporters’ antennae are on high alert. They’re
scouring for fresh stories on how the recession is
affecting consumers—and insurance fraud now is
front and center.
Sadly but true, people’s desperate fraud schemes
give fraud fighters a prime stage for building public
outrage and sending forceful deterrent messages.
Well-timed news efforts can help thwart bogus
claims now, and reduce public tolerance of fraud
well after the recession has ended.
The Coalition Against Insurance Fraud is moving
swiftly. Our public-interest news campaign earned nearly
700 stories about fraud and the recession in the first
quarter of 2009 alone.
So-called vehicle giveups remain the fastest-spreading
fraud trend—and hottest news story. Stressed-out drivers
are torching unwanted vehicles, sinking them in
waterways or giving them to chop shops—all for illicit insurance bailouts.
Suspected giveups, for instance, have soared 30 percent or more in New York, Pennsylvania
and Miami. Southern California is another hot spot. Same with Dallas, Las Vegas, Newark,
Louisville and other locales.
This winter we’ve worked on national giveup stories with the Wall Street Journal…New York
Times…Associated Press (national)…CBS Evening News…Good Morning America…Fox News…
ABC News.com…BusinessWeek.com…Hartford Courant…New York Post…MSN and other news
outlets. Most stories have appeared, and some are in progress.
Among the insights by coalition staff quoted in recent news stories:
Wall Street Journal: “The economy is stretching people to the breaking point, and some of
them are willing to risk criminal convictions. They look at (giveups) as their own personal
stimulus package.”
Good Morning America: “Most people who dump their cars are decent, honest people who
are literally driven to do this by the downturned economy.”
ABC News.com: “These are normally honest people who wouldn’t steal a candy bar from a
grocery store…They’re resorting to a stupid and ill-thought-out crime as a last resort…People
are just destroying their lives in an attempt to illegally bail themselves out.”
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Hartford Courant: “All the signs are in place for a national spike in auto arson. If you were
breathing oxygen, you were a candidate for an auto loan. The industry handed out loans like
candy bars. Now we’re seeing the fallout as people lose jobs, and they owe more on their car
than the vehicle is worth. Desperate people do desperate things.”
NewsWatch: What’s next?
Prediction: Vehicle giveups likely will remain a
compelling news story…at least through the early
summer. Especially, watch for the story to keep playing
out locally, as reporters keep digging up stories about
giveup trends in their own cities, counties or states.
Opportunity: Do the research, discover the trends,
and take the findings proactively to reporters. Now is a
prime chance to spread deterrent messages.
What’s next? The giveup story will fade after enough exposure—possibly later this summer.
In fact, more reporters already are asking, “What other insurance cons are happening in the
recession?”
The fact is, almost any insurance scheme can spike in a recession this severe. Which cons will
have enough sex appeal and data to attract reporter attention? Investigators are watching for
possible spikes in schemes like these:
Home arsons. People keep torching their homes, making this potentially a top-tier fraud
story. Some consumers are trying to escape looming foreclosure or general financial distress
through illicit insurance bailouts. This home-arson trend is
far smaller than vehicle giveups…but reporters still are very
interested. Burning homes and desperate homeowners
make for dramatic recession news even if the trend,
statistically, is on lower-burn.
Personal property thefts or losses. Granny’s heirloom
diamond ring mysteriously disappeared, or someone
burgled a pricey sound system from the living room. Many
investigators say suspicious losses are increasing.
Slip & falls and other extortions. A quick and cheap way
to pump up a recession-deflated bank account is to lie that you slipped on a grape in a
grocery store or tripped on uneven pavement in a restaurant parking lot. And here’s a close
cousin of slip & fall extortions: Lie that you chomped on a piece of
broken glass in your salad, or found a dead mouse in your chili.
Workers comp injuries. With layoffs mounting, disgruntled
workers may try to steal free medical treatment or paid time off
via fake injuries if they sense a pink slip is coming.
Boating cons. Are boats being scuttled or sold off, then
fraudulently reported as stolen? Same with expensive boating
equipment?
Business scams: The untold story. Cons by and against
businesses likely will spike, many investigators are convinced.
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
This is a news story waiting to be told. If enough fraud data surfaces, fraud fighters will have
another top-notch chance to place strong deterrent news stories with reporters. Here are
some of the business cons that could spike in recession-worthy volume:
Arsons. A struggling restaurant suddenly goes up in flames because it’s going bankrupt
with fewer people eating out these days. The desperate owner spread gasoline and lit a
match, hoping insurance money will help recoup costs of a failed venture.
