U.S. GOVERNMENT PUBLISHING OFFICE

34–303 PDF WASHINGTON : 2019

S. HRG. 115–431 

INSURANCE FRAUD IN AMERICA: CURRENT ISSUES 

FACING INDUSTRY AND CONSUMERS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CONSUMER PROTECTION, 

PRODUCT SAFETY, INSURANCE, 

AND DATA SECURITY 

OF THE

COMMITTEE ON COMMERCE, 

SCIENCE, AND TRANSPORTATION 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

AUGUST 3, 2017 

Printed for the use of the Committee on Commerce, Science, and Transportation 

( 

Available online: http://www.govinfo.gov 

(II) 

SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JOHN THUNE, South Dakota, Chairman 

ROGER F. WICKER, Mississippi 

ROY BLUNT, Missouri 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

JERRY MORAN, Kansas 

DAN SULLIVAN, Alaska 

DEAN HELLER, Nevada 

JAMES INHOFE, Oklahoma 

MIKE LEE, Utah 

RON JOHNSON, Wisconsin 

SHELLEY MOORE CAPITO, West Virginia 

CORY GARDNER, Colorado 

TODD YOUNG, Indiana 

BILL NELSON, Florida, Ranking 

MARIA CANTWELL, Washington 

AMY KLOBUCHAR, Minnesota 

RICHARD BLUMENTHAL, Connecticut 

BRIAN SCHATZ, Hawaii 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

TOM UDALL, New Mexico 

GARY PETERS, Michigan 

TAMMY BALDWIN, Wisconsin 

TAMMY DUCKWORTH, Illinois 

MAGGIE HASSAN, New Hampshire 

CATHERINE CORTEZ MASTO, Nevada 

NICK ROSSI, Staff Director 

ADRIAN ARNAKIS, Deputy Staff Director 

JASON VAN BEEK, General Counsel 

KIM LIPSKY, Democratic Staff Director 

CHRIS DAY, Democratic Deputy Staff Director 

RENAE BLACK, Senior Counsel 

SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT SAFETY, 

INSURANCE, AND DATA SECURITY 

JERRY MORAN, Kansas, Chairman 

ROY BLUNT, Missouri 

TED CRUZ, Texas 

DEB FISCHER, Nebraska 

DEAN HELLER, Nevada 

JAMES INHOFE, Oklahoma 

MIKE LEE, Utah 

SHELLEY MOORE CAPITO, West Virginia 

TODD YOUNG, Indiana 

RICHARD BLUMENTHAL, Connecticut, 

Ranking 

AMY KLOBUCHAR, Minnesota 

EDWARD MARKEY, Massachusetts 

CORY BOOKER, New Jersey 

TOM UDALL, New Mexico 

TAMMY DUCKWORTH, Illinois 

MAGGIE HASSAN, New Hampshire 

CATHERINE CORTEZ MASTO, Nevada 

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C O N T E N T S 

Page 

Hearing held on August 3, 2017 ............................................................................. 1 

Statement of Senator Moran .................................................................................. 1 

Prepared statement .......................................................................................... 2 

Coalition Against Insurance Fraud 2016 study entitled ‘‘The State of 

Insurance Fraud Technology’’ ...................................................................... 41 

Coalition Against Insurance Fraud 2016 Annual Report .............................. 56 

Statement of Senator Blumenthal .......................................................................... 3 

Statement of Senator Nelson .................................................................................. 3 

Prepared statement .......................................................................................... 4 

Statement of Senator Capito .................................................................................. 38 

WITNESSES

Hon. John D. Doak, Insurance Commissioner, State of Oklahoma, On Behalf 

of the National Association of Insurance Commissioners ................................. 6 

Prepared statement .......................................................................................... 8 

Dennis Jay, Executive Director, Coalition Against Insurance Fraud ................. 11 

Prepared statement .......................................................................................... 13 

Sean Kevelighan, Chief Executive Officer, Insurance Information Institute ..... 17 

Prepared statement .......................................................................................... 19 

Timothy J. Lynch, Director, Government Affairs, National Insurance Crime 

Bureau ................................................................................................................... 20 

Prepared statement .......................................................................................... 22 

Rachel Weintraub, Legislative Director and General Counsel, Consumer Federation of America ................................................................................................ 23 

Prepared statement .......................................................................................... 24 

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INSURANCE FRAUD IN AMERICA: CURRENT 

ISSUES FACING INDUSTRY AND CONSUMERS 

THURSDAY, AUGUST 3, 2017 

U.S. SENATE, SUBCOMMITTEE ON CONSUMER PROTECTION, PRODUCT

SAFETY, INSURANCE, AND DATA SECURITY

COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. 

The Subcommittee met, pursuant to notice, at 9:49 a.m. in room 

SR–253, Russell Senate Office Building, Hon. Jerry Moran, Chairman of the Subcommittee, presiding. 

Present: Senators Moran [presiding], Blumenthal, Nelson, Fischer, Klobuchar, Capito, Hassan, Cortez Masto, and Young. 

OPENING STATEMENT OF HON. JERRY MORAN, 

U.S. SENATOR FROM KANSAS 

Senator MORAN. Good morning, everyone. I call the hearing of 

this Subcommittee on Consumer Protection, Product Safety, Insurance, and Data Security to order. As our title suggests, this Subcommittee exercises wide jurisdiction over a diverse range of topics. 

And this will be our first hearing this Congress to examine matters 

related to insurance, specifically today, that of insurance fraud. 

Thank you for our expert witnesses who have joined us. 

Insurance fraud is a major concern not only for insurers—who 

bear the cost of fraudulent claim payouts—but also consumers, who 

see those costs passed on to them in the form of higher premiums. 

This hearing will examine the scope of insurance fraud at large in 

the United States and address nationwide fraud trends across a variety of insurance markets, including property and casualty, and 

life insurance. In addition, we’ll discuss the tools available to 

states, insurers, and consumers to protect themselves against these 

crimes. 

The insurance industry has an enormous presence in the United 

States. There are nearly 3,000 property and casualty insurance 

companies across the country, another 850 life and health insurance companies. Together, they generated over $1 trillion in premiums in 2015 alone. 

The FBI reports that the sheer size of this industry makes it an 

attractive target for criminals by providing ample opportunities 

and bigger incentives for committing illegal activities, estimating 

the total cost of non-health insurance fraud in the United States 

at more than $40 billion annually. That level of insurance fraud, 

in turn, costs the average American family upwards of $700 per 

year in the form of increased premiums. 

2 

With examples of insurance consumer concerns as recent news 

reports indicate, Wells Fargo charged its automobile loan customers for collision insurance they did not need, this hearing is 

timely. As for oversight, my staff is already in communication with 

Wells Fargo regarding these concerns, and we plan to follow up accordingly to gather additional information on the circumstances 

and what should be done. 

While insurance is largely regulated at the state level, insurance 

fraud schemes can and do lead to Federal criminal charges, and I 

believe the Federal Government must do what it can to protect consumers from bad actors who seek to defraud them. 

As was a common theme among popular consumer scams discussed in this Subcommittee earlier this year, insurance fraud 

schemes are constantly evolving and growing in complexity over 

time. Technology must and will play a crucial role in catching sophisticated fraud activity. And I look forward to learning more 

from our distinguished witness panel about the use and efficacy of 

emerging technologies, data collection, and information-sharing 

practices to better detect and prevent insurance fraud. 

Once again, thank you for being here. Thank you for generously 

delaying your August travel plans to be part of this important 

hearing. 

[The prepared statement of Senator Moran follows:] 

PREPARED STATEMENT OF HON. JERRY MORAN, U.S. SENATOR FROM KANSAS

Good morning, everyone. I call to order this hearing of the Senate Subcommittee 

on Consumer Protection, Product Safety, Insurance and Data Security. 

As the title suggests, this Subcommittee exercises wide jurisdiction over a diverse 

range of topics. This will be our first hearing this Congress to examine matters pertaining to insurance—specifically, that of insurance fraud. Thank you to our expert 

witnesses who came here to join us today. 

Insurance fraud is a major concern not only for insurers—who bear the costs of 

fraudulent claim payouts—but also consumers, who see these costs passed on to 

them in the form of higher premiums. This hearing will examine the scope of insurance fraud at-large in the United States and address nationwide fraud trends across 

a variety of insurance markets, including property and casualty, and life insurance. 

In addition, we’ll discuss the tools available to states, insurers, and consumers to 

protect themselves against these crimes. 

The insurance industry has an enormous presence in the United States. There are 

nearly 3,000 property and casualty insurance companies across the country, and another 850 life and health insurance companies. Together, they generated over 1 trillion dollars in premiums in the year 2015 alone. 

The FBI reports that the sheer size of this industry makes it an attractive target 

for fraudsters by providing ample opportunities and bigger incentives for committing 

illegal activities, estimating the total cost of non-health insurance fraud in the U.S. 

to be more than 40 billion dollars annually. That level of insurance fraud, in turn, 

costs the average American family upwards of 700 dollars per year in the form of 

increased premiums. 

With examples of insurance consumer concerns like recent news reports indicating 

Wells Fargo charged its automobile loan customers for collision insurance they did 

not need, this hearing is exceptionally timely. As for oversight, my staff is already 

in communication with Wells Fargo regarding these concerns, and I plan to follow 

up accordingly to gather additional information on the circumstances and what is 

being done to address these issues. 

While insurance is largely regulated at the state level, insurance fraud schemes 

can and do lead to Federal criminal charges, and I believe the Federal government 

must do what it can to protect consumers from bad actors who seek to defraud 

them. 

Raising consumer awareness is a significant component of helping consumers protect themselves, and to that end this hearing will highlight a number of current inVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
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surance fraud trends—including auto insurance fraud, workers’ compensation fraud, 

fee churning schemes, and contractor fraud in the wake of natural disasters. 

As was a common theme among popular consumer ‘‘scams’’ discussed in this Subcommittee earlier this year, insurance fraud schemes are constantly evolving and 

growing in complexity over time. Technology must and will play a crucial role in 

catching sophisticated fraud activity, and I look forward to learning more from our 

distinguished witness panel about the use and efficacy of emerging technologies, 

data collection, and information sharing practices to better detect and prevent insurance fraud. 

Once again, thank you all for being here and generously delaying your August recess travel plans to be a part of this important hearing. With that I will now turn 

to the Ranking Member, Senator Blumenthal, for his opening remarks. 

Senator MORAN. And I now turn to my Ranking Member, Senator Blumenthal, for his opening remarks. 

STATEMENT OF HON. RICHARD BLUMENTHAL, 

U.S. SENATOR FROM CONNECTICUT 

Senator BLUMENTHAL. Thank you, Mr. Chairman, and thank you 

so much for having this hearing. 

Before I give some very, very brief opening remarks, I want to 

yield to the Ranking Member, my friend Senator Nelson, for some 

remarks because he has to leave to go to a classified intelligence 

briefing this morning. 

STATEMENT OF HON. BILL NELSON, 

U.S. SENATOR FROM FLORIDA 

Senator NELSON. Thank you for your courtesies, Mr. Chairman 

and Senator Blumenthal. 

Years ago, I had the hardest job, Commissioner, that I’ve ever 

had in public service, that of the elected insurance commissioner of 

Florida. Not the least of one of the challenges was the fact that we 

inherited a mess in the aftermath of a monster hurricane. 

In the course of all of those years of trying to be a proactive insurance commissioner, we would run into fraud quite a bit. And 

when I say ‘‘quite a bit,’’ I mean a small percentage, just minimal 

percentage, of all the insurance that is bought and sold, but when 

you would find it, it would be despicable. 

For example, we found insurance companies selling low-value 

burial policies that had done it for decades in the African American 

community for which they charged the African American community a higher rate than the same policies sold in the white community. Once we discovered that and busted it open, it quickly 

stopped. Some of those insurance companies have long since been 

sold to other insurance companies, and the practice involved some 

of the national insurance companies. 

Individual states, not the Federal Government, continue to be 

the primary regulators of insurance. And, that fact is not lost on 

us, as we are now trying to fix the existing law on health insurance. As we’re going forward, the insurance commissioners are 

going to have to be brought into the discussion to determine what 

will work in their states. As recently as last night, there were a 

group of 14 of us, interestingly, divided evenly between Rs and Ds, 

talking about the fixes that could be done primarily through Senator Alexander’s Committee, once we get back here in September. 

And so it’s important that we consider your ideas, Mr. Commissioner. 

4 

Insurance has been an issue in front of us so much because of 

the dominance of the debate of health care. We discussed, for example, one of the experiences that we had in Florida when I inherited a paralyzed marketplace in the state because insurance companies had fled Florida due to monster Hurricane Andrew. 

By the way, there happened to be a lot of fraud committed in the 

course of all of that debacle. And one of the ways of getting insurance companies back into the state was to create a reinsurance 

fund against hurricane catastrophe. That fund exists today with 

huge reserves, the Florida Hurricane Catastrophe Fund. 

As we look at the question of fraud, I am very, very appreciative 

of you, Mr. Chairman and Mr. Ranking Member, that you all would 

hold this hearing. All fraud does is it hurt insurance companies, 

hurt the people, and hurt the providers, and hurt the agents. It 

hurts everybody, and we ought to be ferreting it out. 

Thank you for bringing forth this hearing. Thank you. 

[The prepared statement of Senator Nelson follows:] 

PREPARED STATEMENT OF HON. BILL NELSON, U.S. SENATOR FROM FLORIDA

Thank you for calling this hearing Mr. Chairman. As Florida’s former insurance 

commissioner, I’ve seen firsthand how fraud impacts consumers and insurers. 

Insurance fraud takes on many forms from sales abuses that target the elderly 

to ‘‘cash for crash’’ schemes where accidents are deliberately staged or caused for 

financial gain. 

One of the most despicable cases I can recall was that of an insurer who took advantage of black policyholders for decades by overcharging them for burial policies. 

Fortunately, we were able to put a stop to that practice. 

While individual states, and not the Federal government, continue to be the primary regulators of insurance, I welcome hearing from our distinguished panel today 

regarding the trends they’re seeing on the fraud front and whether there is a role 

the Federal government can play to help the states. 

Meantime, since we are talking about insurance, I would also like to take this opportunity to share my thoughts on last week’s health care vote and its aftermath. 

As I have said throughout this process, we need to come together and seek bipartisan solutions to fix the Affordable Care Act and not undo all of the good things 

its done. 

That is why I’ve been working with Senator Collins to find solutions that will provide immediate relief to families back home. 

In fact, over the last week the two of us have joined a bipartisan group of other 

senators who share our desire to find a path forward. 

We’ve discussed creating a permanent reinsurance fund to lower the financial risk 

of insurance companies and reduce premiums for American families. 

I’ve seen this work before during my days as insurance commissioner following 

Hurricane Andrew, the second costliest hurricane in our Nation’s history. 

In Andrew’s aftermath, Florida established a reinsurance fund to insure the insurance companies for their catastrophic losses. 

The same thing can and should be done for health care. 

I cosponsored a bill to create a permanent reinsurance program that would provide Federal funding to cover 80 percent of insurance claims falling between $50,000 

and $500,000 over the next two years. 

After that, Federal funding would cover 80 percent of insurance claims between 

$100,000 and $500,000. 

One Florida insurer estimated the bill would reduce premiums for Floridians by 

up to 13 percent. 

We can also work in a bipartisan manner to fund payments that lower Americans’ 

out-of-pockets costs. 

These are the same payments the administration is threatening to end that lower 

costs for millions of Americans. 

If these payments are stopped, there will be real consequences. 

Working families will face higher premiums and fewer insurance options. In Florida, premiums will increase by 25 percent if these payments are cancelled. 

Higher costs mean fewer folks will be able to afford coverage. 

5 

Our colleagues on the HELP Committee, Chairman Alexander and Ranking Member Patty Murray, have the right idea. 

They have committed to holding a series of hearings with the goal of stabilizing 

the ACA’s insurance market. 

That’s a good start and one I hope we can all get behind because, in reality, it’s 

going to take more than just a few of us to improve health care for families back 

home. 

That said Mr. Chairman, I would welcome working with you or any of my colleagues here to find that path forward. 

Senator MORAN. Senator Nelson, thank you for joining us. We 

appreciate you being here and understand there are other commitments. 

And I again recognize the Senator from Connecticut, the Ranking 

Member. 

Senator BLUMENTHAL. Thank you. 

Senator Nelson is absolutely right. Insurance fraud hurts everyone, including the business people, who are charged higher premiums, as well as consumers, because insurance fraud is costly to 

those companies. And, of course, it hurts individual consumers who 

are misled or deceived when they believe they are owed money for 

legitimate claims and they find that somehow there is fine print in 

the policy, sometimes inserted or interpreted in ways they never 

thought possible. And that’s why we’re here today. 

I hope that you will not take personally the anger and frustration that I and others may express today. Your willingness to be 

here I think is very important, and I want to thank each of you 

for being here to enlighten us and respond to our questions. 

But what we’ve seen is, for example, in Connecticut, homeowners 

affected by a substance called pyrrhotite. Insurance companies 

have surreptitiously modified their homeowner policies without 

properly telling them to exclude damage to a home’s foundation 

once the insurance companies learn that those foundations had a 

potential and naturally occurring flaw as a result of that substance, 

pyrrhotite. The insurance companies in effect changed the policies 

without properly notifying their consumers. And I’m going to be 

asking questions about that occurrence. 

Insurance companies have stalled and delayed payment of claims 

citing obscure clauses in policies, forcing policyholders into protracted and expensive legal battles just to receive legitimate and 

rightful claims. 

Insurance companies have used Social Security data to cut off 

annuity or retirement payments upon a policyholder’s death, but 

they haven’t stopped collecting premium payments in the meantime. And just last week, we learned about Wells Fargo forcing unwanted insurance on auto loan borrowers without their knowledge 

since at least 2012 through a process known as, ‘‘force-placed insurance.’’ 

I spent a couple of decades as Connecticut’s Attorney General, 

and I saw all kinds of fraudulent schemes and the stories and testimonies about misleading and sneaky insurance companies from 

Americans across my state in Connecticut, ought to be of tremendous concern because at the end of the day, what insurance companies have that’s most important to them is their credibility and 

their reputation for honesty. And these kinds of instances, even if 

they are a handful, cost literally millions, tens of millions, of dolVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\34303.TXT JACKIE
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lars to ordinary consumers, and they give the vast majority of insurance companies and brokers and agents a bad name. 

And I want to hear today from industry and consumer advocates 

about how we can hold insurance companies accountable for any 

misleading or unfair action. I hope that today’s hearing is the beginning, not the end, of this inquiry. 

And again I thank the Chairman for having us all together 

today. And I will be—I’ve read your testimony. I’m going to be leaving for your testimony because I have a Judiciary Committee meeting, but I’ll be back for the questions. 

I apologize for my absence, Mr. Chairman. 

Senator MORAN. Senator Blumenthal, thank you for your cooperation. We look forward to your return. I’ll introduce the witnesses, and we’ll take their testimony. 

