Author Archives: Fernando L. Roig, Esq.

Crooks Use Stolen IDs to Take Vehicles, Reports NICB

The National Insurance Crime Bureau (NICB) has noticed an uptick in the use of more sophisticated schemes to steal cars as new vehicle technology makes methods like hot-wiring almost obsolete. These findings highlight a growing trend in “financial fraud” auto theft.

Even though these vehicles are technically stolen by crooks, the methods they use for the theft—in legal terms—constitute financial fraud, the NICB explained in a news release. Consequently, these stolen vehicles are not counted as auto thefts, partially explaining a continual decline in auto theft crime statistics over the past two decades.

One such ploy involves the use of stolen forms of identification, such as fake drivers’ licenses and personal information stolen from identity theft victims. Stolen IDs are used to fraudulently lease or obtain loans to procure new vehicles. Once the crooks drive the vehicle off the lot, they never make scheduled payments. Often instead, these cars are re-sold to unsuspecting buyers after the scammers switch the Vehicle Identification Numbers (VINs).

Unfortunately for investigators, there is currently no central database that quantifies these crimes.

“Trying to put a number on these kinds of thefts is a challenge,” said NICB President and CEO Joe Wehrle. “It’s comparable to a hacker stealing IDs—you don’t know you’re a victim until it’s too late. Most of these thefts don’t show up in traditional crime reporting numbers and become financial losses for lenders, car rental companies and others. The result is millions of dollars added to the cost of doing business which is ultimately passed on to consumers.”

NICB advises consumers to frequently check their credit reports for signs that someone else is using their identity to take out new loans.

Because these types of “white collar” crimes have become more widespread, the NICB has launched a new series to draw attention to the growing trend in order to raise public awareness and thwart these types of auto thefts. Over the next few months, NICB will expose other new schemes that criminals are using to steal cars besides using stolen IDs.

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Text Mining an Emerging Tool in Anti-Fraud Technology

Insurer use of anti-fraud technology is rising, according to a report released this month by the Coalition Against Insurance Fraud. The study reports that as of 2014 nearly all insurers (95 percent) said they use anti-fraud technology, compared to 88 percent in 2012.

Evidence that fraudulent activity is increasing bolsters the growing business need for technology-based solutions. More than half the insurers surveyed said that suspicious activity has risen over the last three years and that it flows through the entire claims cycle.

Fraud schemes today have not only increased in number, but shifted away from auto theft and more towards bodily injury and suspicious medical provider activity, according to the study. Insurers, needing to adapt to these tactical changes, are increasingly adopting advanced analytics to combat the evolving nature of fraudulent activity.

Advanced technological tools may help limit the rise in fraudulent activity, according to the report. The survey found that while 81 percent of insurers use basic technology tools, far fewer employ more advanced technology, such as link analysis (50 percent), predictive modeling (43 percent), or text mining (43 percent).

The most common challenge faced by 53 percent of insurers when considering implementing advanced anti-fraud technology is the lack of IT resources. Among other obstacles, SIU’s inability to process the large volume of potentially fraudulent claims was cited by 6 percent of insurers.

The increased presence of organized crime rings is a noteworthy development in the evolution of fraudulent activity. Text mining is one anti-fraud tool that can be utilized to expose these crime rings at the beginning of the claims process.

Text mining can connect information that is otherwise unstructured data buried in multiple, separate places, i.e., adjuster field notes, email, medical records, and police reports. By using text mining, insurers can explore this data to discover previously unknown concepts and patterns. For example, insurers use text mining to discover scripted comments in claims notes and call center logs, allowing them to notice incidences where multiple, allegedly unrelated, claimants say the same thing.

The study concludes that an anti-fraud strategy incorporating advanced technology and tools will result in a much higher fraud detection rate, thus ultimately cutting overall costs for insurers.

The report, titled “The State of Insurance Fraud Technology,” is published jointly by the Coalition Against Insurance Fraud and SAS. Click on the link to read more.

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Bodily Injury Claims Costs Drop when Data Analytics Increases, Study Finds

A recent study by LexisNexis concludes that insurance companies incorporating more data into the claims process at an earlier stage can realize considerable benefits. According to the study, carriers incorporating third-party data and analytics into their initial claims process, preferably at first notice of loss, can realize greater efficiency, reduced costs, and increased customer satisfaction.

LexisNexis completed a study of more than 10 million features from A.M. Best’s top 20 personal auto carriers. The dataset utilized in the study included 400,000 third-party bodily injury features.

These features were separated by the availability of certain data elements immediately after completion of the claim reporting process and before assignment. “Less Data” features included a telephone number and only one additional data element or had no telephone number but all the other elements; “More Data” features included a telephone number and two or more other data elements.

Comparing bodily injury settlements between the Less Data and the More Data groups, it became clear that having multiple data fields earlier in the claims process resulted in lower average severity payments, expense levels, and cycle time.

For example, in the Less Data category, the average bodily injury loss was $7,359; having More Data reduced the average loss by 15%, to $6,255. Furthermore, the average duration of the claims process went down from 116 days to 110 days.

As insurance carriers face increasing pressures to reduce expenses, they will look closely at the efficiency and effectiveness of their claims function. Based on the results found in the study, the authors conclude that the solution is to incorporate real-time data and analytics throughout the claims process.

