News and Views From the Fraud Squad
Ted Clark (Kansas DOI) shares concerns with recent insurance fraud activities.
Ted Clark, director, anti-fraud division, Kansas Department of Insurance shared an insider’s view on insurance fraud, drawing on his most recent experiences to discuss current trends. Clark’s presentation made it clear that many new trends in fraud are more complex than in the past, resulting in more complex investigations. Here’s what Kansas anti-fraud is working on now:
Viatical Scams
Clark noted that viatical scams are trending up and are of concern due to the negative impact on both consumers and companies. What is a viatical scam? Simply put, a viatical company will buy or invest in life insurance policies to collect the proceeds and disburse—betting the insured will die prior to the need to pay out any funds, yet putting some money in the pocket of the insured through the buyout. Viatical scams are a form of insurance fraud that many do not understand prior to investing—this was prevalent during the initial Aids epidemic and is now used against the elderly.
Viatical scams are now even more complex because the Stranger Originated Life Insurance (STOLI), a form of viatical, is becoming more and more prevalent in the marketplace. The STOLI presents considerable confusion to the regulators because of regulation priority—STOLIs are investments in insurance products so does insurance oversight handle regulation or does investment oversight have priority?
Medical identity theft
Medical identity theft is defined as using an identity for treatment or to bill for goods or services not provided. Clark noted medical identity theft can harm consumers in a variety of ways, including cost AND the generation of a false medical history—creating long-term financial and medical issues for the individual. Perpetrators have multiple avenues to gather information used in medical fraud and—adding to the complexity—now sell information for fraud use to others.
Clark noted that medical identity theft can be caught by individuals being diligent in review benefits packages, the yearly summary of benefits and by monitoring medical and credit records.
Service providers
Clark noted that the fraud involving roofers continue to be an issue. Roofing frauds usually spike after storms—and Kansas sees plenty of storms. He noted that fraudulent roofers will do anything from actually creating damage to requesting insurance checks be signed over—without work performed.
Producer problems
Producer problems have traditionally been present in the insurance industry and this is typically a bigger problem during a poor economy. Producer problems include myriad issues and have included upgraded policies, selling improper products, churning for commissions, and cashing premium checks.
Clark noted additional fraud techniques experiencing new highs include product liability claims, arson, false or inflated burglary claims, vehicle owner give-ups, and vehicles with pre-existing damage.
Clark stresses the need to work together so we can stay ahead of the ever-changing fraud problems.
What’s being done on a national level
As chair of the NAIC task force for anti-fraud, Clark works extensively with the NAIC and the entire working group. Their activities, personnel and reach are extensive. Current projects for this group include:
- Linking systems so that one report can be sent to multiple entities so that cases can be transmitted immediately and in a more user-friendly fashion.
- Standardization of suspected fraud reporting form to assist working on fraud cases in a more global fashion so that positive data mining can be realized.
- Developing model guidelines for standardized filings of anti-fraud plans.
- Review of medical benefits plans to determine if any aspects of a plan are unethical, illegal or fraudulently marketed.
- Working with title insurance task force to review mortgage fraud, and
- Determining best practices to keep DOI agents safe during investigations.
Clark pointed out that all initiatives are geared toward having the many consumer-oriented agencies working together to avoid errors and omissions. The overriding goal? To stay ahead of the ever-changing and growingly complex fraud options perpetrated against the insurance-buying public.
CONTACT INFO
Theodore K. Clark
Anti-Fraud Divisoin Director & NAIC AFTF Chair
Kansas Insurance Department
420 SW 9th Street
Topeka, KS 66612
785.296.2752
tclark@ksinsurance.org
www.ksinsurance.org
PRESENTATION
Click here to view Clark’s presentation
