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


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


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)


Criminal Punishment Ranges


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%


Populations of Top Markets


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


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


FY 2017 Statistics: TDI Fraud Unit


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


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




Property


Arson for Profit

Staged Slip and Fall

Fake Burglary – Commercial and Homeowner

False Burglary and/or Theft Reports


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



Property


Arson for Profit



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


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



Property Weather Related Claims

Arson for Profit



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


Upcoding/Unbundling

Manufacturing treatment/diagnosis

• Patient or Provider

Malingering

Duplicate claims

Foreign claims

Identity theft

Lab testing

Common Types of Fraud: Disability / Life


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


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


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


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


Premium theft

Commission scams

Embezzlement

Additional fees

Churning?

Unauthorized Insurance Prohibited

Investigating and Preventing Fraud

Investigating and Preventing Fraud


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?

Date post:	08-Jul-2020
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Prosecuting insurance fraud · 2020-07-01 · TDI Fraud Unit Duties - Chapter 701 Texas Insurance...

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