Our panel consists of the following: The Honorable John Doak, 

who is the Oklahoma Insurance Commissioner, and he is here testifying on behalf of the National Association of Insurance Commissioners; Mr. Dennis Jay, Executive Director, Coalition Against Insurance Fraud; Mr. Sean Kevelighan, Chief Executive Officer, Insurance Information Institute; Mr. Tim Lynch, Director of Government Affairs, National Insurance Crime Bureau; and Ms. Rachel 

Weintraub, General Counsel, Consumer Federation of America. 

Thank you all for being here today. 

We’ll begin with you, Commissioner Doak. Senator Inhofe intended to introduce you today. He is unable to be with us this 

morning. He had prepared some remarks of introduction, and I will 

make those a part of the record. We now turn to you for your testimony. 

STATEMENT OF HON. JOHN D. DOAK, INSURANCE 

COMMISSIONER, STATE OF OKLAHOMA, ON BEHALF OF THE 

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS 

Mr. DOAK. Thank you very much. 

Good morning, Chairman Moran, Ranking Member Blumenthal, 

and members of the Subcommittee. I appreciate the opportunity to 

testify to provide state insurance regulators’ perspective on insurance fraud trends and our efforts to reduce and deter this activity. 

Insurance is an attractive target for fraud because detection can 

be challenging. Unlike bank or credit card accounts, consumers do 

not frequently interact with insurance policies. Premiums are typically paid annually, and claims are filed only upon injury, death, 

or damage to one’s property. With consumers and business spending over $2 trillion on insurance per year with infrequent interactions, tempting windows of opportunity are created for criminals. 

Some estimate insurance fraud costs between $80 billion to $100 

billion annually across all lines of insurance. Ten percent or more 

of the property/casualty insurance claims may be fraudulent. 

State insurance regulators are tracking several current trends in 

insurance fraud. For example, state insurance departments have 

seen contractor and adjustor fraud occurring after natural disasters. In these instances, contractors or insurance adjusters require 

advanced payment from consumers for services or advance assignment of insurance policy benefits and then disappear without ever 

doing the work. In cases where repairs were made, the contractor 

7 

does shoddy work using substandard materials. In Oklahoma, my 

department’s Anti-fraud Unit deploys after disasters to assess damage and educate consumers about fraud prevention. Here’s a photo 

of myself and Governor Fallin and state legislators with our antifraud unit after a recent tornado in Elk City, Oklahoma. 

[Photo shown of Mr. Doak with Governor Fallin] 

We’ve also seen a scam where strangers offer to replace vehicle 

windshields, claiming it’s unsafe and the insurance will cover the 

cost. Even though the windshield is undamaged, the fraudster replaces it, files a claim on the individual’s policy, and not only is the 

work unnecessary and the claim fraudulent, but the replacement 

windshield may not be installed correctly, leading to serious safety 

risk. 

Last, state insurance regulators are seeing an increase in fraudulent activity in the health care sector, such as prescription drug 

and medical equipment scams, including unjustified claims and 

identity theft. These trends are deeply troubling, which is why 

fighting insurance fraud is one of the highest priorities of state insurance regulators. We initiate inquiries on suspected fraud acts, 

and we have the authority to conduct exams to investigate. Many 

of the state bureaus possess law enforcement powers and may have 

civil authority to impose fines. 

State insurance regulators work with insurers and their special 

investigation units to address suspected fraud and ensure that they 

are complying with state fraud prevention statutes. As part of our 

anti-fraud efforts, state insurance regulators formed an Antifraud 

Task Force in the 1980s to coordinate this work. I serve as the current Chair. In this task force, the states review fraudulent insurance activities, discuss national trends, address concerns related to 

insurance agent fraud and unauthorized insurance sales. We also 

engage with consumers and insurers to address anti-fraud issues. 

The NAIC created the Online Fraud Reporting System through 

which consumers and insurers can report suspected fraud to insurance departments. This provides consumers and insurers one central portal to report suspected fraud. A report made against an insurer or intermediary is delivered to all states in which they do 

business. 

In addition, the Task Force is evaluating sources of anti-fraud 

data and looking at ways to improve the exchange of information 

among regulators, law enforcement, insurers, and anti-fraud organizations. The Task Force is developing uniform fraud referral requirements that would require companies to submit data relating 

to suspected fraud to insurance departments. 

Finally, we engage in efforts to educate consumers regarding insurance fraud. The NAIC has consumer resources, including its 

‘‘Fight Fake Insurance’’ program, which encourages, ‘‘Stop, Call, 

and Confirm,’’ the insurance agent and the company to make sure 

the insurance agent and company are properly licensed before buying coverage. 

In conclusion, as insurance fraud continues to develop, the state 

regulators will remain vigilant. We continue to adapt strategies 

that prevent and detect fraud in order to protect consumers and 

maintain insurers’ financial health. 

8 

1The NAIC is the United States standard-setting and regulatory support organization created 

and governed by the chief insurance regulators from the 50 states, the District of Columbia, and 

five U.S. territories. Through the NAIC, we establish standards and best practices, conduct peer 

review, and coordinate our regulatory oversight. NAIC members, together with the central resources of the NAIC, form the national system of state -based insurance regulation in the U.S. 2 California, Connecticut, Louisiana, Maryland, and Oklahoma also have fraud bureaus in 

their state attorney general’s office. Louisiana also has a fraud bureau in their state law enforcement agency. 

Thank you, sir, for the opportunity to be here. And we’d be 

pleased to take your questions at the appropriate time. 

[The prepared statement of Mr. Doak follows:] 

PREPARED STATEMENT OF JOHN D. DOAK, INSURANCE COMMISSIONER, STATE OF

OKLAHOMA, ON BEHALF OF THE NATIONAL ASSOCIATION OF INSURANCE

COMMISSIONERS

Introduction 

Chairman Moran, Ranking Member Blumenthal, and members of the Subcommittee, thank you for the invitation to testify today. My name is John Doak. I 

am the elected Insurance Commissioner for the state of Oklahoma and I present today’s testimony on behalf of the National Association of Insurance Commissioners 

(NAIC).1 I serve as the Chair of the NAIC’s Antifraud Task Force as well as its 

Property and Casualty Committee. On behalf of my fellow state insurance regulators, I appreciate the opportunity to provide an overview of our efforts to detect, 

investigate, and prevent insurance fraud. 

Insurance is an essential part of the financial services sector, a fundamental pillar 

of our economy and vital for the well-being of our citizens. It is a means of protection against damage to property or loss of life, and is at the core of the risk management strategies of consumers and businesses. Insurance can be an attractive target 

for fraud because detection can be a challenge. Unlike other financial products, particularly bank or credit card accounts, which consumers access weekly or even daily, 

consumers do not interact with their insurance policies with the same frequency— 

premiums are generally paid monthly or annually and claims are filed only upon 

the occurrence of an insured event such as injury, death, or damage to one’s property. Consumers and businesses spend more than $2 trillion on insurance per year, 

and the relatively infrequent interactions between consumers and many of their 

policies creates tempting windows of opportunity for criminals. The prevalence of insurance fraud costs an estimated $80–100 billion dollars annually across all lines 

of insurance and industry estimates that 10 percent or more of property-casualty 

insurance claims alone may be fraudulent. Insurance fraud inflicts significant financial and personal damage on consumers and imposes additional costs on insurance 

companies that can be passed along to policyholders in the form of higher premiums. 

Reducing and deterring fraud is a priority for state insurance regulators, whose 

antifraud activities aim to protect consumers and maintain insurers’ financial 

health. The state insurance regulatory response to insurance fraud is multifaceted, 

involving consumer education and information, reporting and prevention, investigation, and corrective action. 

State Insurance Regulators’ Efforts to Fight Fraud 

Fighting fraud is an important aspect of state insurance regulation. States combat 

insurance fraud through special fraud bureaus that are charged with identifying 

fraudulent acts, investigating cases, and preventing insurance scams. Thirty-one 

states and the District of Columbia have fraud bureaus housed in their insurance 

department 2 while eleven states have bureaus housed in their attorney general’s office, law enforcement agencies, or another regulatory entity. Other states address 

insurance fraud through their market conduct, consumer affairs, or legal divisions. 

Many state fraud bureaus possess law enforcement powers and may also have civil 

authority to impose fines. State fraud bureaus initiate independent inquiries and 

conduct investigations on suspected fraudulent insurance acts. They also review reports or complaints of alleged fraudulent insurance activities from federal, state and 

local law enforcement and regulatory agencies, persons engaged in the business of 

insurance, and the public to determine whether the reports require further investigation and to conduct these investigations. State fraud bureaus regularly conduct 

independent examinations of alleged fraudulent insurance acts and undertake studies to determine the extent of these acts. States can also access the NAIC’s ReguVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
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latory Information Retrieval System (RIRS), which contains all final adjudicated actions taken and submitted by state insurance departments. This information typically includes administrative complaints, cease and desist orders, settlement agreements and consent orders, and license suspensions or revocations. Since 2007, there 

have been more than 96,000 adjudicated actions submitted by the states into RIRS. 

States can receive alerts through this system. 

State insurance regulators work with insurers and their special investigation 

units (SIUs) to address suspected fraud. The SIUs are divisions within insurers to 

investigate insurance fraud and usually consist of former law enforcement or claims 

employees turned investigators. Insurers’ SIUs must comply with the NAIC Insurance Fraud Prevention Model Act (#680) or similar state fraud prevention statutes. 

This model act creates a framework to help state insurance regulators identify, investigate, and prevent insurance fraud and provides guidance on how to assist and 

receive assistance from other state, local and Federal law enforcement and regulatory agencies in enforcing laws prohibiting fraudulent insurance acts. Further, the 

NAIC Antifraud Plan Guideline (#1690) establishes standards for SIUs regarding 

the preparation of an antifraud plan to meet state insurance department requirements. By conducting an audit or inspection, or by reviewing an insurer’s antifraud 

plan in conjunction with a market conduct examination, state insurance regulators 

help ensure an insurance company is following its submitted antifraud plan. 

NAIC Antifraud Initiatives 

As part of state insurance regulators’ efforts to help fight the growing problem 

of insurance fraud, the NAIC formed an Antifraud Task Force in the 1980s. 

Through this task force, states coordinate efforts to review issues related to fraudulent insurance activities and schemes; address national concerns related to insurance agent fraud and unauthorized insurance sales; educate consumers about insurance fraud; maintain and improves electronic databases regarding fraudulent insurance activities; and disseminate research and analysis of insurance fraud trends to 

the insurance regulatory community. The Task Force also serves as a liaison between insurance regulators, law enforcement and other antifraud organizations, and 

coordinates with state and Federal securities regulators. 

Data collection and information-sharing are critical to our antifraud efforts. 

Through the NAIC, state insurance regulators created the Online Fraud Reporting 

System (OFRS), through which consumers and insurers can electronically report 

suspected fraud to the appropriate insurance department. By using this system, consumers and insurers have one central, online portal to report suspected fraud to one 

or more states. A report made in OFRS against an insurer or intermediary is delivered to all states in which the insurer or intermediary does business. Since its inception in 2005, there have been more than 685,000 reports of suspected fraud received through OFRS. 

In addition, the Task Force is undertaking an initiative to evaluate sources of 

antifraud data and propose methods for improving the exchange of information 

among insurance regulators, law enforcement officials, insurers SIUs, and other 

antifraud organizations. The Task Force is developing uniform insurance fraud referral requirements for insurers to submit suspected insurance fraud data to state 

insurance departments. We are collecting information from the states in order to develop these requirements. Task Force members also continue to develop new and 

update existing seminars, trainings and webinars for regulators regarding insurance 

fraud and relevant trends, and efforts to combat fraud. 

The NAIC and state insurance regulators also play an important role in educating 

consumers. The NAIC has a robust communications effort in place through its consumer alerts and Insure U public education program to assist consumers with navigating the complexities of insurance. The NAIC website provides tools to help consumers avoid being scammed. The NAIC’s ‘‘Fight Fake Insurance’’ program was developed to protect consumers from insurance fraud by encouraging them to ‘‘Stop, 

Call, Confirm’’ that the individual insurance agent and company are properly licensed by their state insurance department before buying coverage. In my home 

state of Oklahoma, my department leads a series of Senior Fraud Conferences 

throughout the year focused on educating and protecting seniors regarding Medicare 

fraud and other types of financial fraud. In 2017, we held seven conferences with 

approximately 500 attendees statewide. 

Coordination with Federal Government and International Partners 

In addition to our work with insurance consumers within our own states, state 

insurance regulators collaborate with our Federal and international colleagues to 

address insurance antifraud issues. State insurance regulators work with the U.S. 

Department of Treasury and other financial regulators on Anti-Money Laundering 

10 

(AML) initiatives as well as initiatives to combat the financing of terrorism (CFT), 

which can involve permanent life insurance, annuities, and other products with cash 

value or investment features. While the Treasury Department’s Financial Crimes 

Enforcement Network (FinCen) has primary responsibility in this arena, state regulators coordinate with FinCen and monitor insurer activities to make sure they are 

not engaging in these activities and are not susceptible to those acts. To cooperate 

and facilitate the sharing of information, state insurance departments and FinCen 

have established Memorandums of Understanding and insurance regulators notify 

appropriate Federal regulators if an insurer is not in compliance with AML/CFT requirements. 

With regard to health care, the NAIC and state insurance regulators participate 

in the Centers for Medicare and Medicaid Services’ (CMS) Healthcare Fraud Prevention Partnership (HFPP), a voluntary public-private partnership between the 

Federal government, state agencies, law enforcement, private health insurance 

plans, and healthcare anti-fraud associations. The HFPP aims to foster a proactive 

approach to detect and prevent healthcare fraud through data and information sharing. 

On the international front, the NAIC actively participates in the International Association of Insurance Supervisors’ (IAIS) Financial Crime Task Force to addresses 

supervisory practices and issues surrounding fraud, anti-money laundering/combatting the financing of terrorism, and cyber risks. 

Current Insurance Fraud Trends 

Through our interactions with our state and Federal regulatory and law enforcement counterparts, we are seeing some disturbing insurance fraud trends, including: 

• Contractor/adjuster fraud following natural disasters: State insurance departments have seen a number of instances of contractor and adjuster fraud recently that have occurred immediately after floods, tornados, and other natural 

disasters. Contractors or insurance adjusters have required advance payments 

from consumers for services or advance assignment of insurance policy benefits. 

In these cases, the contractors sometimes disappear without ever doing the 

work. In other cases where repairs are made, the contractor engaging in this 

conduct does substandard work using substandard materials. In Oklahoma, my 

department’s antifraud unit deploys to disaster areas to assess damage and to 

educate consumers about potential fraud and how to avoid it. They will place 

yard signs in affected areas with our consumer hotline so consumers know how 

to get help with insurance issues and go door to door to speak to impacted individuals. 

• Medical equipment scams on seniors and identity theft: In this scam, seniors receive unsolicited calls from scammers who insist that the seniors have an urgent need for medical equipment and claim Medicare or Medicaid will pay for 

the equipment at no cost to them. The personal information provided by the victim is then used to file unjustified claims and for other fraud schemes, such as 

identity theft. 

• Opioid abuse/insurance scam: As a result of the growing opioid epidemic, state 

insurance regulators are seeing an increase in fraudulent prescription scams to 

capitalize on this surge in addiction. Some corrupt medical professionals are unlawfully and overly prescribing opioids, while billing the costs to insurance companies. ‘‘Pill mill’’ doctors that overly prescribe pills without medical justification run clinics in which they give patients opioid prescriptions, typically for 

cash, with few questions asked. This scheme allows patients to easily obtain 

opioids in order to sell or misuse them. 

• Automotive windshield replacement scams: State insurance departments are 

seeing a rise in a scam whereby a stranger at a car wash, a parking lot attendant, or valet parking service offers to repair or replace a vehicle owner’s windshield. The fraudster claims the windshield is unsafe and says that insurance 

will take care of the entire cost. Even though the windshield is perfectly fine, 

the fraudster replaces the windshield and files a claim on the individual’s policy. Not only is the work unnecessary and the claim fraudulent, the replacement 

windshield may itself be defective, may not be a correct fit or may not be installed correctly, which can then lead to serious safety risks. 

• Life insurance fraud: State insurance departments are also seeing a rise in the 

tragic case of parents or guardians taking out a life insurance policy on their 

child and then murdering them for the payout. State insurance departments are 

currently working diligently on ways to tighten insurers’ underwriting procedures and assist local law enforcement by closely monitoring and possibly preventing the sale and issuance of such policies. 

11 

These examples are a few of the recent trends that we have observed, but other 

fraudulent scams have been around for some time, such as staged auto accidents 

with the resulting fraudulent automotive and medical claims, faked workers compensation claims, and arson by homeowners. 

Conclusion 

As insurance fraud continues to evolve, state insurance regulators remain vigilant 

in our efforts to combat fraud and work with relevant stakeholders to address critical concerns. Our fight against insurance fraud never stops and state insurance 

regulators continue to adapt our strategies to prevent, detect, and investigate such 

schemes to protect consumers and support insurers’ financial health. We appreciate 

the subcommittee’s focus on this important issue and the opportunity to be here on 

behalf of the NAIC, and I look forward to your questions. 

Senator MORAN. Thank you very much for your testimony. 

Now, Mr. Jay. 

STATEMENT OF DENNIS JAY, EXECUTIVE DIRECTOR, 

COALITION AGAINST INSURANCE FRAUD 

Mr. JAY. Chairman Moran, members of the Committee, thank 

you for holding this hearing on an important issue that virtually 

affects every consumer and business in America. My name is Dennis Jay, and I am Executive Director of the Coalition Against Insurance Fraud. We were founded 24 years ago as a national broadbased alliance of the major stakeholders in the fight against fraud, 

and that includes consumers, government agencies, and insurance 

companies. And, in fact, the four organizations represented at the 

table today all had a hand in founding our organization, particularly so with Consumer Federation of America. 

Our mission is to unite the forces in combating insurance fraud, 

while we also are involved in legislative advocacy on the state 

level, empowering consumers to help fight fraud, as well as conducting meaningful research. 

Mr. Chairman, as you said in your opening remarks, overall, insurance fraud in property/casualty specifically, continues to be a 

drain on consumers and businesses in this country to the tune of 

tens of billions of dollars each year. And it’s committed by organized rings, by professionals, such as medical providers and lawyers, insurance agents, by home contractors, by body shops, as well 

as everyday Americans, our friends, coworkers, and neighbors. 

The schemes go beyond just inflating insurance claims. Some of 

them can leave businesses and consumers in financial ruin, some 

can injure and even kill innocent consumers. Our submitted statement includes a comprehensive list of these scams and some of the 

ways that the fraud-fighting community is looking to counter them. 

During the last 20 years, property/casualty insurers have helped 

counter the growing threat by establishing investigation units 

within their company and investing heavily in training and in technology. And on that last point, the sharing of claims data by these 

insurance companies has been absolutely essential in helping to detect fraud, especially some of the schemes by these organized criminal enterprises that are defrauding billions of dollars. 

