What is Insurance Fraud?

 

Fraud occurs when someone knowingly lies to obtain a benefit or advantage to which they are not otherwise entitled or someone knowingly denies a benefit that is due and to which someone is entitled. According to the law, the crime of insurance fraud can be prosecuted when:

• The suspect had the intent to defraud. Insurance fraud is a "specific" intent crime. This means a prosecutor must prove that the person involved knowingly committed an act to defraud.

• An act is completed. Simply making a misrepresentation (written or oral) to an insurer with knowledge that is untrue is sufficient.

• The act and intent must come together. One without the other is not a crime.

• Actual loss is not needed as long as the suspect has committed an act and had the intent to commit the crime. No money necessarily has to be lost by a victim.

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What Types of Insurance Fraud or Other Crimes Does the Fraud Division Handle?

The Fraud Division is charged with enforcing the provisions of Chapter 12 of the California Insurance Code, commonly referred to as the "Insurance Frauds Prevention Act," California Penal Code, Sections 549-550 and California Labor Code, Section 3700.5. Current law requires the Fraud Division to investigate various felony provisions of the Penal and Insurance Codes. Most often, investigations conducted by the Fraud Division involve some aspect of a "Suspected Fraudulent Claim" or other related crimes.

Cases investigated by the Fraud Division most often involve criminal acts involving automobile property and personal injury, workers' compensation, health insurance and residential and commercial property claims. Some examples of the types of insurance fraud that are investigated include:

• Automobile Collision

• Automobile Property

• Medical

• Life

• Workers' Compensation

• Other

• Fire

• Property

• Healthcare

California and federal laws also permit the Fraud Division to pursue its cases federally. In those instances, the crime of "insurance fraud" is usually pursued as "mail fraud," "criminal racketeering" or other federal offenses.

 

Types of Insurance Fraud

 

Automobile Collision

• Swoop & Squat

• Backing

• Right of Way

• Hit& Run

• Organized Ring

• Sudden Stop

• Pedestrian Vs Auto

• Phantom Vehicle

• Paper Collision

• Medical Provider

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Automobile Property

• Faked Damages

• Vehicle Theft

• Auto Property/Vandalism

• Embezzlement

• Trailered Watercraft Arson

• Inflated Damages

• Vehicle Arson

• Agent/Broker

• Trailered Watercraft/Theft Damage

• Other Auto Property

Medical

• Slip & Fall

• Disability

• Pharmacy

• Embezzlement

• Inflated Billing

• Food Contamination

• Dental

• Other Medical

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Life

• Questionable Death

• Suspicious/False Policy Application

Workers' Compensation

• Claimant Fraud

• Legal Provider

• Pharmacy

• Under Reported Wages (Premium Fraud)

• Embezzlement

• Employer Defrauding Employee

• Medical Provider

• Misclassification (Premium Fraud)

• X-Mod Evasion (Premium Fraud)

• Uninsured Employer

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Other

• Casualty

• Agricultural/Livestock

Fire

• Commercial Fire

• Residential Fire

• Arson for Hire

• Inflated Fire Loss

Property

• Theft Residential

• Theft Commercial Carrier

• Watercraft/Aircraft Arson

• Property Theft from Vehicle

• Mold Related

• Theft Commercial

• Watercraft/Aircraft Theft

• Vandalism

• Agent/Broker

• Other Property Damage

Healthcare

• Embezzlement

• Unlawful Solicitations/Referral

• Immunization Fraud

• Surgery Center Fraud

• Identity Theft

• Billing Fraud

• Pharmacy

• Disability

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Definitions

Automobile Collision

Swoop - "Swoop" vehicle swerves in front of "squat" vehicle causing "squat" vehicle to slam on its brakes, which causes a rear-end collision with the victim's vehicle.

Sudden Stop - "Squat" vehicle slows down to close gap between his or her vehicle and the victim's vehicle, then brakes suddenly causing a rear-end collision with victim.

Backing - Victim's vehicle collides with suspect's vehicle while backing out of a driveway or while backing out of a parking space in a parking lot.

Pedestrian Vs Auto - Pedestrian versus auto.

Right of Way - Suspect driver appears to give right-of-way to victim driver, usually in an intersection, causing vehicles to collide; suspect later claims no right-of-way was offered.

Phantom Vehicle - Solo vehicle crashes due to vehicle of unknown origin/description.

Hit and Run - "Hit and run" vehicle strikes victim's car and leaves scene of the accident.

Paper Collision - Parties conspire to create illusion of legitimate accident using either pre-damaged vehicles or by intentionally and covertly inflicting damage on the suspect's vehicle(s). Generally, law enforcement is not called to the scene of the accident.

Organized Ring - Collision orchestrated by organized criminal activity involving attorneys, doctors, other medical professionals, office administrators and/or cappers.

Medical Provider - Medical provider inflates billing, knowingly submits bills with improper medical codes and misrepresents facts.

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Automobile Property

Property Faked Damages - Damages to vehicle exaggerated, non-existent, pre-existing or vehicle damaged at a later point in time.

Inflated Damages - Damages inflated or exaggerated, non-existent or pre-existing; excessive billing of vehicle body parts or repair work.

