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Insurance Fraud. Hard Fraud Hard Fraud is when someone deliberately fakes an accident, injury, theft, arson, or other loss to collect money illegally. Crooks often act alone, but organized crime rings staging large schemes are becoming more common Soft Fraud
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Hard Fraud • Hard Fraud is when someone deliberately fakes an accident, injury, theft, arson, or other loss to collect money illegally. • Crooks often act alone, but organized crime rings staging large schemes are becoming more common • Soft Fraud • when ordinary people get money from insurance companies by inflating their claims. For example a person might pretend to be sicker than she actually is, or she might claim that more damage was done to her car in an accident than was actually the case. • Many people think this is harmless, but it is a crime, and it raises everyone's insurance costs.
Insurance Fraud – deception by a consumer or an insurer for financial gain • Insurer fraud – stealing from investors, cheating their customers, cheating another insurer
Common Types of Insurance Fraud • Staged Accidents • Arson • Faked Death/Murder • Health Insurance Fraud • Insurer Fraud - Insurer Fraud is also called "Internal Fraud" and refers to fraud perpetrated against an insurance company by its own employees, managers, or executives. • Property insurance Fraud
Unlawful & Unfair Practices • Prohibited Sales Practices • Misrepresentation • The most general practice forbidden by state law is misrepresentation. An insurer may not misrepresent itself to any member of the public, nor can it make misleading statements about its insurance policies. • For example, if an applicant asks an XYZ Insurance agent about the company's policies, the agent cannot reply, "unlike our competitors, we pay out on 97% of our claims” if, in fact, the agent has no basis for this claim. • Or, an example of this would be an agent who is trying to sell a replacement health insurance policy but fails to advise the insured of a preexisting condition clause in the replacement policy.
Twisting • Using misrepresentation to trick a policyholder into giving up an existing policy, so that you can sell her another. Defamation • Defamation of other insurers is also illegal. This means that insurers are not allowed to make false, maliciously critical, or derogatory statements about other insurers or their representatives in order to benefit themselves. • For example, XYZ Insurance and its representatives cannot discourage potential clients from purchasing a policy with ABC Insurance by telling them that ABC Insurance "is going broke," "doesn't pay its claims," or "doesn't care about its policyholders."
False Information/False Advertisement • False information and false advertising means making untrue statements about the insurer or its products through any media channel. This is another unethical sales practice. • For example, XYZ Insurance cannot advertise a $30,000 auto insurance policy for $2.99 a month, when it does not in fact offer such a policy. This would be false information. • If the company did offer such a policy, but failed to mention that the policy has a $10,000 deductible, then this would be an example of misrepresentation. • Deceptive marketing or sales to US service members is specifically forbidden by Georgia law, as is any advertising suggesting that an insurance premium or policy coverage is a special deal or advantage when that is not really the case.
Kickbacks and Rebating • Kickbacks • Any kind of compensation given as a reward or motivation for favorable treatment in an insurance transaction or interaction. • Insurers are not allowed to provide kickbacks to insurance brokers for pushing consumers into certain policies they may not need or desire. • It is also illegal for insurers to provide kickbacks to contractors or vendors for "low-balling" damage estimates or repair costs. • Similarly, it is unlawful to give or promise to give a person or a business something in return in order to induce them to buy an insurance policy, perhaps promising to give back a portion of the premium. This practice, called rebating, is not allowed.
Boycott, Coercion, and Intimidation • When it comes to selling insurance, insurers may not participate in boycotts or use coercive or intimidating trade practices. • For example, an XYZ Insurance agent cannot make a deal with a car dealer to approve a consumer’s auto loan only on the condition that the consumer purchases her car insurance from XYZ Insurance. • Similarly, ABC Insurance may not strike a deal with a real estate company forcing home buyers to purchase their policies from ABC Insurance as a condition of buying the home that they want.