I would also like to mention that the property/ casualty industry 

also participates in the successful Healthcare Fraud Prevention 

Partnership. This is a collaborative effort in which Medicare, Medicaid, TRICARE, the VA, private health plans, and others share 

data and intelligence on crooked medical providers. And to date, 

12 

this effort, this public-private partnership, has saved over $300 

million. And we just will continue to see good things from them in 

the future. 

However, the property/casualty insurers are not allowed to access 

or to contribute to the data in this rich pool of anti-fraud information because of restrictions in HIPAA, and that’s a shame because 

we know that some of the fraudsters that are ripping off property/ 

casualty insurers are also defrauding Medicare and Medicaid, and 

vice versa. And I know it’s beyond the jurisdiction of this Committee, but at some point, I hope Congress will take a look at that, 

and maybe we can resolve it at some point. 

On the state level, following up on Commissioner Doak, state legislatures really have come to the table and have enacted some very 

responsible anti-fraud initiatives. To date, all states but two have 

enacted specific fraud statutes to define insurance fraud and set 

penalties. 

Thirty-eight states have established anti-fraud units that investigate and prosecute insurance fraud. Many of them have police 

powers. And some of them have prosecutors within their departments that specifically only do insurance fraud, and that has really 

done a lot to help over the last few years. 

There is a high level of collaboration between these state agencies and insurance companies in fighting fraud, and that in part is 

spurred because most states do require insurance companies to report fraud and to sponsor active anti-fraud programs within the 

companies. 

However, after 20 years of increasing efforts to combat fraud, 

we’re convinced that we’re never going to arrest or convict our way 

out of this problem. More focus has to be on prevention and deterrence of insurance fraud. And public outreach programs, again like 

the Commissioner mentioned, have been vital in helping to alert 

consumers about some of the scams that can impact them, and also 

help otherwise honest people understand that there’s a high price 

to pay for committing insurance fraud. And the research that we’ve 

done and others have done demonstrates that these programs are 

powerful in helping to stop fraud, and we need many more of them. 

We use social media to try to engage consumers directly and, 

again, help to educate them about some of the scams, but also we 

see on social media that people brag about committing insurance 

fraud. Some actually use social media, Facebook, and Twitter, to 

solicit others to help them execute scams. We communicate with 

them, too, and hopefully we’ll have an impact on that. 

So at a time when the acceptance of unethical behavior seems to 

be increasing across the country, it’s important that we have strategies that help to counter some of these trends. 

So in conclusion, while I think we’ve come a long way in recent 

years, insurers, state governments, even the Federal Government, 

in combating fraud, and we need to be proud of that, we need to 

understand we’re still a long ways away of turning the corner on 

insurance fraud. But we feel through continued collaboration and 

perhaps some of these prevention and deterrence efforts, we’ll continue down the path of curbing insurance fraud and the associated 

costs to help save all Americans some money. 

Thank you. 

13 

1 ‘‘Colossal crash ring in permanent reverse,’’ http://www.insurancefraud.org/article.htm 

?RecID=3453, December 23, 2015 

[The prepared statement of Mr. Jay follows:] 

PREPARED STATEMENT OF DENNIS JAY, EXECUTIVE DIRECTOR, COALITION AGAINST INSURANCE FRAUD

Mr. Chairman, members of the Committee. My name is Dennis Jay and I am Executive Director of the Coalition Against Insurance Fraud. I commend you for holding this hearing and shedding light on an issue that affects virtually every consumer and every business in the United States. 

The Coalition Against Insurance Fraud was founded 24 years ago as a national, 

broad-based alliance of major stakeholders in the fight against fraud—specifically 

consumers, government agencies and insurance companies. More than 150 mostly 

national organizations belong to our coalition. 

Our mission is to help unite the forces working to combat fraud while focusing 

on legislative advocacy in the states, empowering consumers and conducting meaningful and useful research. The Coalition seeks to curb fraud in all lines of insurance no matter who may be a victim or a perpetrator. 

We have successfully helped enact anti-fraud legislation in more than 20 states 

with what we call ‘‘balanced bills.’’ This means they not only include criminal and 

civil penalties for defrauding insurers, but also include sanctions against people in 

the insurance industry who defraud consumers. 

Fraud is committed by organized fraud rings, by professionals such as medical 

providers, lawyers and insurance agents, by home contractors and auto body shops 

as well as everyday Americans—our neighbors, friends and co-workers. Our research suggests this is an equal-opportunity crime committed by people of all ages, 

income levels, races, gender sand education levels. Most Americans admit to knowing someone who has committed insurance fraud. 

Today, we would like to provide background on the impact and cost of insurance 

fraud in the United States and give you an update of the state of the fraud fight 

in property/casualty insurance. 

Fraud involving automobile insurance, homeowners coverage and commercial insurance continues to be a drain on consumers, businesses and society in general. 

No one knows the total cost of insurance fraud because of the hidden nature of the 

crime. The data the Coalition analyzes from insurers, government agencies and others suggest insurance fraud costs tens of billions of dollars each year. This expense 

creates 

hardships for low and middle-income consumers who are forced to pay an annual 

‘‘fraud tax’’ on premiums for car and home insurance—as well as a built-in cost on 

every good and service. 

Additionally, some scams injure and even kill innocent consumers. Businesses 

also suffer when they can ill-afford workers compensation insurance because of rising premiums due to fraud. Left unchecked, this can also cause an ever-increasing 

spiral as others become more tempted to commit insurance fraud as premiums continue to climb. 

Types of insurance fraud. 

Insurance fraud is one of the most eclectic crimes in America. Types of fraud include: 

Automobile—staged crashes. Perpetrators can include runners, who coordinate the 

scams, drivers, passengers, lawyers and medical providers. Scammers intentionally 

cause cars to collide—sometimes with innocent motorists—to file fake damage and 

medical claims. This type of fraud is most severe in states that have no-fault automobile insurance. Lives are jeopardized when innocent motorists are maneuvered 

into car crashes staged by crime rings to collect large injury payouts from auto insurers. A family of three burned to death when a setup crash went awry after their 

car was hit by two large trucks on a California freeway. A grandmother in Queens, 

N.Y. died when her car went out of control after she was maneuvered into a staged 

crash. One organized ring in New York City collected more than $279 million in 

false claims through a network of chiropractors, lawyers and staged crash coordinators.1

In many cases, medical clinics in these scams are secretly owned by organized 

rings, employ a licensed physician to front for them and offer no real medical services. The tactics by many of these organized fraud rings can change quickly as insurers and government investigators focus on their scams. One day they may be inVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
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2Scammers evolve tactics for medical equipment, sham clinics, nerve tests, Robert A. Stern and 

James A. McKenney, Journal of Insurance Fraud in America, April 2017. 3 ‘‘Smoking Out Insurance-Arson Rings Earns Laura Uriarte Prosecutor Of Year Award,’’ news 

release, January 12, 2017. 

volved in bogus chiropractic care; and the next they are billing for questionable 

medical procedures or useless nerve testing.2 Additionally, motorists with real injuries may be subject to useless template treatment that does nothing to alleviate 

their injuries, and may enhance their injury. 

Automobile—padding/false claim. This usually occurs by a consumer, a body shop 

or glass-repairs facility that pads damage on an existing automobile claim, or submits a bill for unnecessary work or work not done in connection with an auto accident. In some cases, body shops will intentionally inflict more damage after the vehicle has been towed to their facility in order to increase their profits. Repairs may 

be substandard or haphazard, placing unsafe vehicles back on the road. 

Automobile—give-up. Give-ups involve falsely reporting a vehicle stolen when it 

actually is hidden, shipped overseas, repossessed, dumped in a body of water, buried 

or burned. Perpetrators can include car owners and the people they hire to get rid 

of their vehicles. This crime is more severe during economic downturns when people 

feel they can no longer afford monthly auto payments or they are ‘‘underwater’’ on 

their loans. One factor that seems to encourage this fraud is longer loan terms (five 

and six years), when the loan balance is greater than the value of the vehicle. High 

gas prices also are a factor, especially of gas guzzlers, such as SUVs. Give-ups and 

can include motorcycles, recreational vehicles, boats and even farm equipment. 

Automobile—underwriting. Underwriting fraud in auto insurance includes lying 

on an application to reduce premium or gain coverage that one wouldn’t otherwise 

be qualified to obtain. Deceptions can include untruths about driving record, miles 

driven, where the car is garaged, and number and age of drivers in household. Auto 

underwriting fraud is also called rate evasion. This type of fraud causes the insurance rates of honest people to increase in order to subsidize either the increased risk 

presented or the accidents of the people who cheat. 

Rate evasion has increased in recent years as more people purchase insurance online rather than by telephone or in person through an insurance agent. One version 

of this scam is the ‘‘crash and buy’’ scheme. Motorists who fail to purchase auto insurance get in accidents and then buy coverage and lie, claiming the accident occurred post-purchase. 

Business—arson. Owners or operators who burn down or hire someone to torch 

a business, which is usually failing, for profit. Arson is more frequent during economic downturns. Cases have included building owners of occupied houses and 

apartments. In some cases, fire has spread to adjacent businesses and homes that 

also destroy these structures, placing lives and jobs at risk. This type of insurance 

fraud spans all socio-economic levels. Sadly, every year first-responders such as fire 

fighters die from battling intentionally-set fires. 

Business—padding/faking. This type of fraud includes inflating a legitimate 

claim, or faking a theft or damage claim on a business. A classic case is inflating 

the value of inventory after a fire or flood. 

Contractor fraud. Home contractors can defraud both insurers and consumers, 

from doing shoddy work to stealing claims payments. During natural disasters, unlicensed contractors from out of state are especially prone to committing fraud. Documented cases include contractors causing added damage to roofs and siding to billing the insurer for repair work. 

Drug diversion. The opioid crisis affects property/casualty insurance as well as 

health insurers. Drug diversion includes the prescribing, distribution, selling, acquiring or using legal prescription drugs for illegal or illicit purposes. It is committed when patients addicted to painkillers and other prescription drugs illegally 

receive drugs from doctors, pharmacists, and street dealers. Physicians and pharmacists commit drug diversion when they knowingly prescribe and dispense 

painkilling drugs for no legitimate medical reason. Property/casualty insurers face 

these scams when they reimburse claimants and medical providers who treat auto 

accident victims, premises liability and workplace injuries. 

Homeowners—arson. This includes burning a home that is either owned or rented 

to profit from claimed payments. Perpetrators can include home and business owners and the people they hire to commit the arson. Organized rings in major urban 

centers also have bought run-down homes, over-insured them and then set them on 

fire. One ring in South Florida was caught after photos of the same singed furniture 

kept showing up in claims for different house fires.3

15 

4 ‘‘Shell games: How construction cons steal workers-comp premiums,’’ by David M. Borum and 

Geoffrey R. Branch, Journal of Insurance Fraud in America, February 2017 5 ‘‘The State of Insurance Fraud Technology,’’ Coalition Against Insurance Fraud, November, 

2016. 

Homeowners—padding/faking. This includes inflating a legitimate theft or damage claim on a home or apartment. Sometimes fake receipts are used to inflate 

claims. Another common scheme is reporting a false burglary claim. 

Fraud by insurance agents. Dishonest insurance agents and brokers defraud consumers by failing to remit their premiums to insurers, and sometimes by selling 

fake policies backed by no insurer. This type of fraud can leave consumers in financial ruin if they experience a major loss, such as a home or business fire or a large 

liability lawsuit. 

Fraud by insurance company employees. Most criminal cases include claims-check 

diversion by claims adjusters who collude with a legitimate or fake claimant. Company employees also manufacture claims, manipulating the claims system. There 

also have been rare cases of insurance executives who loot companies and jeopardize 

the ability to pay claims. Some fake companies also have sold bogus coverage and 

have no wherewithal to pay claims. Often these criminals use the names of legitimate insurers to fool insurance buyers. 

Liability—false claim. Grocery stores, restaurants, other businesses and homeowners face false claims by people who fake injury on their property. ‘‘Slip and falls’’ 

can result in large payouts to injured victims and their lawyers. In some cases, people have falsely claimed they found rodents, glass and severed fingers in food ordered in restaurants. 

Fraud by public adjusters. Unlike adjusters who work for insurance companies, 

public adjusters are allowed to represent claimants in many states. They are paid 

a percentage of the final claims payment. Thus they have an incentive to illegally 

inflate the claims payment as high as possible, sometimes illegally by manufacturing losses. Crooked public adjusters can collude with attorneys and contractors 

to increase losses cause by water damage, fire and other perils. 

Workers compensation fraud by workers. This fraud includes workers who fake injuries, refuse to go back to work after they heal, or have a side job while still collecting benefits. It is often encouraged by lawyers and medical providers who profit 

the more severe the injury and the longer the employee is off the job. During the 

2008–2010 recession, solicitors were stationed outside of unemployment offices to 

encourage recently laid-off workers to file false injury claims. 

Workers compensation fraud by employers. These scams occur when a business 

lies about how many employees it has, the types of jobs workers do, and their overall workers compensation claims experience. It is especially prevalent in the construction industry, where builders may employ undocumented workers off the books. 

Large businesses can saves hundreds of thousands of dollars in annual workers 

compensation premiums by committing underwriting fraud. The money they save 

can be used to underbid their honest competitors on construction bids. Organized 

rings also help businesses commit fraud by ‘‘renting’’ them shell corporations to use 

to buy coverage and fool insurers.4 Employee leasing schemes and the practice of 

declaring employees as independent contractors both are prevalent in workers compensation rate-evasion fraud. 

Workers compensation fraud by medical providers. The no-fault system of treating 

and compensating injured workers has generally worked well since its creation in 

the early 20th century. However, the no-fault aspect of the system appears to be 

an open invitation for dishonest medical providers to exploit injured workers and 

plunder the system. Schemes includes billing for services not rendered or needed, 

including chiropractic care, diagnostic tests and prescription drugs. In California 

alone, medical fraud in the workers compensation system costs multiple billions of 

dollars each year. 

Anti-fraud efforts by industry 

During the last 20 years, property/casualty insurers have helped counter the 

growing fraud threat by establishing investigation units, and investing in training 

and technology. In 2016, nearly three-quarters of insurers were deemed to be fully 

engaged in using anti-fraud technology to better and more quickly detect fraud.5

Property/casualty insurers also support organizations that provide training and 

credentialing programs for investigators and claims personnel. 

16 

6 Insurer success in suing fraudsters expected to increase civil actions,’’ Duane Morris Health 

Law, February 17, 2015 7 Healthcare Fraud Prevention Partnership website, https://hfpp.cms.gov/ 8While Virginia does not have a specific insurance fraud statute, it does have an insurance 

fraud bureau housed within the state police. 9 ‘‘Un-civil civil penalties can thwart fraudsters,’’ by Howard Goldblatt, April 20, 2017, https:// 

www.insurancefraud.org/blog/apr-2017/un-civil-civil-penalties-can-thwart 10Social-marketing campaigns taking on small-time crimes, by Virginia Roth and Bernard 

Host, Journal of Insurance Fraud in America, January 2016. https://www.insurancefraud.org/ 

jifa/jan-2016/social-marketing-campaigns-taking-o 

Increasingly, insurers have resorted to civil lawsuits against medical providers to 

return payments from fraudulent claims, and to send a message that fraud won’t 

be tolerated.6

The sharing of claims data among property/casualty insurers has proven to be instrumental in detecting suspected fraud, especially by organized rings. Property/casualty insurers also participate in the successful Healthcare Fraud Prevention Partnership (HFPP).7 This collaborative effort is a forum for Medicare, Medicaid, Tricare, private health plans and others to share intelligence about schemes by medical 

providers who cost taxpayers and insurance buyers tens of billions of dollars each 

year. Government health programs and private health plans are allowed to pool and 

access data on suspect medical providers. This effort has uncovered dozens of 

schemes, and has so far saved nearly $300 million. 

However, property/casualty insurers are not allowed to share or access HFPP data 

because of restrictions of the Health Insurance Portability and Accountability Act 

(HIPAA). The Coalition views this restriction as a lost opportunity: Research shows 

that many medical providers who defraud property/casualty insurers also file false 

claims against government programs, and vice versa. 

Anti-fraud efforts of government 

During the last 20 years, state governments have responded positively to what 

they see as the growing threat of insurance fraud. All states but two (Oregon and 

Virginia 8) have enacted specific insurance fraud statutes to define fraudulent acts 

and set penalties. Additionally, 38 states and the District of Columbia have established specific agencies to investigate and prosecute insurance fraud. Most of these 

state agencies have police powers, and several employ prosecutors to exclusively 

deal with insurance fraud cases. 

In many states, such as California, Florida, New Jersey and New York, insurance 

fraud bureaus are full law-enforcement agencies with hundreds of investigators employed in their units. 

Together, state insurance fraud bureaus receive some 150,000 referrals each year 

about incidents of insurance fraud. Referrals are received from insurers, consumers 

and other law-enforcement agencies. 

There is a high level of collaboration and cooperation among these state agencies 

and insurers in investigating and prosecuting fraud. A total of 43 states require insurers to report cases of suspected fraud. Several also require insurers to sponsor 

internal investigation units and provide training. 

At least a half-dozen fraud bureaus also sponsor advisory committees to gain feedback and intelligence from stakeholders in the state, and to discuss ongoing antifraud efforts. The Coalition Against Insurance Fraud currently serves on five of 

those advisory panels. 

In addition to referring cases for criminal prosecution, several fraud bureaus also 

have authority to take lower-level cases on an administrative and civil basis.9

Other efforts to counter fraud 

Efforts by insurers and government agencies to detect, investigate and prosecute 

insurance fraud is vital to curbing these costly crimes. However, after more than 

20 years of increasing efforts to combat fraud, it’s clear our Nation will never arrest 

or convict its way out of insurance fraud. 

No one knows what percentage of insurance fraud is detected. Informal surveys 

of insurers suggest it may be anywhere from 20 to 50 percent. Only a small percentage of those cases is ever opened for investigation by law enforcement agencies, and 

even a smaller percentage is ever adjudicated. 

In recent years, more efforts have focused on prevention and deterrence. Public 

outreach messages help convince otherwise honest consumers that they will a high 

price for cheating on insurance.10

Research by the Coalition Against Insurance Fraud and others suggests that this 

strategy is helping to reduce fraudulent claims and encourage consumers to report 

fraud. The Coalition also has adopted a strategy of communicating directly with conVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
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11https://www.facebook.com/insurancefraud 12https://twitter.com/insurance_fraud 

sumers through social media about insurance fraud issues, especially about schemes 

that target consumers, such as staged accidents, fake airbags, contractor fraud, dishonest insurance agents and medical ID theft. The use of Facebook,11 Twitter 12 and 

other social-media outlets helps educate consumers about fraud, empowers them to 

avoid being scammed, and reduces their tolerance of this crime. Users of social 

media sometimes brag about the fraud they have committed and solicit others for 

help in executing scams. 

At a time when the acceptance of unethical behavior seems to be increasing in 

our nation, it is important to have strategies in place that will counter this negative 

trend. 

In conclusion 

Insurers, state governments and the Federal government are light years away 

from where they were just twenty years ago in seeking to curb insurance fraud in 

the U.S. However, we still have a long way to go before we turn the corner on this 

crime. The Coalition Against Insurance Fraud is confident, however, that through 

continued collaboration, and though efforts to deter and encourage vigilance by all 

stakeholders, we will continue down the path of reducing the high costs of insurance 

fraud. 

