In order to submit a fraud referral it’s important to have good understanding of what fraud truly is. In some cases you may have a claimant abusing the system, but this does not necessarily mean they are committing fraud.  Fraud is commonly understood as dishonesty calculated for an advantage.  Merriam-Webster dictionary defines fraud as, the crime of using dishonest methods to take something valuable from another person.  Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading. As it relates to insurance fraud there are various elements that need to be proven for a successful fraud conviction.

An easy way to determine if you have a case that meets the criteria for fraud is to think of the milk campaign, Got Milk?  You have probably seen these commercials or television ads where celebrities or athletes have a milk mustache and the tag line is, Got Milk?  So think of Got Milk, when dealing with fraud except use the below defined acronym for milk to see if you have the 4 elements that are generally required for a successful fraud prosecution.  Let’s take a look at the acronym and how it’s used to identify potential fraud:

M –         Material misrepresentation

I –           Intent to deceive

L –           Loss – a loss or damages occurred as a result of the fraudulent activity

K –          Knowledge.  The subject had knowledge that their statements or actions were untrue.

Let’s look at each one of these a little more in-depth.

Material Misrepresentation – A material misrepresentation is deliberately hiding or falsifying a material fact, which if known by the other party, most likely would have altered or aborted a transaction.  In other words it is a lie that would induce a party to act in a different manner than if they were to know the truth.  It’s important to note that not all false statements are fraudulent. As stated, to be fraudulent, a false statement must relate to a material fact. It should also substantially affect a person’s decision to enter into a contract or pursue a certain course of action. A false statement of fact that does not bear on the disputed transaction will not be considered fraudulent. A few examples of a material misrepresentation:

– A subject provides false information on an auto insurance application that is so important that, had the truth been known, the insurance company would not have issued the policy or would have issued it with a higher premium.

– On a life insurance application an insured indicates that they do not smoke cigarettes, yet it is proven at a later date that they smoked cigarettes on a regular basis.

– A worker’s compensation claimant lies during a deposition, hearing, or while receiving benefits.

Intent You have to be able to prove that an insured acted with an intent to deceive.  There needs to be clear evidence that the act was intentional and not a mistake or oversight.  Essentially, you need to be able to show that the insured acted with a reckless indifference to the truth.

Loss – A loss or damages, typically a monetary loss, must be proven for a successful fraud conviction. This is typically very easy to prove in insurance fraud cases when you can prove the other 3 elements as a fraudulent act would result in the payment of benefits or the payment or reimbursement of expenses when the same are not warranted, or the affording of insurance coverage or protection in exchange for the payment of inadequate premium.

Knowledge – Finally, you must be able to show that the insured had direct knowledge that they were committing fraudulent activities.  A statement of fact that is simply mistaken is not fraudulent. In other words a statement of belief is not a statement of fact and thus is not fraudulent. To be fraudulent, a false statement must be made with intent to deceive the victim. This is perhaps the easiest element to prove, once falsity and materiality are proved, because most material false statements are designed to mislead.

As you can surmises, some of these elements contain nuances that are not all easily proved.  That’s why it’s important to analyze any suspicious claims for these elements.

What do state fraud departments look for when pursuing fraud referrals?

In my experience in dealing with many fraud referrals over the years, I have found that companies who put together the most comprehensive “fraud packages” have the most success with successful fraud convictions.  The truth of the matter is that most state fraud bureaus are understaffed and overwhelmed with work.  Additionally, State District Attorney’s offices are also very busy and dealing with serious felony crimes and oftentimes fraud cases are pushed to the bottom of the pile.   It stands to reason that assisting fraud departments or the DA’s office by providing them with a comprehensive fraud referral that clearly outlines all the elements of fraud and provides concrete supporting evidence will increase your chances of successful fraud convictions exponentially.

In speaking with state fraud investigators across the country, I have been told that to pursue an insurance fraud conviction they always look for the 4 elements previously defined.  They also look for thorough irrefutable evidence and facts, quality video if the case involves a claimant feigning an injury, and consistency in activity to refute any potential good day/bad assertion by the claimant’s attorney.

How to increase your fraud referrals

The key to successful claims investigations and ultimately successful fraud referrals is to build a solid case with as many pieces of evidence as possible.    The better you are able to package your evidence and submit all relevant facts to a state’s respective fraud reporting division, the better chance you have at a successful prosecution.

As discussed in the Ethos Guide to Fraud Fighting book (click here to order a FREE copy), the key to successful investigations is preparation, conducting effective due diligence or background investigations, gathering as much evidence as possible and not just relying on surveillance.

In conclusion, in determining if you have a fraudulent case as opposed to perhaps abuse of the system it is important to identify the following key elements:

– There is always a false representation – the lie.

– The lie must be intentional or knowingly made.

– The lie must be made for the purpose of obtaining a benefit the claimant is not due, denying a benefit that is due, or obtaining insurance at less than the proper rate.

– The lie must be material, that is, it must make a difference: “If the truth had been told, would you have done anything differently?”

Got Milk?