Insurance Telematics: The Fraudsters Kryptonite?
Fasten your seat belts … insurance criminals are innovating again! Below are the latest trends in the world of insurance fraud, and the secret weapon (otherwise known as insurance telematics) that could potentially stop them in their tracks.
Swoop and squat
This refers to a staged accident, real or fictitious, commonly executed by organized crime rings. Lest you hear “organized crime” and start imagining salty mafia types, let’s be quick to add that the bosses are usually doctors and lawyers.
Detecting this type of fraud can be a real challenge for claims investigators, who may struggle to prove that a collision wasn’t an accident. “It’s tough,” said Christopher Tidball, a Property Casualty 360 contributor. “The first critical element is to inspect the damaged vehicles. If the damage, paint transfers or metal striations don’t match, the collision probably never took place.”
Alternatively, they can rely on the data collected from insurance telematics to confirm or disprove the validity of an accident. “The more information that can be gathered … the higher the probability of success,” Tidball said.
And success is possible, by the way. Case in point: Mikhail Zemlyansky made the Coalition Against Insurance Fraud 2015 Hall of Shame when he was pinned with an attempted $279 million in fraudulent claims from wrecks both real and fictitious.
The tow-away blues
Faking wrecks is one way to commit fraud; charging outrageous prices for towing and body work is another. In a tow-away scam, a dishonest firm will monitor police frequencies, show up at the scene of an accident, convince the driver to let them tow the vehicle, and take it to a dirty body shop, which overcharges the insurance company to fix the car. In fact, sometimes they damage the car further. Drivers who carry smartphones have some protection against that tactic: they can document the damages themselves with photos immediately following the collision.
Drivers who get insurance coverage via smartphone telematics are also protected from another type of towing scam, in which a bad firm confiscates a car parked on private property and holds it hostage: telematics provides proof of garaging address.
The not-totally-illegal fraud
Rate evasion is easy, and to make things worse, it’s not illegal in some States. In this scheme, a driver simply registers and insures their car across State lines to get a lower premium. In one example, a mere eight miles made a difference of about a thousand dollars.
Make no mistake, rate evasion is fraud, and fraud is against the law, generally speaking. However, not all legislators have made a firm stand against it, so the penalties are not as painful as they could be. Thanks to grassroots campaigns in affected areas, hopefully that’s about to change. Thanks to telematics data that tracks a vehicle’s garaging address, insurers don’t have to hold out for “hopefully.”
Insurance fraud, a revenue stream for crime rings
Insurance fraud is an $80 billion industry in the U.S. It’s also a handy way for transnational crime rings (including terrorists) to fund their other exploits.
“According to the Coalition Against Insurance Fraud, growing symbiotic connections among cartels trafficking drugs, terrorists, cyber thieves, mob syndicates and organized insurance fraud are using one another’s skill sets to profit in the belly of the underworld,” reports Property Casualty 360. What can make this relatively-easy income harder to bring in? Two words: big data.
Which brings us to the good news. Thanks to a storm of recent innovations, such as insurance telematics, insurers are becoming empowered to thwart criminals and soft fraudsters alike: leveraging data to identify fraud when it occurs, follow up on suspicious activity and respond decisively when needed. We’ve seen it again and again. Crime does best in the dark, after all. Trust telematics to turn on the lights. Learn more about how telematics can work for your company by downloading our “Survive and Thrive” report.