Senator MORAN. Mr. Jay, thank you very much. 

Now, Mr. Kevelighan. 

STATEMENT OF SEAN KEVELIGHAN, CHIEF EXECUTIVE 

OFFICER, INSURANCE INFORMATION INSTITUTE 

Mr. KEVELIGHAN. Thank you very much, Chairman Moran, 

Ranking Member Blumenthal, and Committee members. I appreciate the opportunity to address you here today about current 

issues facing the insurance industry and consumers when it comes 

to insurance fraud in America. 

My name is Sean Kevelighan. I’m Chief Executive Officer of the 

Insurance Information Institute. We are an industry-funded organization that has been at work for over 50 years. Our job is to, and 

our mission is to, explain what insurance does and how it works 

to consumers, public policy members, and members of the media as 

well. 

Our members are primarily property and casualty, P&C, insurers, although 70 percent of our members also offer life insurance 

solutions. 

Today, I will focus on fraud trends P&C insurers are seeing and 

how insurers and consumers can protect themselves against these 

crimes. 

As economic first responders, P&C insurers paid out more than $327 billion in 2015 to settle claims. Many of these were to auto 

repair companies as well as building contractors, and this will undoubtedly be the case in 2017. 

Insurance companies recognize the overwhelming majority of 

claims they receive are legitimate, and in those cases, the claims 

are paid out promptly. In fact, in the U.S., the consumers are recognizing them. Home insurers this year, from J.D. Power, received 

their highest rankings ever. 

The relationship between insurers and consumers is one of trust. 

Consumers trust that insurance will help rebuild after catastrophes 

happen. While the insurer trusts that the reported information provided by the consumer is accurate and honest, unfortunately, 

whenever there is an incident of fraud, it has damaging conVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\34303.TXT JACKIE
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sequences for the consumer and the insurance company. In fact, 

Deloitte estimated in 2012 that P&C insurers paid out as much as 

$30 billion, nearly 10 percent of all claims, for fraud. 

Such claims create an additional cost, which insurers must factor 

into their underwriting and administration, resulting in all consumers having to pay higher premiums. This, in essence, puts a 

strain on the trust in the relationship. And for this reason, the insurance industry is dedicated to doing whatever it can to prevent 

fraud. 

Five years ago—since the 5 years that Deloitte released its fraud 

study, insurers and the state regulatory departments have dramatically improved their fighting efforts, and we’re hearing that 

today. Insurers have allocated additional resources, whether in 

their special investigation units or extra training, while today, 

nearly every state department, as we heard from Oklahoma, has 

in-house fraud bureaus, and they are getting results. 

Aside from what we heard here today from California, if you look 

at the State of California, Commissioner Dave Jones has issued 

nearly a dozen news releases about insurance fraud cases in his department as either uncovered or worked on. The California cases 

included fraudulent claims for auto collisions that were either 

staged or never happened, or dealt with worker compensation 

claims where the number of employees was misrepresented or that 

the jobs that they undertook was misrepresented. These frauds 

drive up the costs. 

One of the things that is interesting that P&C insurers are now 

seeing is how all of these are evolving, and as technology improves, 

so are the fraudsters improving the ways that they get more sophisticated and commit these crimes. And at the same time, consumers are increasingly wanting to buy their insurance policies 

from their mobile phones, they want to file a claim through their 

smartphone via photo. And the question is, How can they verify all 

this? 

Fortunately, this is where the industry is beginning to embrace 

new technological innovations stemming from big data and artificial intelligence that will help improve delivery of their services to 

the U.S. consumer and reduce costs. 

As we are seeing in so much of our lives, technology and digitalization can help bring benefits to society, in this case, by rooting 

out unwanted fraud. A report released last month by Boston-based 

Aite outlined the fact that insurers are recognizing their fraudfighting efforts must adapt to the criminals and are finding that 

these efforts are actually creating quite optimistic results, whether 

through data aggregation, verification, or analyzing the data, and 

also using artificial intelligence and predictive analytics. The result, insurers are equipping themselves with technology tools they 

need to neutralize high-tech criminals. 

As much as these emerging technologies make a positive impact, 

there will always be a human element to combating fraud, and that 

is where the I.I.I. plays a role. Consumers must have the information they need to make prudent financial decisions and to protect 

themselves from fraudulent activities. The I.I.I. is proud of the role 

it plays in keeping consumers informed. 

Thank you again for the opportunity to speak before you today. 

19 

[The prepared statement of Mr. Kevelighan follows:] 

PREPARED STATEMENT OF SEAN KEVELIGHAN, CHIEF EXECUTIVE OFFICER, 

INSURANCE INFORMATION INSTITUTE

Chairman Moran, Ranking Member Blumenthal, and committee members. I appreciate the opportunity to address you today about the current issues facing the 

insurance industry and consumers when it comes to insurance fraud in America. 

My name is Sean Kevelighan and I am the Chief Executive Officer of the Insurance Information Institute (I.I.I.). The Institute is an industry-funded consumer 

education organization. We explain what insurance does, and how it works, to consumers, the media, and public policymakers. 

The I.I.I.’s members include the Nation’s largest auto, home, and business insurers. While much of our work focuses on property/casualty ‘‘(P/C)’’ insurers, nearly 

70 percent of our members also offer life insurance solutions. Today I will focus on 

the insurance fraud trends P/C insurers are seeing, and how insurers and consumers can protect themselves against these crimes. 

In its role as the U.S.’s economic first-responders, P/C insurers paid out more 

than $327 billion in 2015 to settle claims. Two years ago, many of these claim payout dollars went to auto repair companies and building contractors. This will undoubtedly be the case in 2017 as well. Insurers provide the capital infusion that allows consumers to recover after an accident, a fire, a windstorm, or another incident 

that causes either property damage or an injury. 

Insurance companies recognize the overwhelming majority of claims they receive 

are legitimate, and these claims are paid promptly. U.S. consumers also recognize 

this fact. Indeed, in 2016 U.S. home insurers scored their highest-ever satisfaction 

rating among consumers who filed a claim, according to a J.D. Power survey. Insurers were given a score of 859 on a 1,000-point scale. 

The relationship between insurers and consumers is one of trust. Consumers trust 

that insurers will help them re-build when catastrophe strikes, while the insurer 

trusts that the reported information provided by the consumer is honest. Unfortunately, whenever there is an incident of fraud it has damaging consequences for the 

consumer and insurance company alike. In fact, Deloitte estimated in a 2012 report 

that P/C insurers paid around $30 billion annually—nearly 10 percent of their total 

claim payouts—in fraudulent auto, home, and business insurance claims. Such 

claims create additional costs, which insurers must factor into underwriting and administration—resulting in all consumers having to pay more in premium. This, in 

essence, puts a strain on the trust relationship. And for this reason, the insurance 

industry works tirelessly to prevent fraud. 

In the five years since Deloitte released its insurance fraud study, insurers and 

the state insurance departments that regulate them have dramatically improved 

their fraud-fighting efforts. Insurers have allocated additional resources to their internal Special Investigations Units (SIUs) and expanded their training of claims adjusters to detect fraudulent activity. Moreover, nearly every state insurance department has an in-house fraud bureau. And they are getting results. 

For example, California Insurance Commissioner Dave Jones has issued this year 

alone nearly a dozen news releases on insurance fraud cases his Department either 

uncovered or worked on. The California cases involved the filing of fraudulent 

claims for auto collisions that were either staged or never occurred. Others dealt 

with workers’ compensation insurance fraud, such as instances in which employers 

either misrepresented the number of employees who worked for them or misclassified the jobs the employees undertook. This type of fraud drives up the cost of doing 

business for a state’s employers. 

Insurance fraud schemes are, however, always evolving and getting more sophisticated, especially as insurance transactions are increasingly conducted online. Consumers increasingly want to buy insurance policies from their mobile devices, and 

have their insurance claims paid solely on the basis of the photo they send electronically to their insurer. 

But how can insurers verify the identity of the mobile-device user, or the legitimacy of a property damage claim, without having the subject of the claim inspected 

personally by a claims representative? 

This is where the insurance industry’s embrace of new technological innovations 

stemming from big data and artificial intelligence will help improve delivery of their 

services to the consumer and reduce costs. As we are seeing in so much of our lives, 

technology and digitalization in insurance can help bring benefits to society; in this 

case by rooting out unwanted fraud. 

20 

In a report released last month, the Boston-based Aite (EYE–TAY) Group outlined 

the fact that insurers are recognizing their fraud-fighting efforts must adapt to this 

new era, and found reason for optimism. The Aite Group reports insurers are retaining state-of-the-art vendors, like data aggregators, producers, and receivers and 

then analyzing this data through the use of artificial intelligence and predictive 

analytics. The result? Insurance companies are equipping themselves with the hightech tools they need to assess a prospective customer, verify a claim, and identify 

suspicious activity. 

As much as these emerging technologies make a positive impact, there will always 

be a human element to combatting fraud, and that is where the I.I.I. plays a role. 

Consumer education is at the core of what we do, whether it be through our website 

content, media relations efforts, or public speaking engagements. 

Like insurers, consumers must have the information needed to make prudent financial decisions and to protect themselves from fraudulent activities. The I.I.I. is 

proud of the role it has played in keeping consumers informed and vigilant about 

rogue contractors, staged auto accidents, and the criminals who want either to steal 

their insurance proceeds—or even their identity. 

Thank you again for the opportunity to speak before you today. 

Senator MORAN. Mr. Kevelighan, thank you very much. 

Now, Mr. Lynch. 

STATEMENT OF TIMOTHY J. LYNCH, DIRECTOR, GOVERNMENT 

AFFAIRS, NATIONAL INSURANCE CRIME BUREAU 

Mr. LYNCH. Good morning, Mr. Chairman and members of the 

Committee. My name is Tim Lynch. I’m the Director of Government Affairs at the National Insurance Crime Bureau, based in 

Des Plaines, Illinois. The NICB is a national not-for-profit organization supported by 1,100 insurance companies who collectively 

write about 80 percent of the Nation’s property and casualty insurance premiums. We are led by President and Chief Executive Officer Joe Wehrle, who is also a retired lieutenant general in the U.S. 

Air Force. 

Working with our member companies, legislators, regulators, and 

law enforcement, we investigate organized criminal groups that 

commit insurance fraud and vehicle crime. We have a 105-year history of established cooperation with Federal, state, and local law 

enforcement to fight insurance fraud and help protect the American 

people from organized criminal rings. 

Our investigative efforts are focused on external claims fraud, 

that is, multi-claim, multi-carrier scams perpetrated by organized 

criminal groups. Through a collective means of investigation, data 

analysis, legislative advocacy, training, and public awareness, 

NICB targets the most egregious forms of insurance fraud and vehicle crime. Some of the schemes we see are staged auto accidents, 

cargo theft, vehicle crime, and medical fraud abuses, just to name 

a few. 

I’ll focus briefly today on three areas: medical fraud, vehicle 

crime, and contractor fraud, as alluded to by Commissioner Doak 

and Mr. Jay. 

Several years ago, NICB made an adjustment to devote more resources to fighting medical-related fraud based on a surge of inflated medical billing and collusion between disreputable doctors 

and other health care providers. To address this surge, since 2002, 

NICB has opened eight Major Medical Fraud Task Forces across 

the country in areas such as Chicago, Houston, New York, and just 

down the road from here in Fairfax, Virginia. 

21 

In 2012, based on our national reach and credibility on the topic 

of medical fraud, NICB was asked to serve on the Executive Board 

of the Healthcare Fraud Prevention Partnership under the U.S. Department of Health and Human Services. We know from experience 

that there is a significant amount of crossover between the fraud 

that impacts property and casualty insurers and the fraud that impacts Medicare, Medicaid, and private health insurance. 

Building on the NICB model, the HFPP is working to share data 

and investigations across all lines of insurance to better detect 

fraud and assist law enforcement to root out potential criminal activity. For example, in 2014, our data analytics team compared 

over $900 million of health care claims data to NICB data resulting 

in the identification of over 100 schemes with health care and property/casualty fraud exposure. In other words, these folks, these organized rings, they don’t discriminate, they’ll rip off anyone. 

In terms of vehicle-related crime, NICB’s experience with this 

issue dates back to our founding in 1912. Stolen vehicles are profitable, whether intact, parted out, or illegally exported. Regardless 

if these vehicles are shipped overseas or sold here in the U.S., buyers of these vehicles often do not know these vehicles might be stolen. The essential, but missing, piece that enables this kind of 

black market enterprise is information. 

Congress itself recognized this deficiency and, in 1992, passed 

legislation that created the National Motor Vehicle Title Information System, known as NMVTIS. Its purpose is to help protect consumers from unsafe vehicles and to keep stolen vehicles from being 

resold. We have served on the advisory board for NMVTIS since 

2010. 

This program, which is administered by the U.S. Department of 

Justice, protects states and consumers from fraud, reduces the use 

of stolen vehicles for illicit purposes, and provides consumers protection from unsafe vehicles. NMVTIS is intended to ensure key vehicle history information is available to consumers so they may 

make well-informed decisions. 

Finally, as mentioned by Commissioner Doak and Mr. Jay, another issue where we’ve seen many abuses is in the area of roofer 

and contractor fraud. We’ve been very active on this matter from 

a legislative and public awareness standpoint, and we see numerous cases of exploitation from our team of investigators. 

In short, this issue is pretty simple. In areas impacted by a severe weather event and there is serious damage to homes, dishonest repair contractors descend on these scenes, oftentimes within a day or two, and entice consumers into scams involving phony 

contracts, offers of free repairs, and filing bogus claims. Examples 

of inflating roof damage, as Commissioner Doak mentioned, are 

also prevalent, as well as these folks collecting a down payment 

from people to do no work and then to leave town. Several states 

have taken action to crack down on this, as Mr. Jay mentioned, including Oklahoma, Texas, and others. 

We have worked with state departments of insurance and are 

willing to work with others, and we’ve worked with Commissioner 

Doak, on increasing public awareness of this issue using billboards, 

social media, and public service announcements. 

22 

In closing, Mr. Chairman, thank you for the opportunity to be 

here. I’m pleased to answer any questions at the appropriate time. 

Thank you. 

[The prepared statement of Mr. Lynch follows:] 

PREPARED STATEMENT OF TIMOTHY J. LYNCH, DIRECTOR, GOVERNMENT AFFAIRS, 

NATIONAL INSURANCE CRIME BUREAU

Good Morning Mr. Chairman and Members of the Committee, my name is Tim 

Lynch, Director of Government Affairs at the National Insurance Crime Bureau 

(NICB), based in Des Plaines, Illinois. The NICB is a national, not-for-profit organization supported by approximately 1,100 insurance companies that collectively write 

nearly 80 percent of the Nation’s total property/casualty insurance premium. NICB 

is led by President and Chief Executive Officer Joe Wehrle. Mr. Wehrle is a retired 

Lieutenant General in the United States Air Force. 

Working with our member companies, legislators, regulators and law enforcement, 

we investigate organized criminal groups that commit insurance fraud and vehicle 

crimes. We have a 105-year history of established cooperation with federal, state 

and local law enforcement agencies to fight insurance fraud and help protect the 

American people from criminal enterprises. 

NICB’s investigative efforts are mainly focused on external claims fraud—multiclaim, multi-carrier scams perpetrated by organized criminal groups. Through a collective means of investigation, data analysis, training, public awareness and legislative advocacy, NICB targets the most egregious forms of insurance fraud and vehicle 

crimes. Some of the fraud schemes we are involved with are staged auto accidents, 

cargo theft and medical fraud abuses. 

I will focus my remarks today on 3 key areas: medical fraud, vehicle crime, and 

some recent state legislative activity on roofer/contractor fraud. 

Several years ago, NICB made a strategic adjustment to devote more resources 

to fighting medical-related fraud based on a surge of inflated medical billing, collusion between disreputable doctors and other healthcare providers. To address this 

surge, since 2002, NICB has opened eight Major Medical Fraud Task Forces in 

major population centers such as Chicago, Houston, New York and not far from here 

in Fairfax, Virginia. 

In 2012, based on our national reach and credibility on the topic of medical fraud, 

NICB was asked to serve on the executive board of the Healthcare Fraud Prevention 

Partnership (HFPP) under the U.S. Department of Health and Human Services. We 

know from experience that there is a significant amount of crossover between fraud 

impacting property/casualty insurers and fraud impacting Medicare, Medicaid and 

private health insurance. 

Building on the NICB model, the HFPP is working to share data and investigations across all lines of insurance to better detect fraud and assist law enforcement 

to root out potential criminal activity. For example, in 2014, our data analytics team 

compared over $900 million of healthcare claims data to NICB data resulting in the 

identification of over 100 schemes with health care and property/casualty fraud exposure. 

In terms of vehicle related crime, NICB’s experience with this issue begins over 

100 years to our founding in 1912. One of the most common reasons for vehicle theft 

is the ability to generate profit from organized vehicle theft activities. Stolen vehicles are profitable, either intact, parted out or illegally exported. Regardless if these 

vehicles are shipped overseas or sold right here in the United States, buyers of 

these vehicles often do not know the vehicles are stolen. The essential—but missing—piece that enables this kind of black market enterprise is information. 

Congress recognized this deficiency and, in 1992, passed legislation that created 

the National Motor Vehicle Title Information System (NMVTIS). Its purpose is to 

help protect consumers from fraud and unsafe vehicles, and to keep stolen vehicles 

from being resold. NICB has served on the advisory board for NMVTIS since 2010. 

NMVTIS, which is administered by the U.S. Department of Justice, protects 

states and consumers from fraud; reduces the use of stolen vehicles for illicit purposes; and provides consumers protection from unsafe vehicles. NMVTIS is intended 

to ensure key vehicle history information is available and affordable to consumers, 

so consumers may make well-informed decisions about used vehicle purposes and 

to avoid purchasing potentially unsafe vehicles or paying more than fair market 

value for a vehicle. 

As mentioned by Oklahoma Commissioner Doak, another issue where we have 

seen egregious abuses is the area of roofer/contractor fraud. NICB has been very acVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
23 

tive in this matter from a legislative and public awareness standpoint, and we see 

numerous cases of exploitation from our team of investigators. 

In short, this issue is fairly simple. An area is impacted by a severe weather 

event, such as a tornado, and there is serious damage to residential communities. 

Dishonest repair contractors descend on these scenes—often times within days—and 

entice consumers into scams involving phony contracts, offers of ‘‘free repairs’’ and 

filing bogus claims. Instances of these individuals inflating roof damage is also prevalent, as well as collecting a sizable down payment to perform services only to skip 

town. 

Several states have taken action to tighten up consumer protections against these 

abuses, such as Colorado, Kentucky, Illinois, Indiana, Minnesota, Nebraska, Oklahoma, Texas and others. 

Since our industry is regulated at the state level, we have also worked with state 

departments of insurance—including Commissioner Doak on increasing public 

awareness of this issue using billboards, public service announcements and social 

media. 