Workers comp premium scams. Cash-strapped businesses may try to prop up declining
profits by avoiding paying full workers comp premiums using illegal ruses such as lying that
high-risk roofers are low-risk clerks.
Fake thefts. Office equipment or outdoor construction equipment may be mysteriously
“stolen” for insurance payouts.
Fake health plans. Crooks peddle bogus discounted health coverage to small businesses
struggling to afford group coverage with double-digit premium increases. Only a couple of
shady plans have surfaced lately, but are more coming?
Views on placing news
The recession gives fraud fighters a
rich opportunity to push strong antifraud messages onto the streets. A
few quick ideas for getting local
fraud news across…
Think big. Is there a vehicle
giveup trend locally? How big is it—
enough to interest a reporter?
Go figure. Reporters live and
die by numbers. You don’t usually
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need totally definitive data. Just
enough to suggest a trend is afoot.
Fraud bureaus, fire marshals, insurers
and others each may have useful
numbers.
See the drama. Reporters love
colorful cases that put a human face
on the trend and show how normal
people are affected.
Alert your pr staff. Let your PR
pros know about recession-driven
trends. The PR staff can sell this trend
info to reporters.
Alert the coalition. As a publicinterest group that’s credible with
reporters, we can help get the fraud
story onto the streets.
Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Auto repair affairs
The coalition created a potentially life-saving consumeradvice column alerting the public about body shop
scams. More than 460 community newspapers around the
U.S. had published the column through April.
“Most body shops are honest, but some will put your life
and safety at risk with cheap, shoddy and bogus repairs,”
the coalition warns in the column.
Drivers should use their insurer’s preferred body shops
to ensure reliable, honest repairs. Get a written estimate and ask to see exactly what work was
done, the coalition urges.
The coalition targeted smaller newspapers because they’re often well-read by people who
can’t always find backyard-level community news in larger news outlets.
TrendWatch:
Internet the news source of choice
A major shift in how people obtain their news and other information keeps picking up
speed. Newspapers of all sizes are losing circulation—and even going out of business—with
startling speed. More people get their news online for free instead of paying for newspapers
(more on this in the next issue of Fraud Wire). Television is further eroding newspaper
circulation.
Implication: Fraud fighters must shift more resources to Internet-based outreach efforts,
exploring digital and highly visual means of getting anti-fraud messages across. Sharper
targeting is especially vital at a time when Americans increasingly tolerate insurance fraud,
the coalition’s consumer-attitude research shows.
Make no mistake—newspapers remain influential info outlets with great power to affect
people’s attitudes. But an irreversible shift in information sourcing has taken hold.
The future of public outreach is online, wireless and visual.
The coalition is responding with ever-expanding online outreach efforts. Our website
www.InsuranceFraud.org is America’s largest website focused solely on insurance fraud. It stays
in constant motion—it’s updated every day. This keeps content fresh and useful—and invites
people to keep coming back for more. Here are several of our online initiatives, with more
coming…
Fraud News Daily. Keeping America informed about the latest
fraud news is one of the coalition’s prime goals. We deliver each
day’s fraud news stories to your email inbox—free—every
afternoon.
Fresh off reporters’ keyboards, the coalition’s daily news service
provides timely updates about fraud crimes and trends around
the U.S. each business day. You can quickly scan the handy news
summaries, and link to the full stories for more details.
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
The newsfeed even formats for Blackberries and other mobile devices. Signup is free, and
takes just a minute.
Fraud news and morning coffee. Many people start their workday with a cup of java and
the fraud news on the coalition’s homepage. New stories covering some of the best busts and
fraud trends around the U.S. are posted each business morning.
FraudBlog. The coalition’s popular blog is the conscience of fraud fighters. Dennis Jay
speaks his truth on wide-ranging fraud issues, with regularly updated postings. Equal parts
compliments, zingers and thought-provoking ideas, FraudBlog is the only online thought
factory of its kind in the anti-fraud profession. Visitors can respond and take part in the timely
debates FraudBlog invites.
A recent posting: A pastor in Baltimore allegedly bought life policies on a blind man and then
had him killed for the payouts. Kevin Pushia may have paid the hitman with insurance money
he allegedly stole by torching a church.
