Prosecuting insurance fraud · 2020-07-01 · TDI Fraud Unit Duties - Chapter 701 Texas Insurance...
Transcript of Prosecuting insurance fraud · 2020-07-01 · TDI Fraud Unit Duties - Chapter 701 Texas Insurance...
The Fight Against FraudTexas Department of Insurance
Kyson Johnson • Chief Prosecutor • Fraud Unit
Agenda
Introduction
Fraud Unit
Statistical Data
• Insurance Markets
• Texas
Current Trends
Statutory Provisions
Fraud Examples
Preventing and Investigating Fraud
Conclusion/Questions
TEXAS DEPARTMENT OF INSURANCE 2018
TDI Fraud Unit
Duties - Chapter 701 Texas Insurance Code
CCP and TCOLE recognized Law Enforcement Agencysince 1995*
23 State Police Investigators
• Austin, DFW, Houston, San Antonio, McAllen
Prosecution Unit since 2005
7 Prosecutors Assigned as Assistant DA’s
• Austin, Dallas, Fort Worth, Houston, San Antonio, (also deputized in other jurisdictions)
* Fraud Unit is LE – not all of TDI
TEXAS DEPARTMENT OF INSURANCE 2018
Fraudulent Insurance Acts?
Can involve any type of coverage
Is not limited to any particular class of society
Can involve large, or small, sums of money
Is committed by doctors, lawyers, teachers, preachers, agents, adjusters, etc., etc…
Can be committed against a company or by company employees against policy-holders; could even be committed by a corporation
TEXAS DEPARTMENT OF INSURANCE 2018
For Purposes of this Discussion
Fraud = Criminal Conduct
• Violation of Penal Law
Texas Penal Code
Federal Laws
Insurance Code Criminal Provisions
• Requires Proof Beyond a Reasonable Doubt for Conviction
Offenses are not regulatory, administrative or civil (although offenses may include these areas which are regulated by other TDI sections not the Fraud Unit)
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Criminal Punishment Ranges
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Texas Felony offenses
• 1st Degree – 5 – 99, or Life in TDJC
• 2nd Degree – 2-20 Years in TDCJ
• 3rd Degree – 2-10 Years in TDCJ
• State Jail – 180 Days – 2 Years State Jail
• All Offenses = Up to a $10,000 fine
Hybrid offenses
Federal
Setting the table
Global Insurance Market Statistics
Insurance Markets
Insurance MarketsRankings by Country
Rank Country Premium Volume
(In Millions US $)
Market
Share
1 United States $2,141,018 38.78%
2 Japan $471,295 8.54%
3 Peoples Rep. China $466,131 8.44%
4 United Kingdom $304,208 5.52%
5 France $237,644 4.30%
6 Germany $215,021 3.89%
Source: NAIC 2016 TEXAS DEPARTMENT OF INSURANCE 2018
Insurance Markets
Over the last two years, Texas’ insurance market grew by over $20,000,000 (from 10th to 9th)
Texas Global Insurance RankingRank Jurisdiction Premium Volume
(In Millions US $)
Market
Share
1 Japan $471,295 8.54%
2 China $466,131 8.44%
3 California $332,010 6.01%
4 United Kingdom $304,208 5.51%
5 France $237,644 4.30%
6 Germany $215,021 3.89%
7 South Korea $170,862 3.09%
8 Italy $162,383 2.94%
9 Texas $155,877 2.82%10 Florida $148,712 2.69%
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Populations of Top Markets
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Japan = 126,451,398
China = 1,379,302,771
California = 39,536,653
United Kingdom = 65,648,100
France = 67,106,161
Germany = 80,594,017
South Korea = 51,181,299
Italy = 62,137,802
Texas = 28,594,306
National and State
Fraud Statistics
National Fraud Statistics
TEXAS DEPARTMENT OF INSURANCE 2018
States with Fraud Bureaus = 43
Reports of insurance fraud = 132,000
Cases opened for investigation = 45,000
Arrests for insurance fraud = 4200
Criminal convictions = 5,000
Restitution ordered = $346,000,000
Reports of Fraud > 17% between 2013-2017
*Source: Coalition Against Insurance Fraud, Study of State Insurance Fraud Agencies
TEXASReports of Insurance Fraud
9000
9500
10000
10500
11000
11500
12000
12500
13000
FY2013 FY2014 FY2015 FY2016 FY2017
10517
1136111253
11781
12607
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FY 2017 Statistics: TDI Fraud Unit
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Fraud reports received – 12,607
Cases opened for investigation - 490
Cases referred for prosecution - 94 cases/135 suspects
Estimated fraud identified in referred cases – $18.09 million
Indictments resulting from investigations - 113
Judgments from cases referred – 97
Fines assessed by courts on Fraud Unit cases – $50,350
Restitution ordered on Fraud Unit cases – $2.28 million
(avg - 11.8 million/yr 2013-16)
Discussion
Types of Insurance Fraud
Common Types of Fraud: Property and Casualty
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Property
Weather Related Claims
Fraud Reports related to Public Adjusters FY 2012-17
2012 2013 2014 2015 2016 2017
Reports 34 27 49 96 140 110
0
