Testing assumptions about naivety in insurance fraud

Abstract

Despite the recognition that traditional methods of fighting the rising and pressing crime of insurance fraud are ineffective, much attention in the process of its detection is still paid to the characteristics of false claims and of people submitting them. Although there is some research looking into the assumptions insurance companies hold about these characteristics, the question of the general public knowledge about them has been rather neglected. This appears unjustified in light of the fact that it is ‘the average’ opportunistic driver most likely to lie about their loss. The results of this project, employing the method of thematic analysis, whereby the narratives of 25 male drivers are examined, challenge the correctness of corporate assumptions about what the layman driver could know about insurance fraud.     

Insurance Fraud and the Role of the Civil Law

Two UK Supreme Court decisions have considered insurance fraud. The first, Versloot Dredging BV v HDI‐Gerling Industries Versicherung (The DC Merwestone), concerned the use of a fraudulent device being harnessed to support a legitimate claim which, in the view of the majority, was an area of insurance law in need of re‐evaluation. The second, Haywood v Zurich Insurance Co, concerned the use of fraud to increase the settlement paid by the insurer and whether an insurer, which suspects fraud but has nevertheless chosen to settle a claim, is entitled to set aside the settlement under the tort of deceit where it subsequently discovers proof that it was in fact fraudulent. This case note examines not only the legal implications of the decisions and their likely impact on industry practice, it also focuses on the broader issue of the proper province of the civil law and whether general deterrence can be justified as a proper objective where the criminal law is deficient in punishing fraud because of its higher standard of proof.     

A FIELD EXPERIMENT ON INSURANCE FRAUD IN AUTO BODY REPAIR*

This article focuses on a particular form of white-collar crime–insurance fraud in auto body repair. Through the use of an experimental design, whether repair estimates were related to insurance coverage was investigated for a statewide representative sample of auto body repair shops in Massachusetts. The auto body repair estimates were significantly higher with insurance coverage than without, regardless of type of car, extent of damage, sex of driver, and location of shop. The implication of the findings is that the automobile insurance industry is very susceptible to fraudulent or illegal practices that take unfair advantage of consumers and insurance companies.     

Insurance fraud in Taiwan: Reflections on regulatory effort and criminological complexity

The nature and prevalence of insurance fraud has been studied only to a limited extent, even in the USA and Europe. Nevertheless, national authorities have pressed ahead with various approaches to control such fraud. This paper briefly outlines the nature and difficulties around measurement of insurance fraud and reviews key international trends in the regulation of fraud. It then presents the findings of an empirical study of insurance fraud in Taiwan and recent proposals for anti-fraud control. It analyses these findings in the context of actual practices of insurance companies which give evidence to the idea that ‘moral hazard’ is embedded in the institutional arrangements, social relationships, and moral economies of private insurance.     

Mission impossible? Assessing the veracity of a mental health problem as result of a road traffic accident: a preliminary review of UK experts’ practices

The number of people claiming for personal injury after being involved in a road traffic accident (RTA) in the UK continues to soar. In April 2015, the UK Government intervened to implement measures aimed at reducing the prevalence of fraud within such personal injury claims. However, these reforms did not include claims for mental disorder that arise because of a RTA despite being responsible for substantially larger payouts in comparison with claims for whiplash. The present study examines the assessment practice for detecting fraudulent claims of this nature using a mixed methods survey analysing UK medico-legal professionals’ assessment methodologies (N = 37). The findings suggest comprehensively that assessment practices in this field are idiosyncratic. The findings evidence limitations in all aspects of the assessment process from medico-legal assessors being asked to undertake examinations without the presence of medical records to 44% of examiners being unaware of the three types of malingering. The article concludes with recommendations for improving both assessments and the assessment process for assessing RTA claimants in the UK.     

You cannot hide your telephone lies: Providing a model statement as an aid to detect deception in insurance telephone calls

Deception research regarding insurance claims is rare but relevant given the financial loss in terms of fraud. In Study 1, a field study in a large multinational insurance fraud detection company, truth telling mock claimants (N = 19) and lying mock claimants (N = 21) were interviewed by insurance company telephone operators. These operators classified correctly only 50% of these truthful and lying claimants, but their task was particularly challenging: Claimants said little, and truthful and deceptive statements did not differ in quality (measured with Criteria‐Based Content Analysis [CBCA]) or plausibility. In Study 2, a laboratory experiment, participants in the experimental condition (N = 43) were exposed to an audiotaped truthful and detailed account of an event that was unrelated to insurance claims (a day at the motor races). The number of words, quality of the statement (measured with CBCA), and plausibility of the participants' accounts were compared with participants who were not given a model statement (N = 40). The participants who had listened to the model statement provided longer statements than control participants, truth tellers obtained higher CBCA scores than liars, and only in the model statement condition did truth tellers sound more plausible than liars. Providing participants with a model statement is thus an innovative and successful tool to elicit cues to deception. Providing such a model has the potential to enhance performance in insurance call interviews, and, as we argue, in many other interview settings.     

