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Fraud in trade and ocean marine insurance
15 May 2013 Markus Spielmann
Agenda
15.05.2013 2 Fraud in trade and ocean marine insurance, Markus Spielmann
1. Definition of terms
2. History
3. Fraud loss figures
4. The persons involved
5. Types of fraud
6. Countermeasures
7. Future outlook
Definition of terms
What is fraud ?
Distinctions and definitions vary, depending on relevant legal system
Often difficult to prove in court
In maritime trade / marine insurance, English legal definitions frequently used due to traditional focus on English law
3 Fraud in trade and ocean marine insurance, Markus Spielmann 15.05.2013
Definition of terms
What is fraud ?
Difficult to distinguish from other types of theft such as
secret taking of third-party property
violent appropriation, i.e. robbery / piracy
Fraud is theft through deception
property is handed over "voluntarily"
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History
Historical accounts are rare, but fraud was documented even in
ancient times
> written evidence dates back to 360 B.C.
> sporadic local incidents up to the 1960s
> disproportionate increase since the 1970s
> more violent offences / piracy since 2008/2009
Cartel of silence among villains and victims
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15.05.2013
Fraud loss figures
An estimation of the exact cost of insurance fraud is difficult:
According to the American Insurance Information Institute, the insurance industry estimates insurance fraud at about 10 percent of the property/casualty/marine insurance industrys incurred losses and loss adjustment expenses.
6 Titel der Prsentation und Name des Redners 15.05.2013
The persons involved
Seller / purchaser
Shipowner, charterer
Master / crew
Banks / lenders
Insurance companies
Brokers / agents
Original Assured
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The persons involved
Methods of committing fraud
Use of false / forged documents regarding the cargo / carrying vessel Supplying false information or concealing information/ facts Fraudulent bankruptcy / breach of contract Setting up bogus firms to conclude contracts Issue of blank, but signed, B/Ls Issue of two differing B/Ls for one cargo
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Types of fraud
Basic patterns of (insurance) fraud
Documentary fraud
Container fraud
Scuttling / arson
Deviation, charter fraud, phantom ships
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Types of fraud
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Documentary fraud
15.05.2013
Types of fraud
Documentary fraud
Perpetrator is typically the seller
Agrees sale of goods on Letter-of-Credit basis
Submits manipulated documents to the bank
Ships
worthless materials in the correct weight
goods of a lower quality than agreed
absolutely nothing
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Types of fraud
Documentary fraud
On the consignee side:
false authorization to take delivery is presented imposters pose as lawful consignees
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Countermeasures
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Countermeasures
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Careful underwriting
do not get blinded by premium expectations
check into local economic conditions
watch out for "critical signals"
check facts and plausibility of the offer
dare to query facts with broker/policyholder
for Insurers:
15.05.2013
Countermeasures
for Insurers
Careful claims management
refuse to be pressurized
request and check the relevant documents
look out for critical signals
make plausibility checks
check facts on route / means of transport, cargo
utilize independent investigators
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Countermeasures
Monitor worldwide claims tendencies
Cooperate with organizations such as IMB, national / international police forces
Exchange information with other parties
Exchange information with insureds
16 Fraud in trade and ocean marine insurance, Markus Spielmann
for insurers
15.05.2013
Countermeasures
Careful underwriting
avoid being blinded by premium expectations
take local economic conditions into account
look out for "critical signals"
check facts and plausibility
Query facts from brokers /ceding company
17 Fraud in trade and ocean marine insurance, Markus Spielmann
for reinsurers
15.05.2013
Countermeasures
Monitor worldwide claims tendencies Cooperate with organizations such as IMB, national / international police forces Exchange information with other insurers and reinsurers Exert pressure on ceding companies for more critical underwriting
18 Fraud in trade and ocean marine insurance, Markus Spielmann
for reinsurers
15.05.2013
Future outlook
People who want to make money through fraud employ modern methods
and are willing to explore new technologies.
19 Titel der Prsentation und Name des Redners 15.05.2013
Thank you very much for your attention
Markus Spielmann
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Fraud in trade and oceanmarine insuranceAgendaDefinition of termsDefinition of termsHistoryFraud loss figuresThe persons involvedThe persons involvedTypes of fraudTypes of fraudTypes of fraudTypes of fraudCountermeasuresCountermeasuresCountermeasuresCountermeasuresCountermeasuresCountermeasuresFuture outlookThank you very much for your attention