“The trend appears to start when people get away with filing small bogus claims that are
paid quickly and, though suspect, are not investigated thoroughly…” Jay writes. “Are some
insurers unwittingly encouraging more fraud by not investigating small, suspect claims? Now,
many insurers will investigate any claim deemed suspicious…But let’s hope that more
insurers adopt a zero-tolerance policy and send a strong signal that committing fraud never
pays.”
Fraud of the month. Sometimes the biggest victims of insurance cons are the smallest ones
—children. Miscreant adults sometimes pull kids into schemes, with lasting damage to their
little lives, says the coalition’s latest fraud of the month. Parents in
a staged-accident gang in Arkansas coached their kids how to act
injured, and one parent even hit his son in the head so he’d have
a real injury to show police. An infant girl was burned to death in
a staged accident gone wrong. A child in North Carolina had 16
perfectly healthy teeth drilled and capped with steel crowns so
the dentist could pad his insurance billings.
Web stats. No surprise to anyone, but people are thirsting for
fraud data. That’s evident from the most-popular sections of the coalition’s website. Our fraud
stats section is by far the most-visited online feature. This suggests that useful fraud data are
in high demand—and often hard to find.
Implication: Anti-fraud websites will deliver more value if they contain fresh and useful antifraud data. Here are the five coalition website sections that people visit most (in descending
order). This says much about what people most want from an anti-fraud website.
Fraud stats
Insurance Fraud Hall of Shame
News
Consumer information
How to report fraud
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Annual report: clear vision
Clear Vision in an Unclear Economy. That’s the title of the
coalition’s annual report. The report gives a closeup history of
how the coalition—and fraud fighters everywhere—
responded to the recession’s grip last year.
“There’s no easy way to reverse this persistent $80-billion
crime. Especially when you’re combating a wrathful recession
and determined army of cheaters,” coalition co-chairs Jim
Brown and Dennis Schulkins say in their opening letter. “But
the coalition isn’t interested in keeping up. We’re staying
ahead.”
It recounts how the coalition broke the news about vehicle
and home arsons stemming from the recession…Revisits the
coalition’s efforts to save lives by toughening up fragmented
state laws about airbag schemes...Shares stories of tragic fraud
victims—like the woman who lost her home and had to sleep in her truck after being sold
fake workers comp coverage…Shows how a consortium of insurers sprang up to combat
widespread medical schemes. “Edison’s lightbulb started with a grand vision of a well-lit
America,” the annual report says.
“Likewise, the coalition is pursuing a leadership vision for turning up the wattage on
America’s fraud fight: Let’s magnify our collective impact by joining forces more—and more
often.” To order free copies, e-mail Kendra Smith or call her at 202-393-7330. You can also
download a pdf copy of the report.
Nominations sought for Prosecutor of the Year
Nominations are being accepted for the coalition’s Prosecutor of the Year award. The award
honors insurance-fraud prosecutors for achievements in hands-on courtroom cases, or for
broader leadership in the field of insurance-fraud prosecutions.
This is the only national award solely for fraud prosecutors focused on insurance fraud.
The achievements must have
happened primarily in 2008.
Deadline is September 1. The
Online resources
award will be presented at the
Links to communications and public outreach resources at
coalition’s annual meeting in
InsuranceFraud.org
December. For more info,
contact Jim Quiggle at
Order outreach materials
202-393-7331 or
Subscribe to Insurance Fraud Weekly ePort
[email protected].
View the latest news articles quoting the coalition
Last year’s winner was Los
Background on insurance fraud
Angeles prosecutor Al
Articles on insurance fraud
MacKenzie, who is mowing
Public awareness gallery
down swindlers by charging
Communicating the anti-fraud message
them with tax fraud.
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Profile: Five questions for Dominic Dugo
Assistant DA of San Diego County
talks public awareness
Hundreds of thousands of drivers in San Diego
County saw billboards warning against workers comp
scams this winter. The outreach effort was launched by
a longtime nemesis of comp cheaters—Dominic Dugo,
deputy district attorney of San Diego county. The
coalition talked with Dom about the highly visible
roadside campaign.
What workers comp fraud trends did your campaign address?
About $4 billion is lost to workers compensation fraud each year in California. As a result,
the San Diego County District Attorney’s Office has within the Insurance Fraud Division an
entire team of professionals working to reduce workers
comp fraud.