独立担保欺诈例外法律问题研究

独立担保因其付款义务的不可撤销性和绝对性而在国际经济交往中发挥着高效而强大的债权保障功能,但因其本身固有的制度缺陷,也为受益人的欺诈索赔留下极大的缺口。为了弥补这一制度缺失,有必要为担保人的无条件付款责任引入“欺诈例外”抗辩权。同时,由于担保人行使欺诈例外抗辩权存在较大的风险,因此,更有效的反欺诈索赔措施应是由申请人向法院申请止付令。     

Knocking at the wrong door: insured workers' inadequate psychiatric care and workers' compensation claims

ObjectiveTo describe the prevalence of inadequately evaluated and treated psychopathology among insured workers making workers' compensation claims for psychiatric disability whose cases were reviewed by one forensic psychiatrist. To assess the relationship of inadequate evaluation and treatment to the outcomes of these workers' compensation claims.MethodsRecords of a series of 185 workers' compensation cases reviewed in 1998 and 1999 by a California forensic psychiatrist were abstracted. Patient factors (gender, Axis II pathology, psychosocial circumstances, substance abuse), case factors (psychiatric injury secondary to physical injury, or secondary to psychological stresses), type of provider (mental health, or other), adequacy of evaluation and treatment, forensic psychiatrist's recommendation, and claim outcome were categorized. The relationships between case characteristics, adequacy of care, and claim outcome were described.Results22% of cases had adequate evaluation, 48% superficial, and 30% had no evaluation. 11% had adequate treatment, 67% superficial, and 22% had no treatment. Compared to claims for psychiatric disability related to a physical injury, claims related to psychosocial stresses more often had superficial diagnostic evaluations and treatments. Those with superficial treatment were less likely to have their claim granted (19.3%) than those with no treatment (47.5%) or those with adequate treatment (36.8%). Success of claim was not related to provider type.ConclusionsThe majority of the studied workers with employer-provided health insurance who sought workers' compensation for disability due to mental illness did so inappropriately, in that the workplace did not cause the psychopathology. Their seeking workers' compensation was plausibly due to the observed inadequate evaluation and treatment available through their employer-provided health insurance. The adequacy of their care influenced the likelihood their claim would be granted. The relations observed here merit further research to establish their generality and to determine their causes.     

The false claims act and the eroding scienter in healthcare fraud litigation

This article addresses the federal government's expansive methods in tackling healthcare fraud, particularly in misapplying the False Claims Act. Although tasked with the obligation to curtail the fraudulent submission of Medicare & Medicaid claims, the U.S. government must rein in the current trend to utilize the False Claims Act against smaller medical providers. As the Act's original focus has ebbed in significance, the government has increasingly applied the False Claims Act to circumstances that do not evince actual fraud. In doing so, federal courts have effectively eroded the statute's critical scienter requirement. The federal common-law doctrines of "payment by mistake" and "unjust enrichment" adequately address the payment of non-fraudulent, albeit false, Medicare & Medicaid claims. Yet the federal government pursues these appropriate remedies only rarely and in the alternative, essentially when the government fails under the False Claims Act. Thus, this article argues for reform, calling for a clearer delineation between remedial and punitive measures. In cases involving smaller medical providers, courts should strictly limit the False Claims Act to those instances where fraud is clearly manifest.     

An efficient method to detect series of fraudulent identity documents based on digitised forensic data

Document fraud is a transnational form of crime, and its serial character has already been highlighted. To combat this phenomenon, the Interstate Database of Fraudulent Identity Documents (BIDIF) has been created and implemented in Switzerland. It supports the comparison of documents and the detection of series, i.e., documents that share a common source. To efficiently use such a system, forensic document examiners would benefit from a harmonised and proven profiling method. Thus, the aim of this study is to develop a method for comparing documents and establishing series. The method is meant to improve the detection capabilities of forensic document examiners operating BIDIF or engaged in the profiling of fraudulent documents. First, a method based on the visual characteristics of digitised images of fraudulent identity documents has been developed. Subsequently, the method was qualitatively and quantitatively evaluated using four tests. The first test verified the ability of the method to detect pre-existing series. The second test checked the capability of the method to detect links amongst isolated documents. Finally, two further tests were carried out to compare the method impact on the successful detection of series. These tests were carried out by professional forensic document examiners and Master students in forensic science, respectively. This allowed a comparison of the method influence on series detection. The method allowed a significant increase in the number of series and links detected, while also decreasing the occurrence of false negatives and false positives. Furthermore, links were more rapidly detected.     

