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Massachusetts Questionable Insurance Claims Up 57 Percent

Wednesday, December 18, 2013

 

Questionable auto insurance claims are up dramatically in Massachusetts over the past three years according to national statistics.

The National Insurance Crime Bureau (NICB) tracks questionable claims across the country and found the number in the Bay State went from 1,492 in 2010 to 2,346 in 2012 — a 57 percent increase.

But the head of the state's main fraud investigatory body says the numbers aren't up, but down.

“We've seen a significant reduction in major fraud types,” including auto insurance-related, says Dan Johnston, executive director of the Insurance Fraud Bureau of Massachusetts (IFB), a statutory organization that investigates suspected cases of insurance fraud throughout the state.

Tallying about 4,000 cases referred to the IFB annually, Johnston said the long-term trend had been a decline following better investigation and prosecution.

Auto insurance to pay for cosmetic procedure?

On Nov. 25, 2012, a woman in Western Massachusetts contacted her insurance company, Travelers Insurance, to report a motor vehicle accident. At the time she reported damage to the vehicle but no personal injury.

Five months after the incident, however, the woman contacted her insurance again and said she had in fact been injured, submitting documents to support her injury claim and treatment.

A subsequent investigation revealed the woman had been a patient at a cosmetic and reconstructive center and consulted on an elective procedure. After learning the service wouldn't be covered by insurance, she attempted to bill Travelers, falsifying a tax sheet, surgical procedure bill, and medical notes in the process.

This past October, according to the IFB, the woman was charged with motor vehicle insurance fraud, false health care claim, and attempt to commit a crime.

Tracking questionable claims nationally

Questionable claims, reported by member insurance companies to the NICB for closer review and investigation based on indicators of possible fraud, numbered 1,492 in 2010; 1,768 in 2011; and 2,346 in 2012.

What's driving that increase? It's due in part to better reporting to that national organization.

“During the recession there was a lot of speculation that the bad economy was going to cause more insurance fraud,” said Frank Scafidi, the NICB's director of public affairs. “We have not found that to be the case — at least not with any reliable data to support that assertion.”

“There are, however, some kinds of insurance fraud that are driven by economics,” Scafidi continued, including the so-called “owner give-up.”

“That is where a person reports their car stolen to collect the insurance when they had the car disposed of themselves. We found a correlation between those kinds of claims and the high cost of gasoline a few years ago, especially when the majority of vehicles identified as give-ups were SUVs and other gas guzzlers. But aside from that example, there is no connection between a bad economy and more insurance fraud — or questionable claims.”

Numbers and types of insurance fraud

In Massachusetts, the city of Worcester had the third overall highest number of questionable auto claims reported to the NICB (79 in 2012), behind Springfield (119) and far back from Boston (511).

Using census-based regions known as core based statistical areas, those rankings of larger metropolitan areas were the same: The Worcester CBSA saw 151 questionable claims, Springfield had 205, and Boston-Cambridge-Quincy reported 1,440.

Faked/exaggerated injury was the most commonly referred reason for a questionable claim, followed by a suspicious hit while parked.

“An exaggerated injury is something like when a minor accident produces a minor ache in a person's arm, but the person seeks medical attention and treatment as if the injury was more like a near amputation,” Scafidi said.

A suspicious “hit while parked” meanwhile is a claim for damage ostensibly caused while the vehicle was parked.

“If the circumstances of the damage and the insured’s story don’t 'add up' then it may be a case where the person is trying to have their insurance pay for something that might not otherwise be covered.”

The NICB doesn't know how many questionable claims pan out as fraud because of myriad ways the claims are investigated, by the insurance companies themselves, the NICB, or state groups like the IFB. “We know that many of these QCs end up being legitimate, but many of them are also fraudulent,” Scafidi said. “We just can't say how many of each.”

Insurance companies and organizations like the fraud bureaus and national Coalition Against Insurance Fraud say deceptive claims cost everyone. “It adds up to a lot of dollars,” Johnston said.

“People should be aware when you get fraud out of the system, premiums go down,” he continued.

Staged accidents prompt fraud task forces in Massachusetts

In a joint report earlier this year by the IFB and Automobile Insurers Bureau of Massachusetts, the total savings in claims from the state's Community Insurance Fraud Initiative (CIFI) program totaled $266 million in 2011 alone.

In Worcester, since the task force's introduction there in 2006, cumulative premium savings have totaled $78,441,701, or an average annual $180 per vehicle.

The first CIFI program in Massachusetts began in 2003 to combat a rash of organized, staged auto accidents. The impetus was a staged accident in Lawrence that year that killed a 65-year-old grandmother. “The accident wasn't intended to be as severe, but it was,” Johnston said. He describes a “cottage industry” in Lawrence at that time built around staging accidents to collect insurance.

Thirteen communities around the state now have a CIFI, including Worcester. The key to the task forces, Johnston said, is cooperation between fraud investigators and local law enforcement.

In the past decade, the task forces have resulted in a total 1,917 individuals charged with insurance fraud: 46 from Worcester. And statistically high injury-to-accident ratios in the communities — a sign of staged accidents — has dropped as a result.

Numbers still underrepresent fraud

But the overall amount of insurance fraud, given that questionable claims reported to the NICB represent less than 0.25 percent of all claims, continues to be “absolutely” underreported according to Scafidi.

Estimates for the cost of property and casualty insurance fraud range widely from $30-80 billion nationwide, depending on who you ask.

Across the country, the number of claims reported to the NICB, which counts fully 93 percent of the nation's personal auto insurers among its members, increased 25 percent from 2010 to 2012, from 91,652 to 116,171 reports.

 

Related Slideshow: Massachusetts Cities With the Most Questionable Insurance Claims

Based on a report by the National Insurance Crime Bureau, here are the 10 Massacusetts cities that have filed the most questionable insurance claims.

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10. Framingham

Population: 63,318*

Questionable Claims By Year

2012: 30

2011: 16

2010: 16

 

*2010 US Census Data

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9. Quincy

Population: 93,027*

Questionable Claims By Year

2012: 31

2011: 13

2010: 20

 

*US Census Data, 2012 estimate

Prev Next

8. Lowell

Population: 108,522*

Questionable Claims By Year

2012: 34

2011: 36

2010: 36

 

*US Census Data, 2012 estimate

Prev Next

7. Revere

Population: 53,179*

Questionable Claims By Year

2012: 37

2011: 22

2010: 30

 

*US Census Data, 2012 estimate

Prev Next

6. Lynn

Population: 91,253*

Questionable Claims By Year

2012: 47

2011: 44

2010: 45

 

*US Census Data, 2012 estimate

Prev Next

5. Lawrence

Population: 77,236*

Questionable Claims By Year

2012: 55

2011: 29

2010: 36

 

*US Census Data, 2012 estimate

Prev Next

4. Brockton

Population: 94,094*

Questionable Claims By Year

2012: 75

2011: 52

2010: 72

 

*US Census Data, 2012 estimate

Prev Next

3. Worcester

Population: 182,669*

Questionable Claims By Year

2012: 79

2011: 57

2010: 47

 

*US Census Data, 2012 estimate

Prev Next

2. Springfield

Population: 153,552*

Questionable Claims By Year

2012: 119

2011: 80

2010: 59

 

*US Census Data, 2012 estimate

Prev Next

1. Boston

Population: 636,479*

Questionable Claims By Year

2012: 511

2011: 468

2010: 370

 

*US Census Data, 2012 estimate

 
 

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