IINSURANCE FRAUD IS EPIDEMIC
Barry Zalma
Nov 20, 2023
Read the full article at https://lnkd.in/gPhRQBi4 and at https://zalma.com/blog and more than 4650 posts.
Honest People Pay to Fund the Criminal Conduct of Insurance Fraudsters
Insurance fraud continually takes more money each year than it did the last from the insurance buying public. There is no certain number. No one knows the amount that is taken by insurance fraud because most attempts at insurance fraud succeed. Estimates of the extent of insurance fraud in the United States was estimated by the Coalition Against Insurance fraud to be $308 billion every year and that is a low estimate. Insurance fraud is a serious crime that bleeds the insurance industry sufficiently to have states compel insurers to create special investigative units (SIU’s) to investigate, deter and defeat insurance fraud to assist the state in its efforts to prosecute the crime.
Insurers and government backed pseudo-insurers can only estimate the extent they lose to fraudulent claims. Lack of sufficient investigation and prosecution of insurance criminals is endemic. Most insurance fraud criminals are not detected. Those that are detected do so because they became greedy, sloppy and unprofessional so that the attempted fraud becomes so obvious it cannot be ignored.
The National Insurance Crime Bureau (NICB) estimated that almost 25% of the bodily injury claims related to auto crashes are bogus. Property and casualty claims against auto insurance are not much better, coming in at around a 10% fraud rate.
The National Association of Insurance Commissioners (NAIC) reports that insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance. Insurance fraud may fall into different categories from individuals committing fraud against consumers, individuals committing fraud against insurance companies and insurance companies defrauding those it insures.
Fraud not only inflicts extra costs on insurance companies, but it also financially impacts consumers, costing the average U.S. family an effect estimated to be between $400 and $700 per year in premiums needed to cover the investigation and payment of fraudulent claims.
When insurers and governments put on a serious effort to reduce the amount of insurance fraud the number of claims presented to insurers and the pseudo-government-based or funded insurers drops logarithmically.
Insurance fraud is not limited to the US. In Britain fraud costs the British economy amounts estimated in billions of British pounds. Since the amount of fraud actually detected is a small portion of what was actually found, the estimates published are little more than an educated guess.
As the industry attempts to keep pace with fraudsters’ varied, ever-shifting tactics, it must deploy more innovative, effective anti-fraud technologies or risk dire losses.
Vendors and organizations include the Coalition Against Insurance Fraud (CAIF), CSC, Experian, FICO, IBM, Innovation Group, Insurance Bureau of Canada (IBC), ISO/Verisk, KPMG, LexisNexis, FastCase, Mattersight, Mitchell, the National Insurance Crime Bureau (NICB), SAP, SAS, and TransUnion.
Insurers must also generate a close relationship with the state insurance department’s fraud division or fraud bureau, local police agencies, the FBI, the ATF, Homeland Security, the Postal Investigation Service, the local fire department’s arson unit, local prosecutors, and the local U.S. Attorneys if they are to have any chance to reduce the effect of insurance fraud. Insurers should also work to make the general public, state legislators, state governors, congress members and U.S. Senators, and the Attorney General of the United States aware of the effect insurance fraud has on the public at large and the insurance industry.
Wherever insurance is written insurance fraud exists. It is an equal opportunity fraud committed by people of every race, religion or national origin.
Insurers who do not exercise serious anti-fraud efforts often complain that the local district attorneys and police agencies give a low priority to the crime of insurance fraud. The complaints are well founded. Insurance fraud prosecutions are document heavy and prosecutors are loathe to get involved in a complicated case.
No matter how seriously the insurers work to prove fraud the authorities often ignore them. In response, police and prosecutors complain that the insurers do nothing that police and prosecutors can use to prosecute the crime of insurance fraud while insurers complain that prosecutors ignore them when they present evidence of a fraud.
There is some truth in both complaints. Insurers, although compelled by statute to investigate potential insurance fraud and to present the results of their investigations to prosecutors, they are not trained as police officers. Insurance company employees, whether claims adjusters or Special Investigative Unit (SIU) investigators are not police offers, have no right to arrest, and can only conduct investigations with the permission and consent of those persons being investigated. The SIU investigator is capable, however, to present evidence of a either a tort or a crime to a court.