Species identification in routine casework samples using the SPInDel kit

The identification of species in casework samples is of fundamental importance for forensic investigations. Laboratories are increasingly compelled to provide accurate and fast identifications in trace materials left on crime scenes, wildlife poaching, illegal trade of protected species, fraudulent food products cases, etc. However, the field of nonhuman forensic genetics is still working on the standardization of typing methods and practices. Here we describe the successful implementation of the Species Identification by Insertions/Deletions (SPInDel) method in routine casework analyses in 11 laboratories worldwide. The SPInDel was developed to detect human DNA, at the same time that identifies common animal species. The fragment size analysis of six mtDNA regions allows identification in suboptimal DNA samples, including mixtures, with no need for sequencing. The samples were collected from 2013 to 2018 and included hair, blood, meat, saliva, faeces, bones, etc. The SPInDel kit successfully identified >95% of the samples, being dog, human and pig the most frequently detected species. The six SPInDel loci were successfully amplified in mixtures and degraded samples (river water, sand, stains in clothes, etc.). Interestingly, several species that were not originally targeted by SPInDel primers were also identified (e.g., red fox, brown bear, fallow deer and red deer). In conclusion, the SPInDel kit was successfully used in crime scene investigations (often involving human DNA detection) and in cases of poaching, environmental contamination and food fraud. It is now becoming a useful tool for the routine analysis of nonhuman DNA samples within the high quality standards of forensic genetics.     

Case study: From embedded system analysis to embedded system based investigator tools

Since mid-2012, France and Germany have had to deal with a new form of payment card skimming. This fraud consists of adding a wireless embedded system into a point-of-sale payment terminal with the fraudulent goal of collecting payment card data and personal identification numbers (PIN).This case study details the strategy adopted to conduct the digital forensic examination of these skimmers. Advanced technologies and analyses were necessary to reveal the skimmed data and provide useful information to investigators for their cross-case analysis.To go further than a typical digital forensic examination, developments based on embedded systems were made to help investigators find compromised payment terminals and identify criminals.Finally, this case study provides possible reactive and proactive new roles for forensic experts in combating payment card fraud.     

The Insurance Act 2015: Rebalancing the Interests of Insurer and Assured

The Insurance Act 2015 is the first piece of legislation since the eighteenth century to seek to lay down new principles governing the formation and operation of insurance contracts. Exactly 250 years after Lord Mansfield articulated the routinely‐cited principle of utmost good faith in insurance law in Carter v Boehm (1766) 2 Burr 1905, that principle has been recast, with important implications for both the pre‐ and post‐contractual duties of the parties. The Insurance Act has also imposed important restrictions on the enforcement of policy terms by insurers, and clarifies the law affecting fraudulent claims. The Marine Insurance Act 1906, a codifying measure, looks increasingly outmoded.     

DIFFUSION OF FRAUD: INTERMEDIATE ECONOMIC CRIME AND INVESTOR DYNAMICS*

Criminologists have studied the spread of fraudulent practices and techniques among perpetrators. This article attempts to contribute to the field by looking at the other side of diffusion, examining the spread of fraud among investors in a case of “intermediate fraud.” Intermediate fraud occurs when fraudulent acts are committed in or by a legitimate business. Using comprehensive archival, interview, and survey data, we analyze a business that exhibited a two‐stage pattern of intermediate fraud: It was created and operated as a legitimate business in the first stage, and then economic crimes were increasingly committed in the second stage. We use diffusion theory to guide our analysis, investigating the ways in which five factors—product attributes, buyer attributes and behavior, seller attributes and behavior, structure of the social network, and method of propagation—influence the adoption and diffusion of investments in oil and gas wells among a population of investors. The case of intermediate fraud is interesting because the factors that contributed to the success of the business in its legitimate stage are the same factors that contributed to the success of the fraud in its illegitimate stage.     

“I knew it was a scam”: Understanding the triggers for recognizing romance fraud

Research Summary

This article investigates the contributing factors (or triggers) to a realization of romance fraud victimization, based on 1015 reports lodged with Scamwatch (Australian online reporting portal for fraud) between July 2018 and July 2019 (inclusive). The article examines the free text narrative of each report to propose five discernible trigger categories: further requests for money; characteristics of communications; verification checks; an offender's action(s); and being told by a third party.