Click on the link for more information about the survey, titled “More Data, Earlier: The Value of Incorporating Data and Analytics in Claims Handling.”

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Jeff Atwater, Facing Re-Election, Notes Success in Shutting PIP Clinics

Jeff Atwater has served as Florida’s Chief Financial Officer since January 4, 2011, and is up for re-election in November. He recently spoke with the editorial board at The News-Press in Naples about his accomplishments and priorities.

In a wide-ranging interview, Mr. Atwater emphasized Florida’s fight against fraud as an area of success. Some highlights from the interview follow.

“We have worked with sheriffs, the state attorney’s office, the FBI and locally with law enforcement, under the umbrella of financial literacy,” notes Mr. Atwater. “We are beginning to neutralize this. We are shutting PIP clinics and under-the-table transactions.”

Key accomplishments in the state’s continuing battle against fraud over the past three years include:

  • 5,000 insurance fraud arrests
  • 2,000 arrests in PIP fraud cases
  • $129 million in public assistance fraud uncovered

Atwater may run for governor or the U.S. Senate in four years, according to the article. He has served in public office since 1993, when he was elected Vice Mayor of North Palm Beach. He was elected to the House of Representatives in 2000 and the Florida Senate in 2002. In 2008 he was selected to serve as Senate President.

Click on the link to read the full article.

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Florida’s Third-Party Bad-Faith Laws are Costly to State’s Auto Insurance, Says IRC Study

More than $800 million in additional auto liability claim payments were made in 2013 as a result of Florida’s third party bad-faith lawsuit environment.

Those findings were revealed in a recent study—“Third-Party Bad-Faith in Florida’s Automobile Insurance System”—conducted by the Insurance Research Council (IRC). This translates to an average of $79 in additional claim costs for every insured vehicle in the state.

From 1995 through 2013, Florida experienced a striking increase in the frequency of bodily injury liability claims and a significant jump of 68 percent in average claim payments per insured vehicle, according to the report.

Compare that to other large no-fault states that do not authorize third-party bad-faith lawsuits against insurers, such as New Jersey, New York and Pennsylvania, where notable declines in liability claim frequency and much smaller increases or even declines in claim payments per insured vehicle were found.

A contributing factor in Florida’s growing problem with third-party bad-faith lawsuits is believed to be the “apparent failure of the no-fault system’s tort threshold to limit access to liability reimbursement under most auto insurance policies,” according to the study. Other no-fault states’ systems are designed to limit the number of liability claims that are filed for reimbursement for lost wages and medical costs.

In contrast, Florida’s tort threshold appears not to minimize liability claim frequency. In 2013, Florida’s bodily injury claim frequency rate was not only higher than most tort system states (states without no-fault coverage), but was higher than the U.S. frequency rate for liability claims.

“The virtually unrestricted ability to file a third-party bad-faith lawsuit against an insurance company poses a serious threat to Florida’s auto insurance system,” said Elizabeth A. Sprinkel, CPCU, senior vice president of the IRC. “The possibility of winning large bad-faith settlements and court judgments creates powerful incentives for potential claimants and their attorneys to file auto liability insurance claims that otherwise would not be filed.”

The IRC said that it will be doing more research related to the impact of Florida’s tort threshold and other important aspects of the no-fault system and will publish those findings later this year.

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Three Jacksonville Residents Charged with PIP fraud

Florida Chief Financial Officer Jeff Atwater recently announced that three Jacksonville residents have been arrested for personal injury protection fraud. The suspects—Yolanda Vargas, Christian Vargas, and Willdelyn Rodgriguez—have each been charged with one count of committing a staged motor vehicle accident and one count of insurance fraud.

A fourth suspect by the name of Felix Vargas, who has not yet been located, is alleged to have recruited the three individuals to participate in the fraud scheme. He is believed to be connected to a New York identity theft ring, as well as to an IRS scam in which he directed payment of others’ tax refunds to himself.

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Jacksonville Couple Sentenced in “Family & Friends” PIP Insurance Fraud Ring

A married couple convicted of staging car crashes with family members—as we first reported on our FL-PIP Guide on June 23—was recently sentenced for their involvement in an extensive insurance fraud ring in Duval County.

According to a news release issued by the State Attorney’s Office for the Fourth Judicial Circuit, Jose Alberto Velez, 30, received 74 months in prison for three counts of knowingly participating in an intentional motor vehicle crash and five counts of false insurance claims. His wife, April Rosita Wynn, 23, was sentenced to 48 months in prison for two counts of knowingly participating in an intentional motor vehicle crash and four counts of false insurance claims.

A 2012 investigation by the State Attorney’s Office (SAO) and the Division of Insurance Fraud (DIF) found that Velez and Wynn, who are now married, had been recruiting family members and friends to participate in staged car crashes with them. They would then file Personal Injury Protection (PIP) claims through designated rehabilitation clinics, which provided bogus treatment for the participants’ fictional injuries.

Over the past year-and-a-half, almost 100 individuals have been arrested for their involvement in this insurance fraud scheme. Many have already been sentenced, including one of the ringleaders, David Rodriguez Lopez. He received 15 years in prison on charges of schemes to defraud over $50,000, false insurance claims over $100,000, and knowingly participating in an intentional motor vehicle crash.

Other cases are currently pending.

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