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Barry Zalma, Esq., CFE
Barry Zalma, Esq., CFE
Insurance claims expert, consultant at Barry Zalma, Inc. and author/Publisher at ClaimSchool, Inc.
Published Mar 27, 2024
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Posted on March 27, 2024 by Barry Zalma
Indicators of Insurance Fraud are Investigative Tools
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See the full video at https://rumble.com/v4ln1xr-red-flags-of-insurance-fraud.html and at https://youtu.be/xSnn0wy1yUU
Suspicious claims have common attributes. Insurers and their anti-fraud organizations have collated the common attributes into lists of indicators or red flags of fraud. The lists were created as training aids and to be used to determine whether further investigation is required to determine if a claim is legitimate or false and fraudulent. Continually growing, these lists are known as the “red flags” or “indicators” of fraud lists. There are many different categories, ranging from those associated with the claim itself or with insureds to indicators of specific types of fraud, such as bodily injury fraud or arson for profit.
If, when assessing a claim, three or more red flags are found the need for further investigation should be considered and evaluated by the claims person, a supervisor and the insurer’s special investigative unit. The existence of red flags does not mean a fraud has occurred. Red flags are only a signal to the adjuster to investigate further so that the suspicion may be either removed or confirmed. It is not any single indicator that alerts the adjuster to the possibility of a fraudulent claim but a combination of the red flag or red flags discovered coupled with the results of the thorough claims investigation.
Although the existence of multiple red flags should trigger an investigation, failure to investigate has been held to be reasonable as long as there are no patent inaccuracies or actual knowledge of false representations.
Red Flags
As the Nebraska Department of Insurance states in its booklet, Fraud Detection Hints, it is “important to remember that the … possible ‘red flags’ [indicate] that there may be some evidence consistent with an insurance fraud scheme. Any one or two of these by themselves may not raise your suspicions; however, when you have several of these hints (red flags) present or a pattern begins to emerge, you should investigate further or forward your suspicion to the Insurance Fraud Prevention Division.” [O’Donnell v. Allstate Insurance Co., 734 A.2d 901, 1999 PA Super 161 (Pa. Super., 1999); and LeForge v. Nationwide Mut. Fire Ins. Co., 82 Ohio App. 3d 692 (Ohio App., 1992).]
Red Flags Common to a Claim
An adjuster should consider further investigation if a claim occurs:
Red Flags Connected with the Insured or Claimant
Adjusters evaluate the manner in which the insured makes a claim. A few red flags that may raise suspicions include some of the following when the insured or claimant:
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The adjuster or investigator should also pay attention to the insured’s or claimant’s history and background, including their financial situation.
Red Flags Concerning the Insured
Fraud by Insurers
Insurers and their officers commit fraud in many ways, including, but not limited to:
Some examples of fraud by insurers claimed under homeowners policies:
ZALMA OPINION
Red flags are not evidence. They are often contradictory. They are evidence that a fraud might be happening and require, when more than three or four red flags show up in an investigation that it is time to refer the claim to the insurer’s Special Investigative Unit to determine if there exists admissible evidence that a fraud has been attempted.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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