We would encourage the committee members—especially those who represent 

areas prone to severe weather—to communicate to your constituents that they exercise caution after severe weather events, and be sure to contact their insurance company before signing any repair contracts or providing up-front cash for materials— 

especially if it is from a contractor who just appears, unsolicited, at their door. 

In closing, we would like to thank Chairman Moran and the Committee members 

for their interest in insurance fraud. We ask that you keep these three issues in 

mind—medical fraud, vehicle crime and property fraud—as you communicate with 

your state departments of insurance to help protect the citizens of your state from 

insurance fraud. 

Thank you for inviting us to testify and I’d be happy to answer any questions. 

Senator MORAN. Mr. Lynch, thank you very much. 

Welcome back, Ms. Weintraub. 

STATEMENT OF RACHEL WEINTRAUB, 

LEGISLATIVE DIRECTOR AND GENERAL COUNSEL, 

CONSUMER FEDERATION OF AMERICA 

Ms. WEINTRAUB. Thank you, Chairman Moran and Ranking 

Member Blumenthal. I appreciate the opportunity to provide testimony on Consumer Federation of America’s perspectives on insurance fraud in America. I am Rachel Weintraub, Legislative Director and General Counsel at CFA, a nonprofit association of approximately 280 pro-consumer groups that was founded in 1968 to advance the consumer interest through advocacy and education. 

CFA is concerned about fraud by the insurance industry against 

consumers, and fraud by consumers against the industry. Both cost 

consumers dearly. Although most insurance companies and agent/ 

brokers are honest and ethical, fraud by the insurance industry 

against consumers is a serious problem. It costs consumers when 

they pay premiums for unnecessary coverage, when they pay excessive rates for required coverage, when they buy insurance priced in 

an unfairly discriminatory manner, and it costs them when they 

are presented with misleading policy language that is constructed 

to make them believe they are purchasing protection they will 

never in fact receive. 

Fraud by insurers also costs consumers who face unfairly denied 

claims, underpaid claims, and claims that take too long to be paid. 

Examples abound, and here are just a few. Insurers have used fake 

engineering reports to deny flood insurance claims after 

Superstorm Sandy. Insurers have participated in the sale of unnecessary policies, such as the placing of unnecessary auto insurance 

onto the auto loan payments of borrowers who were not advised of 

such action by Wells Fargo, as we just learned last week. A MediVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 S:\GPO\DOCS\34303.TXT JACKIE
24 

care Advantage insurer settled a whistleblower case for $32 million 

in a case where the insurer exaggerated how sick patients were. 

CFA has undertaken a series of reports on the plight of gooddriving, lower income Americans. These consumers are unable to 

afford state-required auto insurance due to the use of unfair rating 

factors related to income. Our research has identified that gooddriving, low-income people often pay more for auto insurance than 

wealthier people with accidents and tickets. It is unquestionably a 

defrauding of American consumers when insurers charge safe drivers more than unsafe drivers for the same coverage. 

Fraud against the insurance industry by consumers is a serious 

issue. There are two types of such insurance fraud: hard fraud and 

soft fraud. 

Hard fraud entails somewhat deliberate—someone deliberately 

planning or inventing a loss, such as a collision, auto theft, or fire 

that is covered by their insurance policy in order to receive a claim 

payment. Criminal rings are sometimes involved in hard fraud 

schemes and can steal millions of dollars. The data on hard fraud 

are fairly reliable since such data can be collected from criminal 

case records. 

Soft fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in an automotive collision, an insured person might claim more damage than actually occurred. The statistics on the extent of such soft fraud are unclear, 

and there are some incentives to overreport it. Congress should be 

cautious about claims of soft fraud exceeding more than a few percent of premium dollars. 

A specific consumer’s likelihood to commit soft fraud appears to 

be impacted by how the consumer sees the insurance industry’s 

treatment of them to be. The public’s perception of insurers is very 

negative. If the industry can repair its image, that could positively 

impact the degree of fraud against it. 

CFA supports insurer attempts to control fraud, including the 

creation of special investigative units to look into suspicious claims. 

However, SIUs and other attempts to control fraud must be reasonable. Such investigations should not go on for extensive periods 

while people are not able to return to their home, for example. 

In conclusion, CFA is concerned about insurance fraud. We are 

aware of numerous types of fraudulent activity by a few insurers 

and by a few consumers using the insurance market, both of which 

harm the vast majority of consumers, who are honest and ethical. 

Congressional efforts should consider the whole range of frauds 

being committed in the insurance market, and the prospect of 

fraud should not be used to justify an unscrupulous attack on innocent consumers seeking claims payments. 

Thank you. 

[The prepared statement of Ms. Weintraub follows:] 

PREPARED STATEMENT OF RACHEL WEINTRAUB, LEGISLATIVE DIRECTOR AND

GENERAL COUNSEL, CONSUMER FEDERATION OF AMERICA

Chairman Moran, Ranking Member Blumenthal and other members of the Consumer Protection, Product Safety, Insurance, and Data Security Subcommittee. I appreciate the opportunity to provide testimony on Consumer Federation of America’s 

(CFA) perspectives on Insurance Fraud in America. I am Rachel Weintraub, Legislative Director and General Counsel at CFA. CFA is a non-profit association of apVerDate Nov 24 2008 11:04 Jan 28, 2019 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6621 S:\GPO\DOCS\34303.TXT JACKIE
25 

1https://www.youtube.com/watch?v=11VjWZvA0Ig 

2https://www.nytimes.com/2017/07/27/business/wells-fargo-unwanted-auto-insurance.html; 

https://www.reuters.com/article/us-wells-fargo-insurance-idUSKBN1AG20Q; https:// 

www.washingtonpost.com/news/business/wp/2017/07/28/wells-fargo-charged-570000-customers-for-auto-insurance-they-didnt-need-potentially-forced-some-to-have-cars-repossessed/ 

?utm_term=.9073ef7bfeff 3http://www.npr.org/sections/health-shots/2017/05/31/530868367/medicare-advantage-insurers-settle-whistleblower-suit-for-32-million 4https://www.nytimes.com/2017/02/10/business/dealbook/former-aig-executives-reach-settlement-in-accounting-fraud-case.html?_r=0 5http://www.insurancebusinessmag.com/us/news/breaking-news/insurance-agent-chargedin-1–1-million-scam-73861.aspx 

proximately 280 pro-consumer groups that was founded in 1968 to advance the consumer interest through advocacy and education. 

CFA is concerned about insurance fraud and is working to contain it as well as 

document and identify it. We were a founding member of the Coalition Against Insurance Fraud and continue even today to serve on its Board of Directors and we 

conduct research to document inequality in the insurance market, especially the 

auto insurance market. 

CFA is concerned about both kinds of fraud: that is, fraud by the insurance industry against consumers and fraud by consumers against the industry. Both cost consumers dearly. 

Fraud by the Insurance Industry Against Consumers 

I will first focus on fraud by the insurance industry against consumers. Although 

most insurance companies and agents/brokers are honest and ethical, fraud by the 

insurance industry against consumers is a serious problem. It costs consumers when 

they pay premiums for coverage they do not need; when they pay excessive and actuarially unjustifiable rates for coverages they are required to buy; when they buy 

insurance priced in an unfairly discriminatory manner; and it costs them when they 

are presented with inadequate and misleading policy language that is constructed 

to make them believe they are purchasing protection they will never, in fact, receive. And, of course, fraud by insurers also costs consumers who face unfairly denied claims, underpaid claims and claims that take far too long to be paid. 

Examples abound, and here are just a few of many: 

• Insurers, as Congress knows, have used faked engineering reports to deny flood 

insurance claims after Superstorm Sandy. This was documented by 60 Minutes 

in ‘‘The Storm After the Storm.’’ 1

• At times insurers participate in the sale of unnecessary policies. A recent example is the placing of unnecessary auto insurance onto the auto loan payments 

of borrowers who were not advised of such action by Wells Fargo. This was documented just last week by numerous news outlets.2

• A Medicare Advantage Insurer settled a whistleblower case for $32 million, in 

a case where the insurer exaggerated how sick patients were.3

• Two top executives of AIG settled an accounting fraud case, agreeing to return 

almost $10 million in salary.4

• In just the last few years, insurers have begun to raise rates on people who do 

not shop around, a process called ‘‘price optimization.’’ In this scam, insurers 

use information from non-driving related sources such as third-party consumer 

databases, grocery store shopping records, and social media analysis to determine if a person does or does not shop when prices go up. They use this information to raise the rate above the actuarially sound price on the non-shopping 

consumer. This is illegal in every state, since state laws require prices to be 

based on driving risk, not shopping tendency. Since CFA raised the issue three 

years ago, 20 states have banned the practice, but we believe this fraudulent 

pricing system is still being deployed or introduced in several states. 

A quick search over the last month or so of headlines from Insurance Business 

Magazine identifies some other examples of the consistent drumbeat of insurer/ 

agent fraud against consumers: 

• A San Diego insurance agent was charged in connection with allegedly 

scamming five people—three of them seniors—out of a total of more than $1.1 

million.5 (July 24, 2017) 

• A Connecticut man presented himself as an insurance agent after the state 

pulled his license and is headed to prison for nearly four years. The insurance 

26 

6http://www.insurancebusinessmag.com/us/news/breaking-news/fake-insurance-agent-getsnearly-four-years-73739.aspx 7http://www.insurancebusinessmag.com/us/news/breaking-news/farmers-insurance-exchange-must-make-refunds-to-1600-drivers-73452.aspx 8http://www.insurancebusinessmag.com/us/news/breaking-news/judge-approves-metlifes-32– 

5-million-race-bias-class-action-settlement-72878.aspx 9http://www.insurancebusinessmag.com/us/news/breaking-news/insurer-claims-health-system-unjustly-enriched-itself-72483.aspx 10http://www.insurancebusinessmag.com/us/news/workers-comp/insurance-broker-gets-longcustodial-sentence-after-fraud-71698.aspx 11 (http://www.insurancebusinessmag.com/us/news/breaking-news/allstate-hit-by-another-potential-class-action-71111.aspx 12http://www.insurancebusinessmag.com/us/news/breaking-news/insurance-agents-indictedfor-300000-mail-fraud-70249.aspx 

agent pleaded guilty to wire fraud, according to the San Francisco Chronicle. 

Prosecutors say he scammed people out of more than $874,000.6 (July 21, 2017) 

• Farmers Insurance Exchange will refund $315,000 to more than 1,600 Minnesota drivers, after authorities found that the firm wrongfully charged the 

drivers with higher auto insurance rates. The state’s Commerce Department 

said the insurer charged drivers with higher rates solely because they were 

home renters rather than homeowners. Minnesota law prohibits firms from setting auto insurance rates or benefits, or denying coverage, based on a driver’s 

status as a residential tenant.7 (July 19, 2017) 

• A U.S. District Court has approved the $32.5 million settlement of a racial discrimination case against MetLife filed by a class of African-American former 

MetLife financial services representatives. The former employees filed the case 

against the insurer in 2015. They accused the firm of maintaining ‘‘a racially 

biased corporate culture and stereotypical views about the skills, abilities, and 

potential of African-Americans that affect personnel,’’ a court docket said.8 (July 

12, 2017) 

• A health care system suing Chubb paid itself ‘‘excessive’’ amounts from employee retirement programs and ‘‘unjustly enriched itself,’’ the insurer claims.9

(July 7, 2017) 

• A Colorado insurance broker was sentenced to 12 years in state prison on Monday after he pleaded guilty to several counts of forgery, insurance fraud, and 

theft. The insurance broker pocketed some $130,000 in workers’ compensation 

premiums that he wrote while his license was revoked. Previously, this broker 

had been sentenced to two years of probation and had his license revoked in 

2014 after pleading guilty to forgery in what was described as a similar case.10

(June 28, 2017) 

• A recommended Federal class-action lawsuit against Allstate has been approved 

by the Pennsylvania Supreme Court. The class-action is in relation to Allstate’s 

policy that mandates claimants undergo medical exams by a doctor of the carrier’s preference before they can receive benefits.11 (June 21, 2017) 

• The owners of a California insurance agency have been indicted by a Federal 

grand jury for allegedly sending more than a million pieces of mail without paying the postage.12 (June 13, 2017) 

A. Auto Insurance Pricing 

CFA has undertaken a series of reports on the plight of good-driving, lower-income Americans. These consumers are unable to afford state-required auto insurance due to the use of unfair rating factors related to income. Our research has 

identified that good-driving low-income people often pay more for auto insurance 

than wealthier people with accidents and tickets. It is, unquestionably, a defrauding 

of American consumers when insurers charge safe drivers more than unsafe drivers 

for the same coverage. 

CFA’s research addresses several different aspects of auto insurance rates, premiums and the market, but all point to a few key findings: 

• The cost of state-mandated basic liability insurance is higher than many lowerincome Americans can afford and the number of uninsured citizens in this category is higher than the national average as a result; 

• Insurers use a variety of socio-economic rating factors unrelated to driving that 

push auto premiums up for lower-income Americans despite good driving 

records; and 

• Stronger state consumer protections related to auto insurance rate setting leads 

to greater access to and more stability in auto insurance markets. 

27 

13http://addictionblog.org/treatment/health-insurance-and-its-influence-on-the-opioidepidemic/ 

A description of each of the reports that CFA has issued since 2012 is available 

in the attached appendix. This is followed by a summary of the key recommendations from the reports. Our research documents that states require good-driving, 

lower-income Americans to purchase auto insurance to drive and harshly penalize 

them for driving without that insurance. But most states do not regulate the use 

of factors that raise rates on widows, renters, low-wage workers, people with less 

education and other factors that adversely discriminate against the poor. 

B. Actions Against Insurers for Bad Faith 

There are hundreds of legal actions against insurers for bad faith. Consumers pay 

money for premiums, often for many years, prior to an event occurring or a claim 

being filed. Consumers believe that insurers will do right by them if they file a 

claim. Once a claim is filed, the insurer owes the consumer a duty of utmost good 

faith in handling the claim. If the insurer improperly denies or delays payment of 

the claim, it is possible that the insurer has not acted in good faith. It is likely that 

the number of times consumers are defrauded by insurer bad faith is orders of magnitude larger than the number of times insurers are sued for this kind of fraud. For 

many consumers, this fraud comes in the form of an insurer’s low-ball offer—on a 

total loss claim on a car insurance policy, for example—that may short the consumer by $1,500, which is devastating to a consumer but not a viable legal action 

against the insurance company either because the cost of litigation is too high or 

because many states prohibit such suits. 

C. Fraud Against Consumers by Other Entities Involved in the Insurance 

Market 

1. Storm Chasers 

CFA warns consumers about ‘‘storm chasers,’’ which are repair firms that come 

in after a storm and offer to repair structures. Often, they have no local connections, 

may not have proper insurance for their workers, and do subpar repairs. They have 

opportunities to do work, particularly after catastrophic weather events, because 

there are so many repairs that need to be done in a relatively short time. Insurers 

want to settle claims from storms as quickly as possible. However, insurers should 

work with reliable contractors to make sure that there are sufficient workers and 

supplies in the catastrophe area as repairs must be done in a timely way. State government action could assist in making sure that there are sufficient resources available to complete repairs promptly. 

As bad as storm chasers can be, those that do acceptable work do help to get necessary work completed. The market demands an increase of contractors after a 

storm, and there would be value in helping communities identify those who will not 

cut corners in the repairs and can meet standards of quality that will equal the 

promises contained in the insurance contract. Consumers would be served by better 

tools to help distinguish between the fraudulent storm chasers and those contractors 

who arrive in the wake of a catastrophe not just looking for a quick buck but to 

provide a quality service. 

Regardless of what additional resources might be made available in the future, 

CFA always advises consumers to make sure that the people they contract with for 

repairs after a storm are (1) capable of doing the work well, (2) properly credentialed, and (3) have references. We urge consumers to check with their insurance 

company if they have questions about a contractor who approaches them. 

2. Opioids 

Insurers have the data to monitor opioid prescription levels and should be a force 

for good in finding ways to tackle this mounting problem. We encourage insurers’ 

full cooperation in working with government and others seeking solutions. However, 

insurers can also be part of the problem in a number of ways. First and most importantly, some insurers will not pay for alternatives to opioids such as steroid injections, physical therapy and nerve blocks.13 Second, insurers try to do the right thing 

by limiting the amount of opioids to a person but sometimes are not sophisticated 

in doing so, since some patients have been on the specific drug for a long time and 

need more of the drug to get the necessary relief. In these cases, the patients often 

turn to street drugs, exacerbating the problem. 

We could list many other examples of frauds against consumers by insurers. The 

point that CFA wants to make clear is that fraud against consumers by insurers 

needs Congressional attention. 

28 

14http://www.insurance.ca.gov/0400-news/0200-studies-reports/0700-commissioner-report/ 

upload/AnnualReport2013.pdf, at page 39. 15http://www.insurancefraud.org/statistics.htm 16https://skift.com/wp-content/uploads/2015/02/2015–RQ-Media-Release-Report_020415.pdf 

at page 13. 

II. Fraud Against the Insurance Industry by Consumers 

Fraud against the insurance industry by consumers is a serious issue. There are 

two types of such insurance fraud: hard fraud and soft fraud. 

Hard fraud entails someone deliberately planning or inventing a loss, such as a 

collision, auto theft, or fire that is covered by their insurance policy in order to receive a claim payment. Criminal rings are sometimes involved in hard fraud 

schemes that can steal millions of dollars. The data on hard fraud are fairly reliable, 

since such data can be collected from criminal case records.14

Soft fraud consists of policyholders exaggerating otherwise legitimate claims. For 

example, when involved in an automotive collision an insured person might claim 

more damage than actually occurred. 

The statistics on the extent of such soft fraud are very squishy and the insurers 

seem to have some incentives to over-report it. Congress should be very cautious 

about claims of soft fraud exceeding more than a few percent of premium dollars. 

Some consumers believe that it is acceptable to increase insurance claims to make 

up for deductibles or because they believe their insurer has been unfair to them in 

some way. The Coalition Against Insurance Fraud found these disturbing attitudes 

among consumers;15

• 24 percent say it’s acceptable to pad an insurance claim to make up for the deductible—that’s a drop since 33 percent said it was acceptable in 2002; 

• 18 percent believe it’s acceptable to pad a claim to make up for premiums paid 

in the past; 

• Younger males were much more likely to condone claim padding, and 23 percent of 18 to 34-year-old males say it’s alright to increase claims to make up 

for earlier premiums. This compares with 5 percent of older males and 8 percent of females of the same age; 

• More than half (55 percent) of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer; 

• More than three-quarters (76 percent) say they’re more likely commit insurance 

fraud during an economic downturn than during normal times (up from 66 percent in 2003) 

A specific consumer’s likelihood to commit soft fraud appears to be impacted by 

how the consumer sees the insurance industry’s treatment of them to be. The 

public’s perception of insurers is very negative. The 2015 Harris Poll on consumer 

attitudes towards various industries rates Insurance as 35 percent positive (only Financial Services, Tobacco and Government rank lower).16 If the industry can repair 

its image, that could positively impact the degree of fraud against it. 

