How the detection of insurance fraud succeeds and fails

Abstract

Insurance fraud is a serious and growing problem, and there is widespread recognition that traditional approaches to tackling fraud are inadequate. Studies of insurance fraud have typically focused upon identifying characteristics of fraudulent claims and claimants, and this focus is apparent in the current wave of forensic and data-mining technologies for fraud detection. An alternative approach is to understand and then optimize existing practices in the detection of fraud. We report an ethnographic study that explored the nature of motor insurance fraud-detection practices in two leading insurance companies. The results of the study suggest that an occupational focus on the practices of fraud detection can complement and enhance forensic and data-mining approaches to the detection of potentially fraudulent claims.     

Victims’ motivations for reporting to the ‘fraud justice network’

ABSTRACT

It is well-established that (online) fraud has one of the lowest reporting rates across all crime categories. However, there is a large gap examining why some victims choose to report online fraud offenses. Therefore, this paper examines the under-researched group of online fraud victims who reported their crimes to authorities. Based on interviews with 80 victims across Australia, who lost at least AUD10,000 to online fraud, this paper demonstrates two motivations behind reporting: a sense of individual justice, and an altruistic notion of protecting others. The paper also highlights the negativity associated with the reporting process. The paper uses these findings to determine what can be learnt from the victims who were willing to report. It concludes with a discussion of the challenges evident in seeking to improve the confidence of victims reporting to authorities.     

Missing Data Problems in Criminological Research: Two Case Studies

This paper considers the problem of missing data in two circumstances commonly confronted by criminologists. In the first circumstance, there is missing data due to subject attrition—some cases drop out of a study. In this context, analysts are frequently interested in examining the association between an independent variable measured at time t(x _t ) and an outcome variable that is measured at time t + 1(y _t + 1); the problem is that the outcome variable is only observed for those cases which do not drop out of the study. In the second circumstance there is missing data on an independent variable of interest for typical reasons (i.e., the respondent did not wish to answer a question or could not be located). In this case, researchers are interested in estimating the association between the independent variable with missing data and an outcome variable that is fully observed. Criminologists often handle these two missing data problems by conducting analyses on the subsample of observations with complete data. In this paper, we explore this problem with two case studies and we then illustrate the use of methods that directly address the uncertainty produced by missing data.     

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.     

Ceylon Coffee,the Comtesse and the Consignee: A Historical Reappraisal of Rochefoucauld v Boustead

This paper examines the Court of Appeal judgment of Rochefoucauld v Boustead [1897] 1 Ch. 196 through use of archive records, rarely cited law reports and nineteenth-century academic opinion. A full and hitherto untold account of the facts of the case is presented. It is revealed that the land which was the subject matter of the dispute was sold under the direction of the Ceylon District Court, and that the plaintiff was an accomplished individual who utilized various means to frustrate her former husband's attempts to obtain the land. The Court of Appeal's rulings that the defendant was a trustee of the land for the prevention of fraud, and that the trust was to be treated as an express trust, are also analysed with the aim of establishing how these issues were understood at the time of the judgment. It is argued that both of these aspects of the judgment were regarded as uncontroversial because there was a settled concept of equitable fraud, and because trusts imposed for the prevention of such fraud were an established category of trust in their own right, separate from express, resulting or constructive trusts.     

Fair Trial Rights and the European Community's Fight Against Fraud

The article surveys action taken by the European Community to combat fraud affecting its financial interests, focusing on the development of investigative authority granted to OLAF, the European‘Office Pour La Lutte Anti Fraude’ and its impact on the procedural rights of the alleged defrauder. It shows that the involvement of OLAF can be crucial for a national fraud investigation and subsequent criminal prosecution and that it meets the criteria set out by the Strasbourg organs for the applicability of Article 6 ECH. The article explores whether the legal sources governing the activities of OLAF or national—or rather, Community—law guarantee sufficient protection for the alleged defrauder and thus pay respect to principles arising from the rule of law in law enforcement. It is shown that general principles of Community law, which were mostly established in antitrust law, may provide a certain protection for the suspect, but may not protect him in all regards. It is thus argued that, in the long run, it will be necessary to provide special fair‐trial rights which offer protection to alleged defrauders from those infringements arising out of the specific features of a Community investigation.     

