Publications

The session was over their proposed changes to insurance fraud referral statutes in California. Steve Smith, Manager of Audit Programs with CDI, shared details on these proposed legislative changes and asked for feedback. The affected statutes include California Insurance Code sections 1872.4, 1874.2, and 1877.3, and the proposed changes are designed to address language inconsistencies to make the Suspected Fraud Referral (SFC) process more effective. If the proposed changes move forward, they are expected to become effective January 1, 2025, unless they are considered a higher priority in late 2024. Coalition members can view the recorded session and provide feedback on these proposed changes by emailing [email protected]. 

The Eleventh Circuit Court has referred two critical questions to the Florida Supreme Court concerning auto glass claim activity. The core issue at hand pertains to alleged violations of the Florida Repair Act. In the legal case, GEICO. v. Glassco Inc., facts show that Glassco offered "no-cost" windshield repairs to GEICO customers starting in 2016. Customers assigned their insurance payment rights to Glassco, who then submitted invoices for the repair work to GEICO. Glassco complained that GEICO paid discounted rates for most of these claims and initiated small claims actions against GEICO. In response, GEICO filed suit, arguing that Glassco's claims were fraudulent and unlawful. This included allegations that Glassco committed violations of the Florida Repair Act by subcontracting repair work without obtaining the insured customers' consent, failing to provide written estimates for repairs, neglecting to offer written repair estimates, omitting invoices upon repair completion, and not including odometer readings on work orders and invoices. GEICO is seeking over $700K in reimbursement. The Eleventh Circuit Court has sought clarity from the Florida Supreme Court on two critical questions related to Repair Act violations: (1) does Florida law allow an insurance company cause of action when a repair shop does not provide a written estimate, and (2) do violations of the Florida Repair Act void a repair invoice for completed windshield repairs and preclude payment. The outcome could set a precedent for similar cases in Florida, impacting insurers, repair shops, and consumers. This is one to monitor. 

The Coalition has submitted comments on the NAIC Public Adjuster Licensing Model Act. The National Association of Insurance Commissioners (NAIC) requested comments on edits to their draft of the Public Adjuster Licensing Model Act. The NAIC's effort to amend this model is focused on strengthening regulatory standards governing the conduct of public adjusters, an important consumer protection. In support, the Coalition submitted comments on several areas. They include: the model should make it clear that a public adjuster should not have a financial interest in any aspect of the claim other than their contracted fee or commission, a public adjuster should not participate in the reconstruction, repair, or restoration of damaged property that is the subject of a claim being adjusted, and the model could be strengthened concerning an enforcement authority and a penalties section. The NAIC Producer Licensing Task Force will be considering all comments soon. 

Among many other organizations, the Michigan Department of Insurance and Financial Services (DIFS) has cautioned consumers during International Fraud Awareness Week. International Fraud Awareness Week, or Fraud Week, was established by the Association of Certified Fraud Examiners in 2000 as a dedicated time to raise awareness about fraud. Each year, this week-long campaign encourages business leaders and employees to proactively take steps to minimize the impact of fraud by promoting anti-fraud awareness and education. Like many others, including the Coalition, the Michigan DIFS participated in Fraud Week by asking its consumers to be wary of fraud schemes and asking consumers who suspect they fell victim to fraud to report it to the DIFS Fraud Investigation Unit (FIU). The DIFS FIU investigates criminal and fraudulent activity related to the insurance and financial markets, and DIFS works with the Attorney General and other state, county, and local law enforcement to investigate these cases and refer them for prosecution. In addition to the work done by the FIU, DIFS also offers a variety of resources to help fight fraud, including the DIFS website, publications, videos, and the DIFS Locator, which enables consumers to verify that they are working with properly licensed individuals and businesses in the insurance and financial services industries. The mission of the Michigan Department of Insurance and Financial Services is to ensure access to safe and secure insurance and financial services fundamental for the opportunity, security, and success of Michigan residents while fostering economic growth and sustainability in both industries.

Over 200 anti-fraud professionals participated at The New York Anti-Car Theft and Fraud Association (NYACT) 2023 Annual Education Conference on November 8th. The Keynote speaker was Owen McShane, Deputy Commissioner Investigations & Law Enforcement, NYS DMV and Adjunct Professor at the University of Albany College of Emergency Preparedness, Homeland Security and Cybersecurity. Mr. McShane addressed the audience and shared his knowledge and expertise in DMV fraud investigations and facial recognition applications to combat identity theft. Each year, the NYACT Board of Directors presents awards at the NYACT Annual Education Conference. The Joseph McDonald award is NYACT's highest and most prestigious honor and is given to an individual or team in Law Enforcement. This year's honor was presented to Detective Michael Dominguez for his relentless pursuit of truth and justice, which has not only resulted in numerous successful prosecutions but has also deterred potential fraudsters from engaging in illegal activities, and his consistent demonstration and commitment to uphold the highest standards in his investigations. 