The SIU investigator can only advise professional insurance fraud investigators at the state departments of insurance or state police agencies who must then investigate further to obtain evidence that is sufficient for a charge of insurance fraud or to convince a Grand Jury to issue an indictment.
More importantly the SIU investigation can gather enough evidence to determine, beyond a preponderance of the evidence available, to allow an insurer to conclude a fraud is being attempted and allow the insurer to disclaim coverage on a fraudulent claim based on exclusions and conditions in the policy of insurance.
If you are a person who has paid premium to be insured against certain risks of loss it is important that you recognize some of the more common insurance fraud schemes.
INSURANCE FRAUD SCHEMES
- Premium Diversion — the embezzlement of insurance premiums.
- Fee Churning —In fee churning, a series of intermediaries take commissions through reinsurance agreements.
- Workers’ Compensation Fraud
- Health Insurance Fraud —Health insurance companies as well as Medicare and Medicaid are serious targets of crooked health care providers who make claim for services never rendered
- Property Fraud — Arson for profit, fake thefts, false water damage claims, intentional mold infestation, and construction defects that do not exist, among other types of property fraud.
- Liability Claims Fraud — The staged auto accident, the swoop and squat accident, the false injury after a low impact accident, false chiropractic or medical treatment after a collision are auto related casualty or liability claims fraud.
WHAT IS NEEDED TO DETER INSURANCE FRAUD
The logarithmic growth of fraud against insurers and government based programs like Medicare and Medicaid, will eat away any chance insurers – and their shareholders – can operate profitably. In addition, medical fraud perpetrated on federal and state agencies, will increase the tax burden of those who pay taxes to support Medicare, Medicaid and the so-called “Affordable Care Act” or Obamacare, will be insufferable.
The cure for insurance fraud is a vigilant insurance buying public who can work with their insurers to defeat fraud.
If prosecution of insurance fraud is to be successful it is necessary that insurers, prosecutors, police agencies and the insurance buying public must work together as a team dedicated to defeat the crime of insurance fraud. To do so the insurers must train their staff to recognize the elements of both the crime of insurance fraud and the elements of the civil tort of insurance fraud. If well trained, insurance personnel collecting information about a potential insurance fraud, will know the type and quality of information that either a prosecutor or a civil defense lawyer will need to prove fraud was attempted. Police, prosecutors and judges must recognize that insurance fraud is a felony crime and cannot be ignored. Most importantly, the insurance buying public must become angry about the excessive premiums they must pay to allow the insurers to cover the cost of dealing with insurance fraud.
Where a handler having an actual suspicion of fraud (e.g., manual fraud indicator(s), tip off, system generated “high risk” referral etc.) challenges the applicant/claimant by letter, telephone call or instruction of an investigator etc., to clarify key information, provide additional information or documentation etc., and the applicant/claimant subsequently:
- fails to co-operate or provide further documentation; and/or
formally withdraws the application/claim (by phone, e-mail or letter) without a credible explanation; and/or - allows all communication with the insurer to lapse despite the insurer’s reasonable attempts to re-establish contact; and/or
- accepts (without a credible explanation) either a substantially reduced settlement offer in respect of a claim, or a substantially increased premium in respect of an application/renewal (other than in cases where there has been a careless misrepresentation).
All other ‘gone away’ claims/applications arising in the course of normal business do not represent suspected fraud under this definition.
What Insurance People Must Do to Change the Statistics
It is the obligation of all whose work in the business of insurance or are insured is to protect insurers against insurance fraud to do something to change the situation. Methods that are available and that should be exercised by every person who wants to reduce the effect of insurance fraud include:
- Lobby local, state and federal police agencies to change the system so that:
All the insurance tax money must go to all kinds of insurance fraud at the discretion of the Commissioner of Insurance. - Prosecutors must be assigned to the Fraud Bureau or Fraud Division whose only job must be to prosecute insurance fraud.
- When the local D.A. does not file a criminal complaint, the fraud investigator or lawyer for the insurer, must complain, loudly.
- Insurers and their staff should work within the system to:
- Report every suspected fraudulent claim to the Fraud Division
- Follow-up with the Fraud Division after you get the letter saying they won’t investigate.
- Supplement the Suspected Fraudulent Claim (“SFC”) report with investigation results and transcripts of examinations under oath.
- Develop a personal relationship with investigators at the Fraud Division.
- Develop a personal relationship with supervising investigators at the Fraud Division.