We expect an increase in all forms of workers comp
fraud related to the recession as suspicious claims move
through the system. In fact, investigations we’ve opened
for premium and claims fraud are up 13 percent over
April 2008. Unfortunately, this economic crisis may be
leading normally honest people to commit fraud.
Very real fraud cost drivers are committed by
healthcare providers and employers. Injured workers
who are illegally denied benefits, and injured workers of uninsured employers are forced to
seek emergency care with no means to pay.
Why do we need public outreach to support law-enforcement crackdowns?
Educating the public is a key element in our strategy to prevent and combat workers comp
fraud. Typically, when one hears of comp fraud, the first thought is about an injured worker
who is feigning an injury to receive benefits. That is often
true. But another goal of our billboard campaign was to
alert the public to workers comp fraud committed by other
players such as businesses.
We can’t expect deterrence and detection of fraud
without public awareness. The campaign’s catch phrase,
“Don’t do it, don’t tolerate it, report it” encourages the public
to take action against fraud. Note that the average premium fraud case costs about $350,000
in overall losses. So if our billboards, which cost $36,000, can deter just one fraud that’s almost
a 10:1 return on investment.
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Why billboards?
By strategically placing the billboards, we reached a potential audience of about 1 million
daily. The billboard campaign is part of a three-pronged, multi-media effort aimed at all forms
of workers comp fraud. The effort also has included
brochures distributed to the public, mailed to businesses
and the insurance industry, and continually dispersed at
District Attorney public events.
How was the billboard campaign orchestrated?
We spoke with other state anti-fraud agencies and ad
agencies to get suggestions; we read the coalition’s United
We Brand report; and reviewed other public awareness sites and documents. The Pennsylvania
Insurance Fraud Prevention Authority provided one of our designs, and assisted in creating
another.
We had three deterrent goals: inform the public that workers comp fraud is committed by
employers and healthcare providers as well as employees; that fraud is a felony that can have
bad consequences if you’re caught; and that people should
report fraud.
In all, 16 billboards with four designs were used at a cost of
just $36,000. The campaign was set for one month but it
was extended to six weeks, and five billboards remained for
about two months.
Four designs provided variety that caught attention. Using
the words “felony” and “law” with the photo of San Diego
DA Bonnie Dumanis stressed the seriousness of fraud. It
was Bonnie who led the charge to make the campaign come
to life.
We also had billboards in Spanish and English because of the large Spanish-speaking
population in our county.
What results did the billboards generate?
The billboards were potentially seen by about one million people daily. We opened 10 new
cases directly because of 30 hotline calls the campaign generated. Twenty-nine calls were
directly related to the billboards. Another caller did not personally view a billboard, but said a
relative read an article in the San Diego Business Journal about the campaign.
Nine calls concerned suspected applicant fraud by neighbors and acquaintances; one
concerned suspected premium fraud, seven concerned employers without comp coverage,
and one call concerned suspected provider fraud in general healthcare.
The insurance fraud division also received a call about several cases of suspected comp
fraud from a large California business. The firm’s insurer says two more cases will be referred to
the DA when their investigation is completed.
We also received several requests to speak to Chambers of Commerce in San Diego County.
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org
Media Monitor
Insurance fraud articles published by the general media by category in the first quarter of 2009.
Auto - giveup
47
Auto - padding/false claim
27
Auto - staged
23
Auto - undewriting
13
13
Business - arson
Business - padding/faking
Disability
5
1
Drug diversion
14
Fraud - general
39
Homeowners - arson
Homeowners - fake/padding
20
12
Insider - agent
29
Insider - insurer
Liability - false claim
Life insurance
20
10
12
Medical - false claim
38
Medicare/Medicaid
63
Underwriting
Workers comp - employer
19
11
Workers comp - provider 0
Workers comp - worker
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Coalition members can access full-text articles through the coalition’s News Archives
searchable database in the members-only section of www.InsuranceFraud.org. The database
currently contains 7,195 articles on insurance fraud and is updated daily.
Published quarterly by the Coalition Against Insurance Fraud, 1012 14th St., N.W.,
Suite 200, Washington, D.C. 20005. For more information on public outreach,
contact Jim Quiggle, director, at [email protected] or at 202-393-7331.
This newsletter may be distributed freely. Contains may be republished. Please
credit Coalition Against Insurance Fraud, www.InsuranceFraud.org
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Published by the Coalition Against Insurance Fraud, www.InsuranceFraud.org