CFA supports insurer attempts to control fraud, including the creation of Special 

Investigative Units (SIUs) to look into suspicious claims. However, SIUs and other 

attempts to control fraud must be reasonable. There are examples of such investigations going on for extensive periods of time while, for example, people are not able 

to return to their home because of the investigation into alleged arson until the 

damage is repaired. Frequently, these delays go on for an excessive period only to 

conclude with the finding that there was no fraud. Steps must be taken to assure 

that insurer fraud investigations are completed in a timely way so innocent people 

are not left hanging, for example, without a place to live for month after month. 

III. Conclusion 

In conclusion, CFA is concerned about insurance fraud; we are aware of numerous 

types of fraudulent activity by a few insurers and by a few consumers using the insurance market, both of which harm the vast majority of consumers who are honest 

and ethical. We would welcome Congress undertaking research to document and to 

minimize these types of harmful actions that put consumers at great economic disadvantage, so long as the effort is deployed in such a way that considers the whole 

range of frauds being committed in the insurance market, as we have outlined here. 

We support efforts to control these types of fraud, with the important warning that 

the prospect of fraud should not be used as a device to justify an unscrupulous attack on innocent consumers seeking claims payments. 

29 

APPENDIX

CONSUMER FEDERATION OF AMERICA AUTO INSURANCE RESEARCH

3 Major Auto Insurers Usually Charge Higher Prices to Good Drivers 

Previously Insured by Non-Standard Insurers Consumer Federation of 

America (2017) 

Auto insurance giants Allstate, Farmers, and American Family often charge nine 

to fifteen percent higher premiums to good drivers previously insured by smaller, 

‘‘non -standard’’ insurers than those who had coverage from State Farm or other primary competitors. Allstate charged 15 percent ($235) more on average to good drivers previously covered by non-standard auto insurers such as Safe Auto Insurance 

and Equity Insurance Co. than if the y had been previously insured by State Farm. 

Farmers charged nine percent ($260) more on average to customers coming from 

non-standard companies, including Titan Insurance and Access Insurance Company, 

than those hailing from State Farm policies. American Family Insurance, the Nation’s ninth largest auto insurer, charged nine percent ($166) more on average to 

customers previously with non-standard carriers, such as Direct General and 

Safeway Insurance. 

Major Insurance Companies Raise Premiums After Not-At-Fault Accidents 

Consumer Federation of America (2017) 

Safe drivers who are in accidents caused by others often see auto insurance rate 

hikes. The research analyzed premium quotes in 10 cities from five of the Nation’s 

largest auto insurers. Among the cities tested, drivers in New York City and Baltimore pay out the most for an accident where the driver did nothing wrong, and customers in Chicago and Kansas City also face average increases of 10 percent or 

more when another driver crashes into them. CFA’s research over recent years has 

consistently found that good drivers with certain socio—economic characteristics 

that suggest lower incomes generally pay more for auto insurance than higher-income drivers with the same driving record. This pattern holds when it comes to penalizing drivers for accidents in which they were not at fault. Higher-income drivers 

paid $78 more on average after a not-at-fault accident, while moderate-income drivers paid $208 more on average after a not-at-fault accident. 

Major Insurers Charge Moderate-Income Customers With Perfect Driving 

Records More Than High-Income Customers With Recent Accidents 

Consumer Federation of America (2016) 

Auto insurance prices are often more closely aligned with personal economic characteristics than with drivers’ accident and ticket history. Testing premiums offered 

by the Nation’s five largest insurers in ten U.S. cities for drivers with different 

socio-economic characteristics and different driving records, CFA found surprising 

results, including: upper-income drivers with DUIs often pay less than good drivers 

of modest means with no accidents or tickets on their driving record; moderate-income drivers with perfect records pay more than upper-income drivers who caused 

an accident in which someone was injured; progressive and GEICO consistently 

charge upper-income bad drivers less than moderate-income good drivers; moderateincome good drivers often pay more than upper-income drivers with multiple points 

on their record. 

Major Auto Insurers Raise Rates Based on Economic Factors Consumer 

Federation of America (2016) 

In most states auto insurance premiums are driven in large measure by economic 

factors that are unrelated to driving safety, a practice that most Americans consider 

unfair. Among the most common of the individual economic and socio-economic characteristics used by auto insurers are motorists’ level of education, occupation, homeownership status, prior purchase of insurance, and marital status. Because each of 

these factors are associated with an individual’s economic status and because insurers consistently use each factor to push premiums up for drivers of lesser economic 

means, the combined effect of insurers’ use of these factors can result in considerably higher prices for low—and moderate-income Americans, leaving many overburdened by unfairly high premiums and others unable to afford insurance at all. 

Good Drivers Pay More for Basic Auto Insurance If They Rent Rather Than 

Own Their Home Consumer Federation of America (2016) 

Several major auto insurance carriers hike rates on good drivers who rent their 

home rather than own it. CFA tested the premiums charged by seven large insurers 

to a good driver in ten cities. For each test we only changed the driver’s homeownership status and found that renters were charged seven percent more on average— 

30 

$112 per year—for a minimum limits policy than insurers charged drivers who own 

their homes, everything else being equal. 

Price of Mandatory Auto Insurance in Predominantly African-American 

Communities Consumer Federation of America (2015) 

CFA released research comparing auto insurance prices in predominantly AfricanAmerican Communities with prices paid in predominantly white communities. Nationwide, in communities where more than three quarters of the residents are African American, premiums average 71 percent higher than in those with populations 

that are less than one quarter African American after adjusting for density and income. In Baltimore, New York, DC, Detroit, Boston and other cities, the disparity 

of premiums is more than 50 percent between predominantly African American and 

predominantly white ZIP codes. 

New Research Shows That Most Major Auto Insurers Vary Prices 

Considerably Depending on Marital Status Consumer Federation of America (2015) 

CFA released research on how insurers utilize marital status in their pricing of 

auto insurance policies. CFA questions the fairness and relation to risk of this pricing by most major insurers, particularly their practice of hiking rates on women 

whose husbands die by 20 percent on average, the ‘‘widow penalty.’’ 

Auto Insurers Fail to Reward Low Mileage Drivers Consumer Federation of 

America (2015) 

CFA released research showing that large auto insurers frequently fail to reward 

drivers with low mileage despite a strong relationship between this mileage and insurance claims. The study found that three of the five largest insurers often give 

low-mileage drivers no break at all. In a 2012 nationwide survey conducted by ORC 

International for CFA, 61 percent of respondents said that it was fair for auto insurers to use mileage in pricing auto insurance. 

Large Auto Insurers Charge High Prices, to a Typical Lower-Income Safe 

Driver with Car Financing, for Minimal Coverage Consumer Federation of 

America (2014) 

CFA found that annual auto insurance premiums are especially high for the estimated eight million low-and moderate-income drivers who finance their car purchases. These drivers must purchase the comprehensive and collision coverage required by auto lenders in addition to the liability coverage required by states. In 

the 15 cities CFA surveyed, annual premium quotes were almost always more than 

$900 and were usually more than $1,500. In a related national opinion survey undertaken by ORC International for CFA, nearly four—fifths of respondents (79 percent) said that a fair annual cost for this auto insurance coverage was less than 

$750. One-half (50 percent) said that a fair annual cost was less than $500. Respondents were asked what they thought was a reasonable annual cost for a ‘‘30- 

year old woman with a modest income and ten years driving experience with no accidents or moving violations’’ for required liability, collision, and comprehensive insurance coverage. 

High Price of Mandatory Auto Insurance for Lower Income Households 

Consumer Federation of America (2014) 

The country’s five largest auto insurance companies do not make a basic auto insurance policy available to typical safe drivers for less than $500 per year in over 

2,300 urban and suburban ZIP codes including 484, or more than a third, of the Nation’s lowest-income ZIP codes. In the report, CFA analyzed 81,000 premium quotes 

for State Farm, Allstate, Farmers, Progressive, GEICO and each of their affiliates 

in all ZIP codes in 50 large urban regions, which include urban, suburban and adjacent rural communities. CFA also reviewed the premium quotes from an additional 

58 insurance companies—comprising a total of 207 insurance affiliates including 

those of the five largest insurers—which produced similar results. 

In 24 of the 50 urban regions, there was at least one lower-income ZIP code where 

annual premiums for a minimum limits policy exceeded $500 from every major insurer. In nine of these 50 areas—Miami/Ft. Lauderdale, Detroit, Minneapolis/St. 

Paul, Tampa/St. Petersburg, Baltimore, Orlando, Jacksonville, Hartford, and New 

Orleans—prices exceeded $500 in all lower-income ZIP codes. 

This report included the finding from a recent national survey that more than 

three-quarters of Americans (76 percent) believe that a ‘‘fair annual cost’’ for statemandated insurance for a typical good driver with no accidents and no tickets 

should be less than $500. 

31 

Uninsured Drivers: A Societal Dilemma in Need of a Solution Consumer 

Federation of America (2014) 

This report found that most uninsured drivers in America have low incomes and 

cannot afford to purchase the mandatory minimum liability coverage required by 

their state. The report also revealed that these low-income drivers are increasingly 

adversely impacted by state and local government actions, including raising liability 

requirements (driving up premiums), more rigorous enforcement, and stiffer penalties. However, there is little difference in uninsured rates between those states 

that penalize uninsured drivers harshly and those that do not. The report reviewed 

penalties for driving without auto insurance in every state and found some of these 

very harsh penalties for lower-income Americans who truly cannot afford the required insurance: 

• Fourteen states allow jail sentences for a first offense. 

• Thirty-two states allow for the possibility of license suspension for a first offense. 

• Thirty-three states have possible fines of $500 or more for a first offense. 

CFA Analysis Shows Auto Insurers Charge Higher Rates to Drivers with 

Less Education and Lower-Status Jobs Consumer Federation of America 

(2013) 

Several major auto insurers place a heavy emphasis on their customers’ occupation and education when setting prices, forcing lesser educated, blue collar workers 

with good driving records to pay substantially higher premiums than drivers with 

more education and higher paying jobs. For example: 

• GEICO charges a good driver in Seattle 45 percent more if she is a factory 

worker with a high school degree than if she is a plant superintendent with a 

bachelor degree; 

• Progressive charges the factory worker 33 percent more in Baltimore; and 

• Liberty Mutual charges the worker 13 percent more in Houston. 

The reported also highlighted a national survey that found that about two-thirds 

of Americans believe that it is unfair to use education and occupation when pricing 

insurance policies. 

What Works: A Review of Auto Insurance Rate Regulation in America and 

How Best Practices Save Billions of Dollars Consumer Federation of 

America (2013) 

Over the past quarter century, auto insurance expenditures in America have increased by 43 percent on average and by as much as 108 percent. These increases 

occurred despite substantial gains in automobile safety and the arrival of several 

new players in the insurance markets. Only in California, where a 1988 ballot initiative transformed oversight of the industry and curtailed some of its most anticonsumer practices, did insurance prices fall during the period, resulting in more 

than $4 billion in annual savings for California drivers. This report used NAIC data 

to assess the impact of different types of insurance market oversight (prior approval, 

file and use, use and file, flex rating, and deregulation) on rates, industry profitability, and competition. It also provided a detailed analysis of California’s experience with the Nation’s most consumer protective rules governing the auto insurance 

market. 

Largest Auto Insurers Frequently Charge Higher Premiums To Safe 

Drivers Than To Those Responsible For Accidents Consumer Federation 

of America (2013) 

CFA analyzed premium quotes from the five largest auto insurers in twelve major 

cities and found that two-thirds of the time, insurers would charge a working class 

driver with a 45 day lapse in coverage and a perfect driving record more than companies charged an executive with no lapse in coverage but a recent at-fault accident 

on their record. In 60 percent of the tests, the lower-income good driver was charged 

at least 25 percent more than the higher-income driver who had caused an accident. 

Use of Credit Scores by Auto Insurers Adversely Impacts Low- and 

Moderate-Income Drivers Consumer Federation of America (2013) 

Holding all other factors constant, the two largest auto insurers, State Farm and 

Allstate, charge moderate-income drivers with poor credit scores much higher prices 

than drivers with excellent scores. Using data purchased from a third party vendor 

of insurance rate information, this report showed that State Farm increased rates 

for the low credit score driver an average of 127 percent over the high credit score 

32 

1Links to the series with thumbnail descriptions of each report ac be accessed at: http:// 

consumerfed.org/cfa-studies-on-the-plight-of-low-and-moderate-income-good-drivers-in-affordingstate-required-auto-insurance./ 

customer and Allstate raised rates by 39 percent, costing State Farm and Allstate 

customers an average of more than $700 and $350, respectively, based solely on 

credit scores. 

The report also pointed to a recent national survey conducted for CFA that found 

that, by a greater than two to one ratio, Americans reject insurer use of credit 

scores in their pricing of auto insurance policies. 

Auto Insurers Charge High and Variable Rate for Minimum Coverage to 

Good Drivers from Moderate-Income Areas Consumer Federation of 

America (2012) 

This report used extensive website testing to show that good drivers—those with 

no accidents or moving violations—who live in moderate-income areas in 15 cities 

were being quoted high auto insurance rates by major insurers for the minimum 

liability coverage required by those states. Over half (56 percent) of the rate quotes 

to two typical moderate -income drivers were over $1,000, and nearly one-third of 

the quotes (32 percent) exceeded $1,500. 

The report also presents findings from a national survey that shows that lower 

-income families report knowing people who drive without insurance at a much 

higher rate than higher-income drivers. Further, nearly 80 percent of drivers agreed 

that ‘‘they [the uninsured drivers] do so because they need a car but can’t afford 

the insurance.’’ 

Lower-income Households and the Auto Insurance Marketplace: Challenges 

and Opportunities Consumer Federation of America (2012) 

Access to an automobile plays a critical role in creating economic opportunities for 

lower-income Americans and the affordability of auto insurance plays a key role in 

this access. This report provides an overview of the auto insurance market with a 

detailed discussion of low—and moderate-income (LMI) households’ participation in 

the auto insurance market. The report summarizes pricing information collected by 

CFA as well as data related to availability, residual markets and uninsured motorists. 

At the heart of this report, which was the first in the series of reports outlined 

above, is t he finding that for millions of lower-income Americans auto insurance 

is unaffordable and inaccessible despite their unblemished driving records. High 

priced auto insurance, which often leads LMI drivers to choose between giving up 

their cars or driving un insured, creates serious economic hardships, and the issue 

must be addressed by policymakers and regulators. The report concludes with a 

summary of the issues, obstacles and needs facing LMI customers and policy suggestions for addressing them.1

Senator MORAN. Thank you very much. 

Let me just ask a few general questions, and then I’ll turn to the 

Ranking Member. 

Maybe it’s with you, Mr. Doak. Our states share similar kind of 

casualty opportunities for insurance claims to be paid in tornadoes, 

windstorm, hail, and most recently, fires. 

Mr. DOAK. Yes, sir. 

Senator MORAN. Where is the circumstance in which that fraud 

is likely to occur? Somebody has a hailstorm or there’s a tornado 

that goes through town, what are the places that are most significant opportunities for fraud? 

Mr. DOAK. Sure. And thank you, Senator. Commissioner Selzer 

and I have talked about this, and he has actually attended the National Tornado Summit, which we host in Oklahoma City with several other of our colleagues from around the United States to talk 

specifically about natural catastrophes and disasters, and what follows after that is unfortunately there is a high propensity for 

fraud. And, unfortunately, most of the folks that are taken advantage of first in those natural catastrophe events, whether it be 

33 

Sandy, Katrina, some of those events, are seniors, who we want to 

protect and make sure that they’re well educated. 

But we also see some of the basic things as after that size scalable catastrophe example, the Moore tornado not too long ago, we 

had over 80,000 claims in a very concentrated area. The anti-fraud 

units worked, and we actually had the anti-fraud unit from the 

State of North Carolina came and joined us because of the very 

specific job that they do in deterrence. You have folks that go 

through these neighborhoods that really prey upon unsuspecting 

consumers that have never had this size of a catastrophe. So you 

have folks that are asking them, ‘‘We’ll tarp your roofs,’’ and then 

they’ll put liens on their property, and they’ll find out later through 

the claims process that there is a lien on the property. You have 

unscrupulous contractors that take advantage of folks relative to 

roof damage and hail. Whether it’s a complete loss or partial loss, 

a lot of times those find out that they are full losses. 

So there are many things that happen there. But consumers, at 

that particular point in time, for those large-scale losses—hail, tornado—we just recently showed you the picture of the one in Elk 

City, 100 homes, but the contractors that descend on the area, we 

try to encourage them, Senator, to use local reputable contractors 

from their community where they know who they are, but when 

folks come in across state lines, many times that’s where you see 

the fraudulent activity happening. 

Senator MORAN. A disreputable contractor, somebody who enters 

into a contract with a homeowner following a natural disaster, how 

does that become insurance fraud as compared to fraud? 

Mr. DOAK. Right. Well, when it deals with the insurance policy, 

when they’re actually doing work and then billing it back to the insurance company for some type of fraudulent activity, that’s where 

it crosses the line into the insurance issues no matter what state 

they’re in, is if they’re getting payment from the insurance companies, that’s where the fraud is happening. And that can even be a 

first dollar because if they’ve got a deductible to meet, many times 

consumers are using that out-of-pocket expense to tarp a roof, to 

have any type of activity done on their home. In a major catastrophe, they’re keeping those receipts because all of those are applied toward that total insurance claim. So hopefully that answers 

your question. 

But one of the things in Moore, Oklahoma, that really is I think 

a best practice for the country is the registration of contractors that 

come into an area. And we believe that that should be done at the 

local community level where there is recourse. If someone comes in 

from out of state, they register at the local municipality, which it’s 

very, very economical, but they show that they’ve got liability insurance and there’s recourse if their workers are hurt or injured 

on the insured’s property, but there is some recourse to find them, 

they’re just not flight-by-nights. 

So there are some things that we’ve learned from other communities around the United States that really have been best practices. 

Senator MORAN. Perhaps for all of the panelists, Ms. Weintraub 

raises the topic of fraud committed by the insurance company. I 

think perhaps stereotypically we think of a consumer or a third 

34 

party as the perpetrator of fraud. Do you see what Ms. Weintraub 

has described? And do you take that seriously? And are there efforts within the industry to make sure that the insurance companies and their employees, their agents, behave in a non-criminal 

manner, in an ethical way? 

Mr. DOAK. Absolutely. If that’s directed toward me, we absolutely 

do. We’ve got the insurance commissioners, whenever there are 

complaints that are levied, as you’ve outlined, the companies, the 

insurance commissioners, and the departments take those very, 

very seriously. Insurance fraud by companies, if there is unfair 

claims practices, if they’re not treating people fairly, if they are 

using some type of practice behind the scenes, as she mentioned, 

that’s something that state regulators take very, very seriously. 

Other colleagues might have some comments, but that’s very high 

on our radar for all state departments around the country. When 

we hear of those things, we investigate those and follow up on 

them in a pretty timely manner. 

Senator MORAN. Is there a way to estimate—to other panelists, 

is there a way to estimate the cost to consumers of that kind of 

fraud—fraud committed by companies and their agents? 

