Fighting Insurance Fraud
From workers comp to general liability, tips on how to sniff out illegitimate claims
CHARLOTTE, N.C. -- Each year, the two elderly ladies traveled from New York to Florida. And about three times a year, after stopping at a convenience store, one of them would slip, fall and hurt herself. Were they just incredibly accident-prone, unlucky or something a bit more nefarious?
Try the latter. These two grandmotherly types had filed about 14 accident claims against the c-stores they visited. At each stop, they would take turns playing the victim and the witness.
"Fraud is everywhere and it's committed by everyone," said Andris Berzins, team leader of special investigative services for Federated Insurance, Owatonna, Minn., and a presenter at the 2013 CSP Leadership & Crisis Prevention Forum, held this month in Charlotte, N.C. "When you look at who commits fraud, it can be university presidents, unemployed people, street people, school teachers, your neighbors. Are they young? Some are. Uneducated? Plenty of those. Educated? Sure are."
More than 30 retailers, suppliers and consultants gathered at the forum to discuss a range of issues that keep them up at night--ranging from the Affordable Care Act to cyber liability to workplace violence. The issue of insurance fraud proves just as consequential and financially impactful.
"Insurance fraud is the second largest economic crime in the United States," said Berzins, noting it costs the United States $200 billion a year in fraudulent property, casualty, workers' comp and health claims, with $78 billion alone in property, casualty and workers' comp fraud. It is estimated that every American family pays about $900 per year in additional insurance premium costs to cover for fraudulent activity.
"Frankly that's big to our economy," said Berzins. "A $200-billion hit year after year is huge. And it destroys our economy, keeps our employment down and we really need to do something about this."
Federated Insurance has eight special investigation unit agents scattered across the country to investigate suspicious claims, and the c-store channel keeps them busy. "As c-store operators, you are on the front line of a lot of different fraud schemes," said Berzins.
Take for example workers' comp fraud. There's the case of an employee who crushed his hands while moving product around a c-store. Federated Insurance began picking up on "red flags" that pointed to fraud--one was that the employee told the claims agent that he was practicing typing on his calculator to see if he could get his fingers to work again.
"Does that seem ridiculous to any of you?" Berzins asked. "If you know what to listen to, he's overselling. 'Boy I want to get back to work, and I'll do anything—I'm practicing how to work a cash register at home.' Really? I doubt that's really true." In fact, after conducting surveillance on the employee, a Federated Insurance SIU agent videotaped him using a jackhammer on his home's front steps.
Video evidence might appear to be irrefutable. But, to become a prosecutable case, Federated Insurance needed more. "There must be a false statement made to the insurance company," said Berzins. "Believe it or not, we have yet to have any prosecutor accept a case with a false statement given to a doctor who then submitted the records to an insurance company."
In this case, Berzins conducted an in-depth interview with the employee, asking what specifically he was still able to do with his hands. After asking him about jackhammer operation, the employee understood the gig was up. He dropped the claim and quit his job, while Federated Insurance referred his case to the state fraud bureau for further investigation.
There are around 2,500 fraud indicators, available from the National Insurance Crime Bureau, that investigators track when reviewing insurance claims. Others include an employee who hurts him or herself repeatedly, or on the very first day on the job. Or if you call to check on the injured party and they are never home. "If you're so injured and can't go to work, where exactly are you?" Berzins asked.
It's critical that retailers clamp down on insurance fraud because the damage to their company is real: increased cost of goods, damage to the brand's reputation, lost wages, declining productivity, and lower morale, as hard-working employees see coworkers abusing the system and getting away with it.
Berzins advised retailers to get injured employees back to work as soon as possible, even if it means assigning them easy tasks on a part-time basis. Otherwise, there is a higher danger that an employee might enjoy disability leave too much, and become what Berzins calls "an opportunist."
"It's someone who actually does have a fall and injury, hurts themselves, but enjoys that life," he said. "They're getting up late, watching TV: It's a very attractive life, and you're getting paid for it. You get a lot of people who get used to it and sit on it and just keep extending it, and that's one of biggest problems."
Murphy Oil USA puts employees on driveoff watch--an easy, sedentary job. And it assigns triage nurses to injured employees to accompany them to doctor's visits and therapy sessions, and has supervisors check in. "For a person who's a legitimate claimant, it shows you care for them," said meeting attendee Tom Holt, senior safety manager. "The person who's a fraudulent, they don't like it at all. They'll literally close their own claim down."
Other topics covered at the 2013 forum included: Discussions on cyber liability led by John Augenstein, IT quality and project services manager at BIC Corp., and John G. Browning, a partner at Lewis Brisbois Bisgaard & Smith LLP. Steve Burkhart, vice president and general counsel at BIC, updated attendees on product liability. Susan DelVecchio, counsel for QuickChek Stores, shared the company's experiences recovering from Superstorm Sandy. Stewart Van Duzer, first vice president at Federated Insurance, discussed the latest twists and turns in insurance and the Affordable Care Act. David Smith, divisional vice president, risk management with Family Dollar Stores Inc., shared how Crisis Care Network helped the chain establish a crisis-management protocol. And Dan Giampetroni, manager for Kohler Generators, provided a background on generators' role in protecting businesses during power outages.
For more, see the 2013 Leadership & Crisis Prevention Forum coverage in the July issue of CSP magazine.