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Insurance Fraud… What the Future May Hold

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Insurance Fraud… What the Future May Hold Insurance Fraud… What the Future May Hold THE SURPLUS LINE ASSOCIATION OF CALIFORNIA Tuesday, April 18, 2017, Universal City Wednesday, April 19, 2017, San Francisco Introduction and Overview The New … • Predictive Modeling • Assignment of Benefits (AOB’s) • CEOs going to Jail for Fraud • Financial Fraud at the Corporate Level • Internal ID and Extortion Fraud • Internal Consultants and Internal Fraud • Social Engineering & Wire Fraud • When Good Employees go Bad and the Mundane … • Staged Auto Crashes • Arson © 2016 Fisher Consulting Group, Inc. Reducing the $300B Fraud Industry The Yates Memo • More Intrusive Monitoring - Claims data finds abuse, fraud, and waste Arizona and California Auto Insurance Fraud Busts • Detecting red flags on a fraudulent auto claim • Interdepartmental Co-operation • New “Secret” Device • According to NICB, testers were able to open 54% of the vehicles and drive away with half of them! • Of those driven away, 2/3 were then restarted using the device • Many time the owner believes the vehicle has been towed Identify theft and loss of financial information is one of the primary concerns for those in the financial and retail industries © 2016 Fisher Consulting Group, Inc. The “new normal” 75% of companies surveyed had been victims of fraud in the past year—a 14- percentage point from three 2016 years earlier. 73 * 2015-16 Global fraud report by Kroll, Inc. 75 and The Economist Intelligence Unit 73% of finance 2013 professionals 61 reported an attempted or actual payments fraud in 2015. Victims of Fraud Attempted Fraud *The Association For Financial Victims of Fraud Attempted Fraud Professionals’ 2016 Payments Fraud and Control Survey Source: www.McKinsey.com © 2016 Fisher Consulting Group, Inc. The New “secret” Device www.afr.com © 2016 Fisher Consulting Group, Inc. The new “secret” device © 2016 Fisher Consulting Group, Inc. How the Device Works The Automobile Club of The first radio impersonates Germany (ADAC) linked a the key fob and pings its pair of radio devices to wireless entry system unlock a new car That signal is then relayed between the radios – for up This triggers a signal from to 300 feet – to complete the vehicle to seek a what they called the response from the key transmission “handshake” to unlock the car. © 2016 Fisher Consulting Group, Inc. Parts Cost Less Than $100 • Easily obtainable parts according to www.networkworld.com • Power amplifier can be purchased on the internet • New cars designed with remote key entry • Owners now store keys to block signals © 2016 Fisher Consulting Group, Inc. Identifying Fraudulent Auto Claims X Q p Staged accident with multiple claimants u o e l s i MEDICAL BILLS t c Financial issuesAND TREATMENT i y o n c Unusual insured behavior a o Service b v l e providers e r a g Burned to a Vehicle e ownership CRISP Outrageous Frauds that Failed Fraudulent fire kills two Crooked contractors caught when roof caves in Slip-sliding away Broker creates paper empire Contractor gets shingled Insurance broker has expensive tastes From hero to heartbreak I love you … goodbye Coach turns arsonist Ph.D. tries to steal $7.5 million © 2016 Fisher Consulting Group, Inc. Organized Crime/Ring Activity Suspicious auto insurance claims flagged to the NICB in 2012 were categorized as “Organized Group/Ring Activity” One third “staged” for the sole purpose of filing a fake claim for damages or personal injury. © 2016 Fisher Consulting Group, Inc. Organized Crime/Ring Activity Characters in Insurance Fraud and organized crime 1. The Recruiter Recruits and pays individuals to file claims Brings claimants together, orchestrates the “accident”, and steers claimants to professionals 2. The Professional Provides medical care or legal representation 3. The Ring Leader Owns or is connected to the medical clinic, billing operation, and is known organized crime gang leader © 2016 Fisher Consulting Group, Inc. Largest Auto Fraud in US history • Mikhail “Russian Mike” Zemlyansky— the largest no-fault auto insurance scam in U.S. history • $279 million in false injury claims and an estimated $400 million in fraud of all types • Bribed lawyers and doctors to stage accidents • Recruiters paid $2,000 -$3,000 for each “patient” • Zemlyansky used 3 billing companies just to handle the paperwork © 2016 Fisher Consulting Group, Inc. Largest auto fraud in US history • 9 clinics Bronx, Brooklyn, and Queens • Billed excessive medical treatments including physical therapy, acupuncture, pain management, psychological services, X-rays, MRIs and other services • Doctors acted as “straw owners” of clinics • Lawyers sued insurers and coached crash victims • Stolen insurance proceeds financed lavish lifestyles and international