Mr. KEVELIGHAN. Maybe I can—as an industry representative, 

maybe I can speak to that. And I’ve heard a term used both by 

Ranking Member Blumenthal as well as Ms. Weintraub, and it was 

‘‘vast majority,’’ and I think that’s something to take into consideration. We all know that it only takes one instance to damage reputation, but the vast majority of insurers are working very closely 

with their regulators. All policies have to be—all policy terms, conditions have to be approved by the regulatory community and their 

state regulators. 

So there’s a very direct relationship here with the regulatory 

community. The insurers want to get this right. They want to make 

sure they’re providing the right protection. And there are success 

stories. So if we look recently at Sandy, in the first 6 months, we 

had over 90 percent of the claims paid. Now, we can look at specific 

instances where we had troubles, and I think if you look at any industry, you’re going to find those things. But the vast majority of 

this industry is dedicated to serving the consumer and to make 

sure that it’s rebuilding their lives. 

Senator MORAN. Anyone else? Mr. Jay? 

Mr. JAY. Yes, Mr. Chairman, I think that’s an excellent question. 

And following up on what Ms. Weintraub said as far as the industry doesn’t like the few bad apples that are out there, but a lot of 

these scams are perpetrated by rogue insurance adjusters and especially rogue insurance agents. And at one time, insurers really 

didn’t do a very good job in policing their own employees on this. 

I think that’s changed today because of pressure from regulatory 

bodies, but also because I think it’s in the insurers’ best interest, 

and they do want to make sure the consumers are protected and 

that their own reputations are protected. 

So in those areas, I think it is getting better, but some of these 

other instances that you’re taking a look at, I think you also have 

to distinguish between what is a bad practice on behalf of an insurance company that’s harming consumers and what may be deemed 

criminal or civil fraud as defined in the state statutes. And I think 

35 

we need remedies for both, but some may be abuse and some may 

be outright fraud. 

Senator MORAN. Yes. I can see a difference between the frustration that comes with a slow payment for the indemnity, the check, 

or the bureaucracy that comes with filing the claim. That’s different, I think, than outright fraud, trying to deny the consumer 

what they’re due. 

Senator Blumenthal. 

Senator BLUMENTHAL. Thank you very much, Mr. Chairman. 

And again welcome to all of you. 

I want to talk about an issue that is of grave concern to Connecticut and possibly all of the Northeast and the country, and it 

goes by name of pyrrhotite. Few in this room would know how to 

spell it. And not many around the country would know about it, 

but it is well known in Connecticut and in Massachusetts and 

other parts of the Northeast, and it is an example of the kind of 

insurance practice that may be tantamount to fraud, certainly involve deceptive and misleading practices, and unfortunately has 

cost hundreds of Connecticut homeowners possibly their life saving. 

Hundreds of homes in Connecticut, mostly working and middle 

class families, are reported to have cracking or crumbling foundations. Those homes are quickly declining in value. Some have approached the point of worthlessness. The only known solution is to 

replace the entire foundation at costs exceeding $150,000 each. The 

fear is that this condition could spread to thousands of other 

homes, whose foundations were also poured using concrete aggregate from a particular quarry that contains high levels of a naturally occurring mineral called pyrrhotite. 

Insurers have been unwilling, they have been unwilling, to provide desperately needed assistance to these homeowners. Instead of 

alerting their customers about the risks once the insurer became 

aware of them, they surreptitiously changed the policies, they updated the policies, to strictly define coverage of, quote, collapse, end 

quote, to only, quote, abrupt collapse. And they added foundations 

to the list of policy exclusion. 

They never properly told their customers what they were doing. 

They never told them the reason they were doing it. They never 

adequately notified them so the homeowners could take steps to 

protect themselves either by rebuilding or taking construction precautions about the foundation or taking new policies that cover this 

problem. Insurers clearly knew there was a problem with crumbling foundations before homeowners knew, and they immediately 

sought to shield their liability, in other words, protect themselves, 

rather than protect their customers. 

I have highlighted the responsibility of insurers to do more. Some 

have offered, but most have refused to step up and honor their obligation to these homeowners. And I am out of patience. There have 

been lawsuits. So far, I have declined to enter them, but I think 

I and my colleagues and others are at the point of wanting more 

action and more compensation for these homeowners whose life 

savings are at risk, whose homes are not only crumbling, but 

whose financial well-being are crumbling as well. 

So, Mr. Kevelighan, when insurers become aware of a problem, 

as they did here, don’t they have an obligation to notify and inform 

36 

their consumers, as insurers failed to do here, that they are literally changing their policies, the wording of the policies, that will 

deprive them of adequate compensation for this kind of policy problem? 

Mr. KEVELIGHAN. Well, I know this issue, and it is an unfortunate one, and we’ve paid very close attention to it at the Insurance 

Information Institute, and we understand people are very troubled 

financially as a result of this. It’s something that happened as a 

result of construction and manufacturing that occurred 15 or so 

years ago. And as a homeowner’s policy, it is standard, and we’ve 

seen this in other states before, where we have defective materials. 

Those are—it’s a standard exclusion in an insurance policy, so it’s 

not specific to Connecticut. 

Senator BLUMENTHAL. So this issue is potentially widespread. 

Mr. KEVELIGHAN. I don’t know—we only know of this particular 

issue in Connecticut, and I—— 

Senator BLUMENTHAL. Well, when I say the issue, I don’t mean 

pyrrhotite, I mean changing policies so as to, in effect, exclude a 

problem that the insurers know is looming that will in effect rob 

homeowners of their life savings. That is the issue, not pyrrhotite, 

it’s a larger issue, it’s the practice among insurers of changing policies. And you’re telling me that this kind of, in your words, issue, 

in my words, potential fraud, is wider than just Connecticut. 

Mr. KEVELIGHAN. I should clarify. The exclusion of defective construction materials is a standard exclusion in a homeowner’s policy. 

Now, back to what we were talking about earlier about the regulation of insurance. All policies, any changes, are approved by the 

regulator. We work very closely with our regulators to make sure 

that they understand what changes are made. And as far as I understand in the State of Connecticut, the insurance commissioner 

has stood by what the changes were. 

Now, that doesn’t exclude the fact that this is an unfortunate situation. And I know Governor Malloy has also asked FEMA for assistance, which has been denied. I understand that something 

needs to—everybody wants there to be a solution, but the solution 

and whether or not it was something intentional from the insurance companies, I’m not sure. Again, this is a standard exclusion. 

Senator BLUMENTHAL. Isn’t this precisely the reason why people 

buy insurance, homeowner’s insurance specifically? 

Mr. KEVELIGHAN. Everybody buys insurance in order to cover 

their risks. Now, what we do at the I.I.I. is to make sure that people understand how that insurance works, because there are things 

that need to happen in terms of standard exclusions for defective 

construction materials. That is not a homeowner insurance policy 

issue. That may be a manufacturer construction issue, but it’s not 

one that falls to the personal homeowner insurance policy. 

Senator BLUMENTHAL. I’m going to ask Mr. Doak, doesn’t this situation make your blood boil as an insurance commissioner? 

Mr. DOAK. Well, Senator, it’s unfortunate. We have similar 

issues in my state as well. We had a 4.4 earthquake last night at 

9:58 in Edmond, Oklahoma. We have Oklahomans whose foundations are having particular issues relative to seismic activity. However, with earthquake insurance, much like the policy that you’re 

37 

talking about, I do agree with Mr. Kevelighan, that this, to me personally, is more of a commercial risk exposure due to the manufacturer or the quarry that was used, going back to the source, much 

like there are cases in Oklahoma are—— 

Senator BLUMENTHAL. I just want to make sure you understand, 

Mr. Doak, what happened here, and I’ll analogize it to the earthquake situation. It is as though the insurers in your State of Oklahoma figured out, ‘‘Oh, we have earthquakes in Oklahoma, so we’re 

going to change these policies, because this could mean a lot of 

losses for us, to exclude earthquakes, but we are not going to properly inform consumers.’’ So they’re going to wake up today, as 

many of your fellow Oklahomans did, with damage from earthquakes, and go to their policy, and the insurers are going to tell 

them, ‘‘Oh, we changed that policy. It’s only earthquakes in April 

in leap years.’’ That’s the equivalent of what happened here. It’s 

the lack of proper notification. 

Mr. DOAK. Exactly. And this is what I—— 

Senator BLUMENTHAL. And as an insurance commissioner, and I 

would say this to our insurance commissioner, the insurers have an 

obligation to do better—— 

Mr. DOAK. No question—— 

Senator BLUMENTHAL.—and I think everybody on this panel 

agrees. 

Mr. DOAK. No question. The disclosures whenever a product or 

a contract is changed, those disclosures, the clients, the consumers, 

should be educated on that. It’s unfortunate, though, through the 

National Association of Insurance Commissioners, we have the 

Consumer Board of Trustees, and one of the challenging efforts 

that we have on consumer education is most consumers never read 

their policies before there is ever a claim, and when they get these 

endorsements or disclosures in the mail where some of the policies 

are changing based upon the terms and conditions and regulatory 

authority, some of these are changing, but many of them are not 

read. 

But if the clients, if the folks, are not getting the proper disclosures, I agree with you. I think we’re all in agreement there. 

Senator BLUMENTHAL. Well, in my view, there is no question that 

the disclosures were totally inadequate, that this conduct is unconscionable and indefensible, and that there ought to be adequate redress in the courts. 

Mr. DOAK. Sure. 

Senator BLUMENTHAL. And I will take action to support the efforts in the courts more vigorously than we have before because, 

as I say, I have lost patience with FEMA, with other sources of recourse. Some of the insurers have stepped up, recognizing their obligation. 

Mr. DOAK. Sure. 

Senator BLUMENTHAL. But they rightly insist that all of the insurers be part of the solution so it doesn’t fall unjustly on the ones 

who want to do the right thing. And so I would call upon members 

of this panel to use your moral suasion with your industry so that 

all of them do the right thing here because I think it is a really 

important example of following moral and legal responsibility. 

38 

I’m going yield, and then I hope we’ll have a second round of 

questions. 

Senator MORAN. The Senator from West Virginia, Senator 

Capito. 

STATEMENT OF HON. SHELLEY MOORE CAPITO, 

U.S. SENATOR FROM WEST VIRGINIA 

Senator CAPITO. Thank you. Thank you all. I’m sorry I missed 

your testimony, but I do have questions. It’s kind of related along 

the lines of the tornado issue. In our state, it happens to be flood, 

flood catastrophes. I just toured Mannington, West Virginia, and I 

know McMechen, West Virginia, had tremendous floods, homeowners really caught unawares, and life-altering kinds of things. 

Unfortunately, we lost two folks, but a lot of property damage. 

How do you recommend that, as a public servant who goes in, 

works with the EMS, works with FEMA, works with SBA, to try 

to facilitate those conversations with our constituents who are 

harmed, how do we inform them or make sure that rural Americans are not going to be ripe for issues like contractor fraud or insurance fraud in the case of really a once-in-a-lifetime sort of 

event? We can—it’s for anybody. So, Mr. Doak, I don’t know if you 

do anything in Oklahoma. 

Mr. DOAK. I think one of the things that the NAIC has done 

very, very well is provide many different types of consumer education, consumer tools, at the state level. Many of the states like 

mine have put together PSAs. For instance, we have put together 

a series of PSAs relative to earthquake, wildfire, different types, to 

be able to drive that message at a local level to understand the 

claims process or what’s covered or not covered. So in a flood process, those same principles apply because most folks, when they 

have that type of catastrophic event, have never been through it 

before. 

Senator CAPITO. Right, right. 

Mr. DOAK. And so it’s very, very challenging. And also that’s 

where the relationship with the insurers that we regulate, we expect them to provide some of that education, and through some of 

their marketing pieces, to be able to articulate that. But it is very, 

very challenging, Senator. And I do agree. I have been to too many 

sites in my state where folks have been totally devastated, and 

they don’t understand the claims process, no matter what peril 

caused it. 

Senator CAPITO. Right. And one of the things I’ve noticed, and I 

don’t know how you avoid this except through education, is, for instance, in the flood, your first inclination in your home is to get everything out, just to get it out, obviously for obvious reasons, health 

reasons and other reasons, but I kept saying you’ve got to document every single thing, you’ve got to keep all your receipts for 

your cleaning fluids, all the stuff that you—and they sort of give 

me this blank look like, ‘‘Oh, well, that—,’’ you know, you’re in 

such a panic in the first 48 hours to try to—— 

Mr. DOAK. Yes, ma’am. One of the things my colleagues may 

agree on, but one of the things that the NAIC has put together, 

and it has been a very effective tool, is a home inventory tool. They 

can go out on the website. We try to encourage that in Oklahoma 

39 

with the number of catastrophes that we have, but take pictures 

of your home, document some of these things. 

Senator CAPITO. Right, right. 

Mr. DOAK. Because a picture is worth a lot of money when it 

comes time to a claims settlement if it’s by a flood or wildfire or 

whatever the case is. 

Senator CAPITO. Right. I think like I said, that’s a good suggestion. 

I’m going to go to Ms. Weintraub about the opioid issue. Our 

State of West Virginia unfortunately has a high use of—we’ve been 

hit hard with this opioid abuse issue. We’ve had some pain clinic 

doctors who were recently indicted on fraud charges. ‘‘Pill mills’’ is 

a term I’ve heard too much in our state. 

How do you approach this—I read your testimony—in terms of 

insurance? How can you be helpful or how do you feel that the insurance industry can be more helpful in this area? 

Ms. WEINTRAUB. Well, first, this is a huge problem across the 

country and West Virginia. 

Senator CAPITO. Right. 

Ms. WEINTRAUB. And our hearts go out to all of the people and 

all the families who are suffering as a result of this crisis. 

Senator CAPITO. Right. 

Ms. WEINTRAUB. Some insurers have the data to monitor opioid 

prescription levels, and I think should be, and some are, a force for 

good in finding ways to tackle this mounting problem. We encourage insurers’ full cooperation in working with government and others seeking solutions, but in some ways, insurers could also be part 

of the problem. 

First, some insurers will not pay for alternatives to opioids, such 

as steroid injections or physical therapy and nerve blocks. And 

some insurers try to do the right thing by limiting the amount of 

opioids a person should be able to obtain, but sometimes it’s not 

done in the right way, and some patients have been on a drug for 

so long that they then turn to the streets and other much, much 

less safe alternatives. So in these occasions, this sort of turning to 

street drugs exacerbates the problem. 

Senator CAPITO. I have one second left. So does anybody have 

anything to add on that from the insurance perspective? 

Mr. Jay. 

Mr. JAY. Yes, Senator, that’s an excellent question. And part— 

almost every state, every state but one, has a drug monitoring—— 

Senator CAPITO. Right. 

Mr. JAY.—prescription monitoring program. And some states 

have now recognized that if they share some of this data with insurers, both health and property/casualty, who pay reimbursement 

for these drugs, they can find some of these schemes much more 

quickly, not only people who are doctor shopping, but also some of 

the physicians who are prescribing and some of the pharmacists 

who are dispensing these drugs like giving candy out on the street, 

and those are the people we’ve got to shut down first. 

Senator CAPITO. Right. I would say in terms of the insurance industry, our state has a pharmaceutical monitoring system, so if 

that person who is going to the pharmacy is using an insurance 

card, they can and are picked up much more readily. There is a 

40 

certain percentage who are paying cash for this. And some states 

are not required to input that data into a pharmaceutical monitoring system. I will say thank you to the insurance companies in 

that they have created systems where it’s instantaneous, and if the 

person goes to the next pharmacy—— 

Mr. JAY. Right. 

Senator CAPITO.—it can pop up if they’re on insurance, but if 

they’re paying cash, it’s much, much more difficult. But I think our 

states are all working together to figure how to close that loophole. 

And for a long time, some of the problems were the states 

weren’t cooperating with one another. So you have West Virginia, 

and you can just go right across the river over to Ohio or to Kentucky, and you’re in the same thing, and that problem is getting 

better. But we’ve got to have everybody, you all at the table, and 

everybody at the table because this problem is—the report that just 

came out, it’s a preliminary report from the President, says it’s a 

national emergency, and I believe that it is. And thank you all very 

much. 

Senator MORAN. Senator Capito, thank you for persistence in regard to opioid abuse in West Virginia and across the country. 

Let me tell my colleagues and to our panelists, we are expecting 

votes sometime around 11. My intention is to conclude the hearing 

when those votes are called. We’ll wrap up here and we’ll not resume. So we probably have 10, 15 minutes left in this hearing. 

Many of the questions that may be asked of you will be submitted 

to you in writing, and we’ll request a response. 

Let me say to you, Mr. Jay, in regard to your HIPAA legislation, 

I’d be interested—I think I’m speaking to the right person who 

raised this—— 

Mr. JAY. Yes. 

Senator MORAN. I’d be glad to hear more about that if you would 

let our Committee staff know. It seems a place in which there may 

be a role for Federal legislation. 

And I generally would ask the question of all of you. We’re having a—we’ll continue to have a health care debate. One of the 

things I think that has been missing in this conversation for a long 

time is, What do we do to reduce the underlying cost of health 

care? We spend a lot of time on trying to figure out who pays, but 

we’re missing an opportunity that I think could be very bipartisan 

in trying to get rid of the things that drive up the cost of health 

care, and therefore, drive up the cost of health insurance. 

And one of the things that comes to me in the testimony that I’ve 

heard from you is medical insurance fraud, which I assume is both 

committed by the provider, the health care provider, as well as the 

patient or consumer. I’d love to know information about—that you 

all may have in regard to the overall cost to the system that that 

kind of fraud creates. And if there is a way we can address it, it 

could be one of the things on a list I have of many that we could 

address in regard to the cost of health care as we continue to try 

to figure out who pays the bills. 

Let me ask, Mr. Jay, I think this is directed at least initially to 

you. There are a couple of things I want—I’m going to ask you 

about your Coalition’s 2016 annual report. There is also a 2016 

study conducted by the Coalition, ‘‘The State of Insurance Fraud 

41 

Technology.’’ I’d ask unanimous consent that both of those documents be made part of the record. Without objection, they will be. 

[The information referred to follows:] 


803SIFT1.eps
42 


803SIFT2.eps

The State of 

Insurance Fraud Technology 

A sh.1dy of insurer use, strategies and plans f or anti-fraud technology 

Executive Summary 

nl> ra ~c fr:tucl ccmtinuc!~ to l)t> :l m:1jor i~"'t. e k)r :>t.ner~. :ll)d lor c-<mltUIIh.~n; who mv)tt bear 

the hill'her Co;.).i:ts. rhis ctim..- :tel&~ to in:;:ur:mct pretnium$, A m:tjorit)' of )SU«'~ in rhL~ studv s:w 

fr;u•d h:;~s incrc::ased ag::tinst thdr comparw o••c:r the IMt three ve::tr$. U$e of tcxhnologv tO detect 

(mud i1' cbim~. underwriting :md other nrtaS conti nues tcdimb. More insure~ tmbmce :'lnd h:l\tt 

Thi$ :>tucly buikh• on :-timibr (;():llition :<tll(lie5 oonch.1 ct~l in 2014 ;and 2012 to better 

under:o:t:md how l'l un:r:: dept()'.• t«:ht'lology ro tackle in::urance C'rim~. The ~rudy c:omp:tr~ haw 

~urn.nc~ fr.u.1d h:l.!l ch._,_nllC<I since the prtvioot< studi~. and how advanc~ in technol<lg'· e-nable 

nsure~ to bettercomb:n in:mr:mce crime. Th~ sntdy con .. sted o( an on n~ surv~· of 86 insurers. 

which Cpr~cnt a signific:mt :;.hare oi the propertv/C::l$\.talr: marktt. 