Discrimination • When charging premiums, making settlements, or accepting applications, insurers may not discriminate on the basis of age, race, gender, religion, language, or disability, unless these factors have some direct bearing on the risks covered by the insurance policy. • For example, an insurer may only charge different premiums based upon age if there is evidence of a statistical difference in the number of claims. Since younger drivers have statistically been shown to drive more recklessly and cause more accidents than middle-aged drivers, it is not considered discrimination to charge them a higher premium. • Georgia also specifically prohibits discrimination against any person based on his or her status as a victim of family violence.
Unfair Claims Settlement Practices #1-6 • 1. Misrepresenting policy provisions • Insurers and adjusters must honestly disclose all pertinent policy coverages • 2. Failing to acknowledge communications regarding claims promptly • Insurers have 15 days to respond • "Direct communication" means speaking to the claimant in person or on the telephone, or mailing a letter. Voicemail messages and emails are not considered direct communication. Verbal communications must be documented in the claim file. • 3. Failing to put procedures in place that will ensure the proper investigation and settlement of claims. • Prompt acknowledgement of claim • Beginning investigation without delay • Approving or denying claim reasonably quickly
Unfair Claims Settlement Practices #1-6 • 4. Failing to bring about the prompt and fair settlement of claims in which liability has become reasonably clear. • adjuster must pay that settlement promptly. • There is no excuse for delaying or refusing to pay for a valid and undisputed claim • 5. "low-balling" claimants, forcing them to sue in order to recover their losses. • The insurer is not allowed to offer a policyholder substantially less than the proper amount of damages. • 6. Refusing to pay claims without having conducted a reasonable investigation • Adjusters need to pay adequate attention not only to the results of their own investigation, but also to the statements of the claimant and all other relevant witnesses. • An insurer must complete a thorough investigation before it can make a fair decision about whether to deny a claim or not.
Unfair Claims Settlement Practices #7-12 • 7. failing to affirm or deny coverage of a claim to a policyholder within a reasonable time frame. • If the insurer cannot come to a quick decision, it must notify the claimant that it needs more time to deliberate. • 8. Making claims payments to insureds without specifying under which coverage the payments are being made. • 9. Delaying settlement process by requiring bothformal proof of loss form and subsequent verification
Unfair Claims Settlement Practices #7-12 • 10. Not promptly providing a claimant with a reasonable explanation of why his claim was denied or a compromise settlement was offered, if the insured requests this information in writing. • 11. Failing to provide the claimant with claim forms promptly, when the insurer requires these forms in order to settle the claim. • 12. Failing to implement standards assuring good workmanship in company repair shops • If an insurer owns a repair shop, they are obligated to make sure that the work performed there is done in a workmanlike manner by implementing standards for how that work should be done.
Unfair Claims Settlement Practices 13 & 14 • 13. The insurer must pay the insured for covered losses up to the policy limit, according to the contract. • If an insurer hasn’t paid a claimant the full amount due for a claim, and the policy limit hasn’t been reached - and the insurer and insured haven’t come to a compromise agreement about the settlement amount - then the insurer is not allowed to write on a check or payment that that payment releases the insurer from any further obligation. • 14. forbids insurers from issuing payment under one particular coverage and including with the payment language that releases the insurer from its entire liability for the claim. • let’s say a policyholder files a claim after a car accident. The policyholder is entitled to receive indemnification for both the damage to his car ($12,000) and for his medical bills ($60,000). The insurer may not send the claimant a check for $12,000 and include language that will release it from paying the $60,000 under a different coverage.
Commissioner’s Authority • If the Commissioner suspects that an insurer or an agent has been engaging in an unfair practice, he has the right to charge that person or company with a violation. He will notify them of a hearing about the matter, giving them 15 days notice. • If the insurer is found guilty of unfair practices the Commissioner will issue a cease and desist order. He can also issue a penalty up to $1,000 for each violation (or $5,000 if the person knew or should have known that his actions were against the law) and he can suspend or revoke the guilty party’s license. • If the insurer or agent fails to honor the cease and desist order and takes up the unfair practice again, the Commissioner has the right to charge them up to $10,000 per violation.