vacations © 2016 Fisher Consulting Group, Inc. The End • Stolen insurance proceeds financed lavish lifestyles and international vacations • 37 high-ranking members were indicted • including doctors, lawyers, chiropractors, and other professionals Last year Zemlyansky was sentenced to 15 years in federal prison MIKHAIL ZEMLYANSKY Release date 2027 © 2016 Fisher Consulting Group, Inc. LET’S TAKE A 10 Minute BREAK © 2016 Fisher Consulting Group, Inc. How to spot a liar A “low-risk, high-reward gambit” ? Think again! • Some insurers pay suspicious claims…easier than fighting in court. • But states are now enacting tougher fraud laws. • What to watch for… © 2016 Fisher Consulting Group, Inc. How to spot a liar • Verbal vs. nonverbal cues when someone is talking. • The liar often says more than their actual words (I don’t understand what you are trying to say here). If a subject doesn’t answer the question ask follow-up questions • Build a rapport to create a baseline of honesty • The EYES—excellent indicator of how honest an individual is at any moment in time © 2016 Fisher Consulting Group, Inc. Future of Lie Detection www.theinquisitr.com © 2016 Fisher Consulting Group, Inc. Future of Lie Detection The Silent Talker Psychological Profiler (Lie Detector) Developed at UK’s Manchester Metropolitan University between 2000 and 2002 The subject of the interview is observed by one or more cameras (e.g. head-and-shoulders, full body view, thermal imaging camera), which input the stream into a computer program that classifies answers as truthful or deceptive -- in real time The computer detects and classifies the subject’s “micro-gestures” utilizing artificial intelligence (AI) to learn patterns, build profiles and, over time, spot who is lying or telling the truth These micro-gestures are unconscious responses that Silent Talker picks up and indicate signs of stress, mental strain – or even the flash of a smile One of the inventors described these micro-gestures as ‘tells’ that are extremely fine-grained and exceedingly difficult for a person being interview to control © 2016 Fisher Consulting Group, Inc. Future of Lie Detection The subject of the interview The computer detects and These micro-gestures is observed by one or more classifies the subject’s are unconscious cameras, which input the “micro-gestures” utilizing responses that Silent stream into a computer artificial intelligence (AI) to Talker picks up and program that classifies learn patterns, build profiles answers as truthful or and, over time, spot who is indicates as signs of deceptive -- in real time. lying or telling the truth. stress or mental strain . Extremely fine-grained ‘tells’. Difficult for a person being interview to control. © 2016 Fisher Consulting Group, Inc. New Weapons on the War on Fraud • The continuous evaluation of every claim • Predictive analytics • Internal and external dataset usage • The application of usage watch lists and business rules • A seamless workflow integration • Special investigative tools: Telematics Wearables Drones Dash-cams New Devices and their Manipulation Data manipulation Analytics Algorithms Standard Procedures © 2016 Fisher Consulting Group, Inc. Dash-cams in Russia Source: Wired, February 15, 2013 © 2016 Fisher Consulting Group, Inc. Dash-cams in Russia • Used to combat rampant insurance fraud and corruption • Inexpensive cameras • Flash memory and regulations • Interior Ministry in 2009 removed legal hurdles © 2016 Fisher Consulting Group, Inc. Dash-cams in Russia “You can get into your car without your pants on, but never get into a car without a dash cam.” —Aleksei Dozoro, a motorists’ rights activist in Russia told Radio Free Europe last year, Wired According to the World Health Organization, in 2007, Russia averaged 25.2 traffic fatalities per 100,000 people. The U.S., by comparison, had 13.9 traffic fatalities per 100,000 people. © 2016 Fisher Consulting Group, Inc. Insurers Fight Back • 60% = insurers state that fraud has climbed over the last three years • 75% = insurers deploy automated systems to detect false claims • 40% = insurer use of rate-evasion technology since 2012. • 90% = insurers adopting antifraud technology using business rules and red flags to auto detect suspicious claims. • Automobile premium evaders are growing targets of antifraud efforts. © 2016 Fisher Consulting Group, Inc. Technology Disrupting Fraud Telematics and Sensors • Vehicle sensors now determine if the vehicle was driven instead of parked and where • Provide a timeline of claimed event accident Wearables • Sensor-embedded clothing and self-tracking devices such as the Fitbit or Apple Watch can help reveal the truth behind injury claims. • 63% of insurers believe wearables will have a high or very high impact on their organizations in the future. • Smart workplace clothing can help track
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