Policy Implications

Based on a comprehensive understanding of these five categories, the article advocates for broader messaging approaches to encompass financial literacy and well-being, cyberliteracy and critical thinking skills, cybersecurity practices, and respectful and healthy relationships. Leveraging the use of these wider education and awareness campaigns could improve recognition of romance fraud. Importantly, it is suggested that banks and other financial institutions are in a strong position to focus their efforts on some of these broader messages to effect positive change.     

Situational deterrence and claim padding: results from a randomized field experiment

While it is generally argued that threats of legal sanctions are more effective with offenders involved in economic crimes than with delinquents committing more conventional crimes, such an affirmation rests on weak empirical evidence. Also, most studies supporting this proposition were conducted with non-experimental designs, thus, undermining the interval validity of the results. On the other hand, studies base their predictions on individual factors and do not incorporate contextual factors. To overcome those limitations, a randomized field experiment was implemented in four insurance companies to incorporate contextual factors into the dynamics of deterrence. This study assessed the effect of a written threat (a deterrent letter reminding insured persons of the punishment for insurance fraud) on claim padding behaviours of insured persons filing claims for residential theft. A deterrent-letter project was implemented in four insurance companies, with claims randomly assigned to the experimental or the control group. Cases belonging to the control group were managed as usual, while individuals in the experimental group received the written threat. The experimental design made sure that the deterrent stimulus was exactly delivered to the insured persons when they had the opportunity to exaggerate the value of their claims. Findings demonstrate that claimants in the experimental group were less likely to pad their claims than were those in the control group. The letter was effective, regardless of the means of delivery. In conclusion, the administration of a written threat at the moment of criminal opportunity appears to be an effective strategy for preventing economic crimes.

诈骗罪中的财产损害

诈骗罪是事关财产的犯罪,诈骗罪的成立应当要求被害人具有财产损失,即在未遂的情况下,要求欺骗行为具有造成被害人财产损失的危险性;在既遂的情况下,则要求诈骗行为造成被害人现实的财产损失。整体财产减少说、形式性个别财产减少说以及折中说均有不足之处,因此,诈骗罪中的财产损害应当以实质性个别财产减少为基准进行判断,即综合处分行为前后财产的价值,在此基础上,以处分后的财产是否受到损失为基准进行判断。另外,相应给付,欺诈性乞讨、募捐,欺诈性权利行使均可以成立诈骗罪。     

Challenges in Producing Defensible Environmental Chemistry Measurements for Litigation

The quality, integrity, interpretation and proper use of environmental forensic chemistry measurements should be a paramount concern to investigators, claims professionals and litigators. These issues are complicated for forensic chemists who often use nonstandard methods to discern unique chemical contaminant attributes. In addition, data fraud remains a constant, if not increasing, problem. The evolving interpretation of the Daubert ruling further complicates litigators' strategies in designing an effective forensic chemistry study which will be admissible in court. The purpose of this paper is to advise forensic investigators and litigators to the potential pitfalls in producing defensible environmental measurements, and provide perspectives for generating data that will not wither under scrutiny.     

A primer on US antitrust claims against patentees under Walker Process

Legal context: In the wake of two recent cases from the Federal Circuit onthe subject, this article provides an introduction to the WalkerProcess doctrine under US law. Under the doctrine, a patenteewho knowingly enforces a patent procured by intentional fraudon the patent office may lose its immunity to antitrust claims,should it act to enforce its patent. Key points: Walker Process fraud refers to a knowing and deliberate fraudperpetrated on the patent office as opposed to mere acts ofinequitable conduct. Proving that a patent applicant engagedin Walker Process fraud does not by itself prove liability foran antitrust violation. The accused infringer must still provethe individual elements of an antitrust claim. Antitrust claimsbased on Walker Process fraud require significant time and resourcesto litigate. Practical significance: With the allure of mandatory treble damages and attorney's fees,antitrust claims based on Walker Process fraud can serve asa potent counterclaim for an accused infringer's arsenal. Butthe legal requirements and resources needed to successfullylitigate these claims to a conclusion may temper their effectivenessfor the typical patent-infringement suit.     

欺诈的界分

就欺诈的研究视角,大多限于合同欺诈的角度,着眼于欺诈的构成及其法律后果,或者民事欺诈与合同诈骗罪的界分。但此种进路忽略了欺诈行为本身以及侵权法上的欺诈,忽视了侵权法在对欺诈的调整中应有的作用,甚至将侵权法对欺诈行为的控制化为乌有。若从法律行为的效力控制、合同责任、侵权责任承担以及合同诈骗罪的判处等不同的法律调控方式及其作用空间角度考察,可以更加明确对不同层面的欺诈的法律调控,也可更有效保护表意人的合法权益。