Vehicle Theft - Vehicle or motor home theft.

Vehicle Arson - Vehicle or motor home arson.

Auto Property/Vandalism - Vehicle or motor home vandalism including such items as car rims, stereo equipment and engine parts.

Agent/Broker - Policy backdated prior to loss date and/or theft of premium dollars intended for payment of coverage.

Embezzlement - Embezzlement of funds.

Trailered Watercraft/Theft Damage - Watercraft stolen or damaged while being transported on trailer.

Trailered Watercraft Arson - Arson of a watercraft while transported on trailer.

Other Auto Property - Any other auto-related circumstance not listed above involving the presentation of false documents as proof of insurance.

Medical

Slip & Fall - Suspicious slip/fall claim.

Inflated Billing - Inflated billing by any medical facility, doctor, chiropractor, laboratory, etc.

Disability - Disability claim submitted against disability insurance policy while claimant on permanent or temporary disability and receiving continual benefits and/or vocational benefits and/or claimant reported working or performing activities exceeding alleged physical limitations.

Food Contamination - Foreign object found within food/drink products.

Pharmacy - Pharmacist or pharmacy inflates bills or falsifies billing; person illegally obtains medical prescriptions and submits prescriptions for habitual need.

Dental - Dentist or dental office inflates bills or falsifies billing codes.

Embezzlement - Embezzlement of funds.

Other Medical - Non-auto injury reported by insured and/or claimant; medical assistance was reported.

Life

Questionable Death - Questionable circumstances surrounding reported death; staged death/false identity.

Suspicious/False Policy Application - Suspicious or questionable actions by applicant or policyholder (insured's health misrepresented on application; suspicious timing of application in relation to insured's death); potential for monetary gain from life insurance policy. Include suspicious claims involving murder for profit and claims pertaining to viatical settlements.

Workers' Compensation

Claimant Fraud - Suspicious employee applicant claim. Employer Defrauding.

Employee - Employer committing illegal act against employee(s).

Legal Provider - Legal provider inflates billing or materially misrepresents the facts.

Medical Provider - Medical provider inflates billing, knowingly submits bills with improper medical codes and misrepresents facts.

Pharmacy - Pharmacy inflates bills or falsifies codes.

Misclassification - Misclassifying the type of workers to obtain workers' compensation coverage at a lower premium. (Example: classifying roofers as clerical, etc.)

Under Reported Wages - Misrepresenting payroll to obtain workers' compensation coverage at a lower premium. (Example: Over-reporting wages as if employees are experienced journeyman with less likelihood of injury and thus allowing for lower premiums or under-reporting payroll to keep premiums lower.)

X-Mod Evasion - Misrepresenting claims history by not reporting reportable injuries or by creating shell companies to give the impression of a non or low claims history to obtain workers' compensation coverage at a lower premium.

Embezzlement - Embezzlement of funds.

Uninsured Employer - Uninsured Employers.

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Other

Casualty - Casualty, injury or theft that does not pertain to other fraud code definitions.

Agricultural/Livestock - Suspicious loss or damage incurred to agricultural products and/or livestock not caused by acts of nature.

Fire

Commercial Fire - Suspicious commercial/business fire damage.

Arson for Hire - Suspected arson for hire.

Residential Fire - Suspicious residential fire damage.

Inflated Fire Loss - Inflated claims from fire loss.

Property

Theft Residential - Suspicious residential theft.

Theft Commercial - Suspicious commercial business theft.

Theft Commercial Carrier - Insured reports baggage/cargo lost by commercial carrier (airline, bus, train, vessel).

Watercraft/Aircraft Theft - Theft or damage to watercraft/aircraft while not on a trailer.

Watercraft/Aircraft Arson - Arson of watercraft/aircraft while not on a trailer.

Vandalism - Vandalism or malicious mischief to the interior or exterior of business or residence.

Property Theft from Vehicle - Suspicious theft of personal property while stored in a vehicle or motor home (commonly claimed under a homeowner's insurance policy).

Agent/Broker - Policy backdated prior to loss date and/or theft of premium dollars intended for payment of coverage.

Mold Related - Mold related.

Other Property Damage - Property damage not included in other definitions.

Healthcare

Embezzlement - Embezzlement of funds.

Identity Theft - Using another's identity to secure health care benefits.

Unlawful Solicitations/Referral - Denotes cases where patients are recruited and given incentives to undergo medical procedures, whether those procedures were actually performed or not.

Billing Fraud - Medical provider knowingly submits false medical bills by billing for services not rendered, billing for wrong procedure codes or billing for procedures of a medical necessity when procedures may have been elective or cosmetic in nature and not covered by health insurance.

Immunization Fraud - False billings by medical providers for immunizations that were not given.

Pharmacy - Pharmacy inflates bills or falsifies codes.

Surgery Center Fraud - Any alleged fraudulent activity (billing fraud, etc.) pertaining to outpatient surgery centers.

Disability - Disability claim submitted against disability insurance policy while claimant on permanent or temporary disability and receiving continual benefits and/or vocational benefits and/or claimant reported working or performing activities exceeding alleged physical limitations.

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