- When the Fraud Division refers a case to a prosecutor, determine the identity of the prosecutor and establish a relationship with the prosecutor.
- Make it clear to the prosecutor that you represent an interested and proactive victim.
- Make it clear to the prosecutor that your insurance company is upset that it is the victim of a crime.
- Make it clear to the prosecutor that you will make available to him or her anything needed or required.
- Make it clear to the prosecutor that you, and other employees of the insurance company, will be available to testify at the trial of the insurance criminal.
The full article is rather long and can be read in full article at https://lnkd.in/gPhRQBi4
(c) 2023, Barry Zalma & ClaimSchool, Inc.https://lnkd.in/gPhRQBi4https://lnkd.in/gPhRQBi4
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
Post number 5291
See the video at and at and at https://www.zalma.com/blog plus more than 5250 posts.
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court of Appeals applied the California anti-SLAPP statute which protects defendants from meritless lawsuits arising from constitutionally protected activities, including those performed in official capacities. The court also considered the doctrine of quasi-judicial immunity, which shields court-appointed receivers from liability for discretionary acts performed within their official duties.
Facts
In September 2021, the State of California filed felony charges against Simon Semaan, alleging violations of Insurance Code section 11760(a) for making...
When There are Two Different Other Insurance Clauses They Eliminate Each Other and Both Insurers Owe Indemnity Equally
Post number 5289
In Great West Casualty Co. v. Nationwide Agribusiness Insurance Co., and Conserv FS, Inc., and Timothy A. Brennan, as Administrator of the Estate of Pat- rick J. Brennan, deceased, Nos. 24-1258, 24-1259, United States Court of Appeals, Seventh Circuit (February 11, 2026) the USCA was required to resolve a dispute that arose when a tractor-trailer operated by Robert D. Fisher (agent of Deerpass Farms Trucking, LLC-II) was involved in a side-impact collision with an SUV driven by Patrick J. Brennan, resulting in Brennan’s death.
Facts
Deerpass Trucking, an interstate motor carrier, leased the tractor from Deerpass Farms Services, LLC, and hauled cargo for Conserv FS, Inc. under a trailer interchange agreement. The tractor was insured by Great West Casualty Company with a $1 million policy limit, while the trailer was insured by Nationwide Agribusiness Insurance Company with a $2 million ...
Opiod Producer Seeks Indemnity from CGL Insurers
Post number 5288
Read the full article at https://lnkd.in/guNhStN2, see the full video at https://lnkd.in/gYqkk-n3 and at https://lnkd.in/g8U3ehuc, and at https://zalma.com/blog plus more than 5250 posts.
Insurers Exclude Damages Due to Insured’s Products
In Matthew Dundon, As The Trustee Of The Endo General Unsecured Creditors’ Trust v. ACE Property And Casualty Insurance Company, et al., Civil Action No. 24-4221, United States District Court, E.D. Pennsylvania (February 10, 2026) Matthew Dundon, trustee of the Endo General Unsecured Creditors’ Trust, sued multiple commercial general liability (CGL) insurers for coverage of opioid-related litigation involving Endo International PLC a pharmaceutical manufacturer.
KEY FACTS
Beginning as early as 2014, thousands of opioid suits were filed by governments, third parties, and individuals alleging harms tied to opioid manufacturing and marketing.
Bankruptcy & Settlements
Endo filed Chapter 11 in August 2022; before bankruptcy it ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
You Get What You Pay For – Less Coverage Means Lower Premium
Post number 5275
Posted on January 30, 2026 by Barry Zalma
See the video at and at
When Experts for Both Sides Agree That Two Causes Concur to Cause a Wall to Collapse Exclusion Applies
In Lido Hospitality, Inc. v. AIX Specialty Insurance Company, No. 1-24-1465, 2026 IL App (1st) 241465-U, Court of Appeals of Illinois (January 27, 2026) resolved the effect of an anti-concurrent cause exclusion to a loss with more than one cause.
Facts and Background
Lido Hospitality, Inc. operates the Lido Motel in Franklin Park, Illinois. In November 2020, a windstorm caused one of the motel’s brick veneer walls to collapse. At the time, Lido was insured under a policy issued by AIX Specialty Insurance Company which provided coverage for windstorm damage. However, the policy contained an exclusion for any loss or damage directly or indirectly resulting from ...