A Survey of Reasons for the Under Reporting of Cheque Fraud: Examples from Australia

Fraud is generally defined as the practice of obtaining credit and property from another by means of deception. When the object of deception used is a valueless cheque, then the conduct is called ‘cheque fraud.’ Cheque fraud is a crime; but unlike other types of crime, such as crimes involving force, cheque fraud is under reported to the police. The reasons for the under reporting are diverse and mean that only about 15% of all offences come to the attention of the police. An Australian study conducted to survey reasons for this under reporting revealed that a major factor affecting victims' reactions to cheque fraud was their ignorance of police functions and an uncertainty whether the passing of valueless cheques could constitute a crime. The results of this study are reported herein.     

The effect of social support on fraud victims' reporting behavior: A research note

Little effort has been made to understand white-collar crime victims, and little is known about the factors that influence reporting behavior among these victims. In this paper we use the concept of social support to explain responses to fraud, one form of white-collar crime. Results show that social support in the form of information from others influences whether fraud victims report their victimizations. Fraud victims' responses parallel those of street crime victims in that both types of victims respond according to the direction of social support they receive from family and friends.     

Deconstructing “Force and Fraud”: An Empirical Assessment of the Generality of Crime

Gottfredson and Hirschi (A General Theory of Crime, Stanford University Press, Stanford, CA, 1990) have proposed a general theory of crime to explain a set of behaviors they refer to as acts of force and fraud. Central to their theory is the claim that force and fraud are both manifestations of the individual's unrestrained pursuit of short-term gratification. At the same time, research from numerous disciplines suggests that the correlates of violence differ somewhat from those of property crime. The present study therefore uses data from the National Youth Survey to explore whether force and fraud can legitimately be viewed as manifestations of a single underlying construct among American adolescents. Overall, findings from confirmatory factor analyses suggest that they cannot. Rather, they suggest that multi-factor models of force and fraud improve significantly upon the fit of single-factor models and that force and fraud may therefore reflect overlapping, but empirically distinct, constructs.     

Regulatory Sloth and Activism in the Effervescence of Financial Crisis

Certain financial market practices, previously denied or disregarded by financial market regulators, are being redefined as candidates for active investigation and enforcement. This article contrasts the passive stance of the U.S. Securities and Exchange Commission vis‐à‐vis the Madoff fraud with its relatively diligent but now settled Complaint against Goldman Sachs. The article also explores compromises in the EU's approach to market regulation of information asymmetry, suggesting that grounds for pessimism outweigh those for hope. The introduction sets the context, describing aspects of the first leg of the crisis (states bail out banks) and the second leg (states themselves come under strain).     

An Experiment to Characterize the Decomposer Community Associated with Carcasses (Sus scrofa domesticus) on Oahu,Hawaii

Pig (Sus scrofa domesticus) carcasses were decomposed on the soil surface of a terrestrial habitat on the island of Oahu, Hawaii to begin characterizing the decomposer community. Results showed that carcasses can decompose rapidly on Oahu, primarily due to the activity of fly larvae, with ~80% of mass lost by 8 days (~220 ADD) postmortem. Scavenging was conducted exclusively by the small Indian mongoose (Herpestes javanicus), first feeding on larvae then feeding on the remains. Carcasses were habitats of warm temperature, little to no oxygen, slightly acidic/neutral pH, and high sodium concentration. Larval masses selected for a microbial community comprised of multiple bacterial taxa from phyla Firmicutes and Proteobacteria, particularly genera Clostridium, Proteus, and Providencia. These larval masses were well established from 3 to 8 days (~90 to ~220 ADD) postmortem. These data provide helpful, novel insight into the structure and activity of carcass decomposer communities on Oahu.     