ChatGPT: An insurer's friend or foe in the fight against insurance fraud. The hype around ChatGPT and other artificial intelligence is hard to escape. The importance of learning the risks and advantages of artificial technology cannot be understated. This is especially true for the insurance industry, where insurance companies are integrating AI into the claims process. Indeed, AI may be both a source of insurance fraud and a manner in which to detect and prevent it. Insurance fraudsters are no strangers to AI. Indeed, the use of AI in facilitating fraud claims has steadily increased over the last decade, consistent with advances in technology. Now that ChatGPT and other forms of generative AI are readily available to the general public, insurers should be aware of how this technology can support and guard against fraudulent insurance claims. Insurance fraudsters may also utilize ChatGPT and other generative AI to generate fake documents and photographic evidence to support a fraudulent claim. ChatGPT and other forms of AI are also excellent data aggregators because they can produce concise, seemingly believable output from nearly unlimited data sources. At the same time, insurers should also consider how ChatGPT and other AI tools might assist in detecting and flagging fraudulent claims. Some generative AI tools have the ability to detect AI-generated content, especially large volumes of content, and thus have the potential to detect the AI-assisted fraudulent claims discussed above.

City of London Police marks International Fraud Awareness Week by celebrating the force's top achievements of 2023. A fraudster likened to the 'Wolf of Wall Street' being jailed for 14 years, a hacker being convicted of stealing unreleased Ed Sheeran music, and an organized crime group being detained for more than 22 years are some of the key milestones achieved by the City of London Police so far this year. "Being the national lead force for fraud means that no week is the same for our specialist fraud teams…" Said Assistant Commissioner Nik Adams. "Fraud investigations can be incredibly lengthy and complex, and this year has already been a fantastic year for the City of London Police, which is a real testament to all the hard work done by our teams." Next year will see the launch of the new fraud and cybercrime reporting service to replace Action Fraud. This year's focus has been on building a system that operates proactively in preventing fraud and cybercrime, and futureproofing has been central to this change, with the incorporation of artificial intelligence and machine learning. Among the changes, the new system will provide faster responses for victims and enhance the NFIB's ability to provide packages to forces nationally for consideration for investigation. You can read more about the new service here.

Fraud is damaging the insurance sector's reputation, but insurtechs are helping with the fightback. Insurance services are the core safety net that the financial services sector has to offer society. Particularly in the current cost of living crisis, the insurance industry has a more important role than ever. However, despite millions relying on it, the sector is too often being taken for a ride by opportunistic fraudsters. In fact, industry fraud levels have recently reached record new heights. Insurers appreciate that many customers are facing financial pressures due to rising cost-of-living bills, and they are doing all they can to help while continuing to pay genuine claims as quickly as possible. But whatever the financial pressure, making a fraudulent insurance claim is not the answer. Insurance firms have the power to stamp this out and bolster their reputation as a safety net for society. They must communicate that insurance fraud isn't just one of those crimes that doesn't hurt anyone in particular except the corporate insurer. They must highlight the very real dangers that claiming falsely can have on an individual's own insurance prospects. And they must adopt the right technology and harness data and analytics to detect and prevent insurance fraud. Only by utilizing the latest technology and partnering with the right innovators in this space can the sector clamp down effectively on these claims and be able to maintain its reputation and retain and restore customer confidence.

Former Boston Celtics forward Glen "Big Baby" Davis and ex-Detroit Piston Will Bynum were convicted by a New York jury on Wednesday. They were apart of a scheme that prosecutors said defrauded an insurance plan for NBA players and their families of more than $5M. Davis, 37, was the Southeastern Conference player of the year while leading Louisiana State to the 2006 NCAA championship game. Bynum, 40, played parts of four seasons in the NBA with the Nets, Houston Rockets, Sacramento Kings and Celtics. Doctors and dentists working with the players created fraudulent invoices that were submitted to the supplemental insurance plan for reimbursement. More than 20 people have been convicted in the case, many of them one-time NBA players who submitted fictitious dental and medical claims to the NBA Players' Health and Benefit Welfare Plan. Terrence Williams, a 2009 first-round draft pick of the New Jersey Nets, was sentenced in August to a decade in prison as a ringleader of the scheme.