20
40
60
80
100
120
140
160
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Common Types of Fraud: Property and Casualty
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Property
Weather Related Claims
Arson for Profit
Staged Slip and Fall
Fake Burglary – Commercial and Homeowner
False Burglary and/or Theft Reports
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Claimant fraudulently reports items lost in burglary or theft or invents burglary/theft out of whole cloth
False police reports may be made in an effort to substantiate the claim
Damages padded
Receipts for missing property are altered and, in many cases, fabricated
Multiple policies purchased to cover the same loss
$1450.00
Common Types of Fraud: Property and Casualty
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Property
Weather Related Claims
Arson for Profit
Staged Slip and Fall
Fake Burglary – Commercial and Homeowner
Lost/Stolen Jewelry
Auto Insurance
Staged or intentional accidents
Owner give-up (falsely reported stolen)
Owner Give-Up: Estimated 15% of all vehicle theft claims
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Theft claims filed for vehicles
• sold without paperwork
• abandoned, burned, or impounded
• hidden until after a claims goes through (usually 30 days)
Common reasons
• Extensive, costly mechanical problems
• Unable to continue making monthly car payments
• Just don’t like the car anymore
Common Types of Fraud: Property and Casualty
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Property Weather Related Claims
Arson for Profit
Staged Slip and Fall
Fake Burglary – Commercial and Homeowner
Lost/Stolen Jewelry
Auto Insurance Staged or intentional accidents
Owner give-up (falsely reported stolen)
Paper claims or claims padding
Post-accident policy purchases (false date of loss)
Common Types of Fraud: Medical
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Upcoding/Unbundling
Manufacturing treatment/diagnosis
• Patient or Provider
Malingering
Duplicate claims
Foreign claims
Identity theft
Lab testing
Common Types of Fraud: Disability / Life
TEXAS DEPARTMENT OF INSURANCE 2018
Working while drawing
• EXAMPLE: receiving payments for being disabled while working for another employer
Malingering or faking disability
• EXAMPLE: submitting forged statements of disability from doctors office, fake injuries
Credit/Life disability coverage
• EXAMPLE: submit claim forms indicating disability (when not disabled) in order to have payments for car/house/credit card made by insurance company
Faked death claims/murder for profit
Insurance Claim Fraud
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Sec. 35.02. INSURANCE FRAUD. (a) A person commits an offense if, with intent to defraud or deceive an insurer, the person, in support of a claim for payment under an insurance policy:
(1) prepares or causes to be prepared a statement that:
(A) the person knows contains false or misleading material information; and
(B) is presented to an insurer; or
(2) presents or causes to be presented to an insurer a statement that the person knows contains false or misleading material information.
POP QUIZ: Check on Learning
TEXAS DEPARTMENT OF INSURANCE 2018
Amy Santiago MD, is treating Jake Peralta for hypertrichosis and sends a sample to her local laboratory, Hitchcock and Scully Labs, for testing. At the lab, Ray Holt conducts the test and confirms the syndrome. The lab sends a bill to Jake’s insurer BlueBell/BlueBunny (BBBB) Inc. for $17,500 for the lab testing. Based on these facts has H&S Labs committed insurance fraud? Bonus: If so, what level of offense?
Double bonus: Name the Police Agency?
Answer
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It depends?
Is it immoral?
Is it unethical?
Do we like this conduct?
Is it insurance fraud?
Based on the given facts, the lab provided the testing as billed. The cost may be outrageous but there is no evidence that the lab made a false statement.
Other crime?
Bonus, if it was illegal = state jail felony
Agent / Adjuster / Industry Fraud
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Premium theft
Commission scams
Embezzlement
Additional fees
Churning?
Unauthorized Insurance Prohibited
Investigating and Preventing Fraud
Investigating and Preventing Fraud
TEXAS DEPARTMENT OF INSURANCE 2018
Educate your employees/executives
Become familiar with common fraud indicators – Have an audit process
Be vigilant in protecting your companies assets/rights
Document suspicious activities by providers, claimants and employees
Thoroughly investigate reports of fraud
• Persistence
• Precision
Refer meritorious cases to law enforcement for prosecution
Questions?