Why Does Copyright Ignore Performers? The Case of Flamenco in Spain

Abstract

This article analyzes the gap between the perceived value of the performer's contributions to the musical work and the treatment that it receives in the market. It applies to the case of flamenco in Spain. The proposed methodology is based on three approaches: a study of intellectual property laws; interviews with experts to differentiate among creative and humdrum agents; and finally, double system surveys to determine the perceived valuation of the contributions of such agents. The conclusions show how the flamenco performer develops a creative labor; however, it is not protected by copyright or via royalties, commensurate with its importance.     

Dharmakīrti on the role of causation in inference as presented in Pramāṇavārttika Svopajñavṛtti 11–38

In the svārthānumāna chapter of his Pramāṇavārttika, the Buddhist philosopher Dharmakīrti presented a defense of his claim that legitimate inference must rest on a metaphysical basis if it is to be immune from the risks ordinarily involved in inducing general principles from a finite number of observations. Even if one repeatedly observes that x occurs with y and never observes y in the absence of x, there is no guarantee, on the basis of observation alone, that one will never observe y in the absence of x at some point in the future. To provide such a guarantee, claims Dharmakīrti, one must know that there is a causal connection between x and y such that there is no possibility of y occurring in the absence of x. In the course of defending this central claim, Dharmakīrti ponders how one can know that there is a causal relationship of the kind necessary to guarantee a proposition of the form “Every y occurs with an x.” He also dismisses an interpretation of his predecessor Dignāga whereby Dignāga would be claiming non-observation of y in the absence of x is sufficient to warrant to the claim that no y occurs without x. The present article consists of a translation of kārikās 11–38 of Pramānavārttikam, svārthānumānaparicchedaḥ along with Dharmakīrti’s own prose commentary. The translators have also provided an English commentary, which includes a detailed introduction to the central issues in the translated text and their history in the literature before Dharmakīrti.     

“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.     

Dating hot spot to fraud hot spot: Targeting the social characteristics of romance fraud victims in England and Wales

Research Summary

We found that romance fraud was rising year-on-year across every region in England and Wales, increasing 55% during the 3 years between October 2018 and October 2021. Fifty percent of all the romance fraud victims in the period resided in 17% of the places where romance fraud had occurred. A total of 439 locations (outward postcode areas) were identified as the “power few” in the first year of the data set. Of these 439 locations, 162 of them recurred in both of the following years, becoming chronic “hot spot” locations containing more than one in six of all reported romance fraud victims. The demography of victims in repeat locations differed considerably, but hot spots were more frequently predominantly populated by less affluent populations.

Policy Implications

We conclude that the current national one-size-fits-all fraud prevention approach may not be the most efficient or effective way to reach those victims who most require crime prevention advice. The National Fraud Intelligence Bureau, based in the City of London Police, could adopt a tailored approach to providing preventative information to local police forces based on the year-to-year patterns in crime and the associated intelligence provided by sociodemographic data sources such as Acorn.     

Unusual fentanyl patch administration

Fentanyl is an extremely potent narcotic analgesic that is becoming more popular as a drug of abuse. Because of the unique way in which the drug is packaged and delivered, the potential for unusual methods of abuse exists. We report the first case of true fentanyl patch ingestion in the medical literature. Initially, though unusual, cases of fentanyl ingestion were thought to have been reported, but further investigation of the literature revealed that in other case reports the patches had been held in the mouth and chewed. Because no reports of swallowing the patch had been published, suicide was initially a strong consideration in this case; however, further investigation showed that the decedent and his brother enjoyed swallowing the patches for quick "highs." Cases such as these serve to remind medical examiners and law enforcement officials of the value of performing thorough death investigations by performing complete autopsies with toxicological testing and correlating with investigation information to form an opinion with regard to the cause and manner of death.