Caregiver found guilty of defrauding Medicaid of $45K for caretaking services while working as a teacher. Michael Ann Ellis, of Flint, Michigan, was found guilty of all counts of healthcare claims fraud, Medicaid fraud, and theft by deception. Ellis was the designated caregiver for her ex-boyfriend, who suffered a stroke and required care. In that capacity, she submitted fraudulent timesheets between January 5, 2016, and April 13, 2020, and was compensated by the New Jersey Medicaid Program for caretaking services she never rendered. Ellis was paid by Medicaid, as part of the Personal Preference Program, to provide up to 56 hours of care per week to her ex-boyfriend. However, the jury heard testimony that Ellis was employed as a substitute teacher in Michigan, and she was working in the teaching position on the same dates she was billing for services rendered in New Jersey. This was corroborated by witness testimony from a superintendent from one of the Michigan schools, along with timesheets and payroll records with school locations, dates, and hours of substitute teaching duties Ellis performed in Michigan. Ellis is detained pending sentencing, facing up to 10 years in New Jersey State Prison and a fine of up to $150K.

Three men sentenced for $54M fraudulent prescriptions scheme. David Byron Copeland, of Tallahassee, Florida, James Wesley Moss, of Huntsville, Alabama, and Michael Gordon, of Fort Myers, Florida, were sentenced for their attempts to defraud TRICARE. Moss was a part-owner and CEO of Florida Pharmacy Solutions (FPS), a Florida-based pharmacy that specialized in compounded prescription drugs. Copeland was also a part-owner and senior sales manager at FPS, and Gordon was a lead sales representative. Moss, Copeland, and Gordon, along with their accomplices, engaged in a practice known as "test billing" to develop the most expensive combination of compounded drugs to maximize reimbursement from TRICARE. Moss, Copeland, Gordon, and their accomplices targeted physicians who treated TRICARE beneficiaries and paid bribes and kickbacks to physicians and salespeople to encourage the referral of prescriptions to FPS. The bribes included lavish hunting trips and expensive dinners. In addition, FPS employees used "blanket letters of authorization" that allowed FPS to modify the prescription components to make them more profitable. From late 2012 through mid-2015, FPS billed TRICARE over $54M for its compounded pharmaceuticals. In April, co-defendant Edward Christopher White was sentenced to two years and nine months in prison after pleading guilty for his role in the scheme.

Immigrants in Jacksonville workers' comp fraud face prison, deportation, and big IRS bills. Oscar Santos-Santos, 45, and Wilkin Santos-Calix, 29, took plea deals in June admitting to conspiring to commit wire fraud and cheat the Internal Revenue Service out of tax money owed from hundreds of construction workers across the South, many in the country illegally. Both defendants were solo officers of businesses that investigators described as shell companies, used to hide the fact that building contractors were using illegal workers. The shell companies — Santos-Calix was Brothers Forever Construction, Santos-Santos was JWS Construction LLC — bought cheap workers' comp policies, which Florida law requires, then rented the policies to contractors employing far more workers than insurers expected to protect. The policy that Santos-Calix bought for $14K per year would have cost $1.9M to cover the building contractors in Florida, Georgia, and Tennessee that received copies of the insurance certificate to use on their jobs, his plea agreement said. The two undocumented immigrants living in Jacksonville will finish two years behind bars and be deported to Honduras following their sentencing.

Southern Idaho woman found guilty of felony auto insurance fraud. Kathy Waite of Nampa, Idaho, was sentenced in Canyon County for one count of felony insurance fraud. In June 2020, Kathy Waite was at-fault in a two-vehicle collision in Nyssa, Oregon, where the front end of her vehicle was damaged. Waite obtained an insurance policy through Liberty Mutual the following day and attempted to submit a claim for the damage. The claim was denied due to the policy not being in place at the time of loss. Waite applied for a new insurance policy with Dairyland Insurance on June 18, 2020, where she denied any pre-existing damage to her vehicle. In July 2020, she filed a claim with a date of loss of June 26, 2020. When Dairyland confronted Waite with the previous claim through Liberty Mutual, she reported the backend of her vehicle was hit and caused no damage. Dairyland denied her claim when they discovered the front-end damage was caused by the accident the previous month. On August 13, 2020, Dairyland referred the matter to the Idaho Department of Insurance for further investigation. Waite admitted she lied about the date of loss, which led to her prosecution. Waite was placed on supervised probation for three years and ordered to serve 50 hours of community service. She must also pay a fine of $1K and restitution of $1K to Sentry Insurance (owners of Dairyland Insurance) and $720 to DOI.

Atlanta man to go to trial in Westmoreland County over accusation of car insurance fraud. Vivek Chitturi, 28, of Atlanta, admitted to lying about the date of the crash. The crimes he has admitted to: Chitturi's car was in a car crash with an uninsured vehicle. He told investigators that his friend owned and drove the uninsured car when it was involved in a collision with a box truck traveling from Maryland to Ohio. The crash happened Nov. 18, 2022, along I-70 in Donegal Township, Washington County. Chitturi added the car to his Progressive Insurance policy on December 7, 2022, and then filed a written claim and made recorded statements in which he said he was driving the car. He said the crash happened on December 18. Progressive Insurance denied the claim after verifying with state police and the company that towed the car that the date of the crash was November 18. Chitturi also contacted the truck driver several times by text and phone to ask that he agree to change the accident date when insurance adjusters contacted him to provide a statement about the crash.

Huber Heights homeowner charged with arson indicted after insurance claim. A Huber Heights homeowner already accused of intentionally setting fire to a house in May 2022 was additionally indicted this week for insurance fraud. Jeremy Sparks was issued a summons to appear Monday for his arraignment in Montgomery County Common Pleas Court. Prosecutors say Sparks set his house at 7901 Berchman Drive on fire and then filed an insurance claim for the loss of the property and contents. The insurance claim was for more than $350K, which is more than triple the $100K loss to property and contents estimated in a Huber Heights Fire Division report. The report did not state the fire's cause, but noted no smoke detectors. Sparks arrived at the property during the fire and was detained so he could speak to a Huber Heights Police Division detective. He was identified as a suspect, fire records show, and reportedly told police the house was under foreclosure.

The Coalition Against Insurance Fraud is a valuable resource for State Insurance Fraud Directors, and their comprehensive analysis of insurance fraud is consistently a standout feature of the annual Insurance Fraud Directors Conference. Establishing a constructive and collaborative relationship with the Coalition Against Insurance Fraud has proven beneficial to me in my role as an Insurance Fraud Director in combating insurance fraud in the United States. I express our gratitude to Executive Director Matthew Smith for his exceptional leadership. Congratulations on reaching your 30th Anniversary, Coalition Against Insurance Fraud!

Juan D. Garrett

Division Director

Kentucky Department of Insurance

Division of Insurance Fraud Investigation

Insurers are typically forced into rigorous and often time-consuming manual processes to minimize fraud when they underwrite policies, conduct investigations, and settle claims. And they have to impose these processes on most, if not all, customers because they lack better ways to distinguish between low-risk and high-risk customers. What customers often get as a result of these processes is slower service and an inferior customer experience. The painstaking verification of claims can give honest customers the idea that their insurers don’t trust them. That in turn can lead to reciprocal distrust of insurers by their customers. At the same time, lengthy, labor-intensive processes increase administrative costs and eat into margins – disappointing staff, management, and shareholders.
 

What would your processes look like if you could instantly trust your customers? Knowing when to trust keeps you in control of your processes – automating as much as possible. Our associate member FRISS is the leading provider of Trust Automation solutions for P&C insurers. Their real-time, data-driven scores and insights give instant confidence and understanding of the inherent risks of all customers and interactions. Based on next generation technology, FRISS allows you to confidently manage trust throughout the insurance value chain – from the first quote all the way through claims and investigations when needed. Because speed and convenience have altogether redefined what it means to serve consumers, it is time to start building the relationships your customers demand and deserve. We thank FRISS for their continued dedication to insurance fraud and as a valued member of the Coalition. You can learn more about them at their website: www.friss.com

International Fraud Awareness Week, observed annually in November, is a vital initiative dedicated to raising awareness about fraud and promoting prevention strategies. The week-long event serves as a global call to action, encouraging individuals and organizations to stay vigilant against the evolving landscape of fraudulent activities. In the spirit of this awareness campaign, the International Association of Special Investigation Units (IASIU) plays a pivotal role in combating fraud, particularly within the insurance sector. IASIU is committed to fostering collaboration, education, and networking to effectively address and prevent insurance fraud. Our mission aligns seamlessly with the goals of International Fraud Awareness Week, emphasizing the importance of collective efforts in the fight against fraud. Becoming a member of IASIU offers individuals an opportunity to actively contribute to this global mission. By joining, members gain access to invaluable resources, including industry insights, educational materials, and a network of professionals dedicated to combating fraud. As we recognize International Fraud Awareness Week, considering IASIU membership becomes a proactive step in fortifying our collective defense against fraud, fostering a more secure and resilient global community. To learn more and join the cause, visit iasiu.org. Let's fight fraud together!