The 2012 :5tl.ld\1 round that f'Q\.IJ.,.'<Illv hair of S\II"t~ h::td f\tllv int¢W'atcd t«lmo ~'\' into their 

lnti·frau<l ~·ste 'ls:. Th:u l)ef('Cnt~.: i!> d().4er to 75 percetn l)\' 2016. Ctearlv, insur~nt ~re tllOrecomlOrtablc \1$ing t«hnoiQg~o' and jwtif\•ing its t'Xpet'l!'e. A~ a JlfO\ 'in~r trend. insur(r tlenior 

man~emem is beroming more an~hticallv aware and incrnsin.glv feels technology invesunem 

hdl>$ imprCJ'\'C th~ir oomparw'scompetitiv(' advant::tg('. 

Th(' perception o( incrc:::lScd fr.ll.td ma,y 

he :l bi~ rei~on why nl'ure~ ju.,.tifr $:ft':'ltcr 

itwe:;.tmem in anti~fr.:tud technologv. Some 

61 perce•u report that the number of 

:;.u:;.pect fra\tcl$ incr<aml slightly or 

~i~t'lifieantly il'l the l:t."lt three' rennt (!lee 

fi(,.•\Jre l), Tilis compares to 51 pel'c.:m in 

Ch1nge in "~' suspected frJvd 

dvring c:he la.st three y('~I"S 

• 2016 • 2014 1roo.ac-,___....,. 
43 


803SIFT3.eps

the 2014 study. The qt.a<'.:'tion n;:m:lill." wltr.thf;r frattd i~ 

increasing or whether insur~rs- in part rhrough gr~ar("r u~ of 

tC'dmologv- are g<tting btttcr at de:tecti ~ it. 

Among othc:r (inding::;: 

• Claim~·fr.l.ucl t!etectit)l'l continue.s to beth(" le:ulin~ :.~ 

for tcxhnolo$..'"· 111e txrcenta.cc of in.sure~ t.&Sins,! techn · to 

dc; ~r :;.u:;.pcx:t daim~ jum}>t'd (rom 65 verce11t to 76 perrer.t il''l 

the last four v~t:t.. 

• The ln0$t~popular techno~· depiO\·ed is :..utomated red 

11~/bu:oJ.inffl rulet» u.;;etl b,• 90 percent of insurel':l th:tt u~~ 

anti-fraud t«hnolog~o·. 

mitigarion (Jf losSc:S." 

• More th:..n h:..lf of insurers sur\x:-,•ed US< predict:ivt" modeling, a signif1cant increase from just 

• lntcrn:1l d:na and puhlic- rc:«>n,_l:-o contint.ll! to be the brJ:.;~ sou c~ to l"ccd tcc:hnol()g\· 

:-l-V~tc;m:;:. Th~ m.uuhrr or W\IT(~" and quantity ()f d:)t:l :tvailable to Insurer$ al:;.o ('Qntinue to J,.'T<JW. 

• Technoi()$Z\' is producing more rtf rr::~!$. and ht-ttc;:r-qualitv One$, fn~urcn- report. Another 

be1'1efit n'l:liW cite is increa.~l mitigation of (0$..~. 

• 70 pe«ent o( in:~u«>l':l said t~chno!O;Q'o· arcoum~ !()r rnor~ than 10 perc~nt o( ~ucl rcter~L<~ 

they r«d''e. Six percent of iruur<rs ~id the• r«eh•e more th~n 60 perce-nt of their refernls 

thrma.gh lechnol<>g\·. 

• The rwo bigge:;.t chall(~ insurcn- f.'\C(' i$ the bck of IT r('S()t.ITC("S :..v~ibble to m:..int:..in and 

cxpond pr()$.!r~ n$, an( I c;:xce&;ivc;: (.,1:-l< )>Ot:litivC$ chdr ~\'Stcnl-t vnxh.1c<::. 

• One-third ofSJ\J cli rcct()~ cxJ*ct their IT buclf.,ocf.:o to inerca.;c in 2017. Top:-; on their 

~hopp llg lisrs are predictive mOOeling and link analwi~hocial·rnedia ptO)(l"ams. 
44 


803SIFT4.eps

Current state of fraud & technology 

The lull scale of insurance fraud l$ 

unknown. Bec:l.I..J$C this crime is d<:$iszncd 

communitv can onlv R\-lt'&' at the extent of 

to be prev::tl ~;:nt thrQ\I.gho\lt the n~1,.1r~m« 

life("\·de. (roan lhe :tpplic:nion proc:~i; 

through the claims arena. ln.~ure~ 

incrc:l:oinj.!h' ~c: more attemptcxl ~u .. •d at 

~""~'"*~ a. ..... ""'"'" ~~ ~ 8»1• 

_,...., 

--..........--··· ___ _..,._,.,.... ____ .. ,..,_ 

• :IOH 

,., 

"point of ~le .. - during the applic::ltion and rea't"ral procC$.<1. This i.:; nt0$t-common with online 

("Q\ ~e P\ITCha.<:es. $\tn:r~ :;~ ro fight internal rr3vd. lli()UC,' hmndcrins: and. tOr the la.."t ~v yean~. 

the emerging issue of cyber fraud. 

Areas em.ployi1\g technolog)•. Somt 76 pero.-nt o(in~urtt'$ $lid derectir•u cl:lims Ct:tucl is the 

primarv \ I$C:: or anti-(r::uJd tcxhnol()$.,<v. That i$ up from 71 jXTCcnt in 2014 ::md 65 Pt"TCCn t in 20l2. 

Usil'g tt-chnology to counter underwriting and automobile mt.:--evasion sch~m(:l; $aw similar 

incrc3:5<$ from 2011 to 2016. Tl1e lX~"C<!nt:v:<: who~" th<'· I.I$C no tedmoiO;I::\' in the :n<:~..<~: li$ted 

dropped fro1n eight percent in 2012 to 2.5 ~~m in 2016. 

U:~ n.g t«h to Ul)cover internal fr:~oud h3..'( pl:ueaued at :!9 J.*rc~nt. !tur~rs. u:ting: anti·mon~· .. 

l:wndcrinJZ $Ofcv.·ar(' fdl I rom 24 penxmt to nin(' perc('nt O":er the last two ve::trt'. The \~crline lll3\' 

stem from the small sample size lOr that 

Ql.l('$tion i n 2014. 

Cvbc-r fraud ("()ntinue-!' to be ::t ).'1'0\\;n~ 

A~ue tOr )~urcr antl·l'raud departmen~. 

Nearlv one of fh·e $:1.\ ' thev ux- tC<'hnologv 

to combat this growiru: thre:1c. 

Anti~ir.aud ce<hnology currt:ntly employed 

---
45 


803SIFT5.eps

Tools employed. Tcxhnolot-.rv pl:w:o :m import::mt rolt> in 

preventing fraud. but most insurers have found that no $ingle 

t«hnologv tool is Hlmcient. A combination of t«hniquQ: 

~u:tllv i~ rcxJuircxl to id<nti(v portuni~tic :tnd J.,o::~. iZ(!d 

fraud. 

The fir;5-t lin\' of dc:fell...<te m<A""t in.surer$ emplov contin\1~ to 

be 3U[OIH:tted red fl.a~/h ~i es.~ rules. They are the bread :mel 

un~r of :tnti·fraud technology. Tied to exi~ting cbims: sy~m!l, 

th<!y can quicklv hdp in.-tur~rs t~ n~t d ::1 im;5. (Qr P'\VItlc"'l\, 

anct i~late Sti$pec:£ ones for routhl.S: co :mti·fraud rlepartm<nt.il.. 

lr1 2016. 90 pttc~m o( in~urers ur, c~ e-tl reportetl u:-1ing 

au tom axed red n~ and bu~inm rules. up from 64 percent four 

'C:'l r~ ¢:\rlicr. 

" ... as tlu: quality, 

ql((lntit)' and tl(lritt)' 

of data expand, 

t~ orkflows will 

become more 

proacrwe and Ul(lt 

«·ill enable S/Us ro 

/oats on tlte most 

significant thrt,(l($ . ., 

The u~ of predictive mOOdinJ.: a~o increased ~is,:nificantl\' ore surer~ went online with 

this rech '\'. The! percent3),.Y( or iiUUI'(I"S wei rut predkti\'e modeling j\lmped from 40 to 54 since 

2012 

Link :.' aly~ :t 3nd mini•'g wci:-1 media :a.lro ~aw ub~t:'lntial nc eas~. T wo-chirtl<t of nsur~ot 

surw"ed s:1id they use the$~ tooL;. 

U~ remai ned largdv Jlat for exception reportingoranom::alv detection, {('X{ mining, gccxbt::l 

mapping, data vis\Jalir.Ltion and ca..~·m :lnagement svstems. While the pure numb~r of users art up 

likdv lxca\.IU of the large sample s:iZ< in 2016, the percentage remained the same. Tile 20lU ~tud\' 

al~) induded a lat).>er perc~nc::~ge of in.::urt~ that are later :~dop[trs of :.nti·( rt~ud tec oiOh~

anOlher reason for the pottntiallag in the apparent growth of these took 

lnsureno alw were a$k«< how often thev refr~h their automated red n~u~inC'S.'I f\lle-s. The 

mo.·n COilW'IOI'I 31\:~w~r \\'3.-t :mnually (34 percent), though 32 l)eCCt"IU say tht"\• err~s h ll'IOte 

entlv. 

Sour<:es of data. lnt<urers report plc:ntv of options to fttd d::ata in thdr S)'H<"ms. Data sour«-!' 

h:'l\'e t.'Xpnnd<:d ::1...; more cbta \'t"ndon; han: come online. and :llt in:ourcr:o llncl $.'f'e:\Ccr u~~ of intern:tl 
46 


803SIFT6.eps

their O\VIl file-s. \XIhile all data sources data Oatasoorce.s 

~wc increased (rom prior studies, thr.:~ 

area..;.- internal cbt:t. p\thlfc r(c:Onl" :tt'HI 

soci31 tn((Ua- h3v(' grown the m~t. 

1!-.d,.,t,<~IW~""'

~~~ --"' ... ;;;;;;;iifF~~ ~"'" 

lnu:·gr..nin.g indu_.:u-y fraud c:Tt:~ imu 

intern31 sy~t~ms al~ is be-coming much 

morc prominent :-;inc:e 20l2 :m<l2014. Tltc 

ncrea.~d a\'aib.bili[\• of such :..len$. likelv is 

hG.tl:ryh..cllilnor..,_....~ 

·-.--·-- f 

encouraging more insurers to ntelitf~\te them into their S\':!tems. 

... '" 

SIU l~dct:: R','t"~ rh:..t :t.'¢ the qual it)•, qu:uniry :md v:~.rie-ty of data t-xpand- in conjUI\<'tion 

with the abilitv to automatically scnab dara-workflow:!- will become more pro:.criv~.That will 

c:n:.hl<: SIU:; to focu:; on the tti0$1-:->i~Znifk:mt tlnc:tl$. 

Benefits seen of employing anti-fraud technology 

M~t in:<l.trer:-; rcpc:)rtcd ~<"i in~ more rci'crr.tl:o, better rcferr.tl:o :tnd incrc.-.:occ:l rnitisr.ttion of 

lo:<se:t when :~Sked [0 lise the top rhree benefits rh~· experience with their tech :;\'stem~. Tht~ 

lx:ndlt;;. are simil3r to th(: 1014 .st\ldy. Two ::m:::l.$ dt<ct 1('$.."--(ten than the <3rlicr stodi~ were 

un<.'t)\'t: n~o: complex o r org:mizt'd ring:;, and in,pr<Wing in\~tigator efi'icicncy. 

The bel\c.fit~ of more reicmls \Wrc echoed when in::ur~N sh:..r.t"<l tlteir experie1\CCS '"'ith 

Only 55 perce1n of il1.~urer:t $-"lid they 

r('cdved more th:m 10 sxrc~nt o( their 

rd"crr:.tl.:; from t«:hnok~·v in 2012. That 

r<>«> to 70 percent by 2016- up from 66 

petce1u in 2014. llnetes:tinglv, no insutet:J: 

reponed receiving more rhan 60 percent 

of referrnl$ from their 3\ltomated t->"$tems 

in 1he cwo previous swdie:ot. In 20l6. ~ix 

f , ;pS 

Perceived benefiu of anti-fraud technology 
47 


803SIFT7.eps

optimum 1"31"1~"<' of refecl':\1 petceiUlgd 

tlleir $\r:s:tem:o :ollOllld produce. Di.:•cu~ion." 

witll inS\Itc.'rs ::'lnd technology expert.;;: 

HIJ,4.<e:tt no ~t and ::ml optimum at thk~t 

poim. Resulnt la rgel~· will oominu~ to 

depend on sophi:•:tication or :0\r:;.[("Ol$, 

trainin$: of u~rr.", daim." phil0$ophv and 

mix of hll$int~~· 

"' 

ow~ve r. 3 me::mingful bc:n('hmarkins,: metrk might b<clcvdoped when anti~fr.l\ld tc:"ch rnat\lrc:tt 

and i~ u.~ed more-uniforml\·. 

Challenges of implementing anti-fraud technology 

Survev participants a1ro i~ted their top thr<e challcn,t:c;: in cmpiO\•in~ chtir tc:dmol0$:i<::$. The:: 

ran kings are similar to the 2014 $tlldy: 

• timitcd IT rcsou rces- both in ud~:ets ;md n-hou~e <xpc-rtise- toppcxl the li$-t. T<ehnoiQg\' 

is cxpandinsr r.1.pidly in m<.'k't :.ut>=t$ of n:-;~,u·: ce OJ)Cr.triOI\:t from m::trkc;tins: to underwriting to 

les,-al. The dem:md for 1u~n'l al IT s~cvice~ i.~ hi~h. ret d~ for outside service$ :u·e !lot ::tdt<JU::tte 

for nlany C'ompa.nic:tt to rn::a.intain c-xisring 

techn ogi~ and add new onf!'$, 

• Excessive false positives a.re the 

-"~Corxl- mo.«t~ited a1len,:..~. Sll J dirc:<:""ton-

$3\' their unitS$pend far too much time 

inv~t pting cas~ th::tt a.re not leWtimat<t 

fraud repor~. While insure~ \ 'el nl0$t 

c~d-" durinS! t1tc:: tri=-s.~ prOC.:cN>. exn::o."i\'1:! 

f::a.b:e icives \V:'tite ~.>':'llu::a.ble ~ou ces 

that ar<" in :thort s.uppl\' in many SlU$. • 2016 
48 


803SIFT8.eps

Th~ hi,::h kn:l of false: J)O:'iti\'t:i ikd~· $ttm~ frorn th~ arJ,:~ 

number o( !at~ adopters of teclmologv that participated in h~ 

~tudv. 

Exc~i e fal~ ~iti <.s :Are mor< likdv to be a problerr, lOr 

in.o:urt't'$ us:in,g a n:trrow s.co~ ol tl"Chno ogi~ :tr'u.Vor clat:t. 

~ttrc:~ u.~i g a rohu:-;.t mix of techno ~-i<'S :mel th()l$(: 1.1sin;: 

s.e,·era.l sourc('S of data seem to experience a ICM•tr level o( blse 

There also is(.orowing ane«<otal evidene< th:u the more 

exptritnu ir\surtl'$ g.-. in with their S\'sttms, ~ptebll,• with 

a1.1tomated r«l fl~/hu~in('.S~ rul~ :md prcdktivc: modding, 

th(' more tht'\' can twtak their :\Weems to reduce false ~ili\'e$, 

"Insurers talk about 

renchi ng a 'su:ttt 

spot' where clteir 

S"fSt.ems produce n 

high lwei of susp.ct 

cl<tinuwhik 

generating far fat·er 

false positi<'ts." 

lnsur~r~ talk abot•t ~ching a "'sw«t spot"' er~ their svs1ems produce a high IC'\'el of s~o.1spec-t 

u~tifving rh~ beneil~ o( using aml-fr:md te<:hnology :1ppe:1rs to be le$$ of a problem for marw 

nsure~. lt w:~s the high<"$t chall(:n~ cited in 2012. As insurer~ ~ow more comfortable with 

techno ~~·. it :lppe:tt:ot ~h SIU leldt>f':'lhip lnd Stl'lior m:lfi3$;(tlllent underst:lnd rhe ~it ve 

bottom·line bentfits o( using technology to detect more fr:.ud. and ~rlier in the- claim:_~: process. 

Measuring success of anti-fraud tech 

FrnuckJetection rat~ was the m~t, 

followed by number of re(t"rt:\ls rect-i\"ed, 

lnterestinglv. one in fh'e insurers tt.:1.id thq· 

do not U;(c U)drir$ m s..-=-u~-e ::ucC.of'$;( ot' 

thdr tc:clmolo.,;.~ · 

Another pOtc;n tialmc:l:> \.lrc:mcn t 

indude:t number of <b~ ftom firsl notice 

of claim to dne-ction. Autom:ltin.g 

,_. Measun"g succ;e$$ in using technology 
49 


803SIFT9.eps

from nrst notice allows each· cb m-c~'Cie 

dct('('tion opporrunitit:s to mitig:'t.te 

ql. e.<ti on:~.bl ~ ~.r: ~'"Crit . 

Future investment in fraud technology 

Anti-imucl tcchnolc))..'Y ike~· will 

continue vi ng [hrough next y~r. 

rlv a third of hlHircl'$ $:;w the'\' ::~ c 

hud,:..oeti ,.~.: to exp:mc-1 th.:ir ccrhnologv. In 

Technology budgets in 2017 

flat 

i:~ , t'Wiet= :1.;; m:uw in .. o:urer;( :;aiel their tech budget.-" will riilf :'1.< :'lid ~ct;( will clcdi1'tc. hl 2014, 

on!\· a quaner o( inwrel'$ ~aid the",· expect bi~""er c~""tu for the l'leXt vear, so it appe-a~ techno · 

inve:;.tment!l are accder:ning. 

And how will inl!-urt r$ spend the new tech dollant~ M<»t $av tht'\' will invest in pn:dictivt 

nu.x:ld inJ:, folki'.\'C<I by link ano r~ ;( ond social-media software, :mel t hen text min ,.~.:. 

Otller findings 

• 64 pe«em maimai1'1 their ste 'ls il'l,house. The c~t ou~o tee : al'ld 

• Af'lti-fraurl ted'IJ'Ic)logie!'> .:t\-~ th e greatc>t imp:.cL o n :"r:.ucl cle:1lit'l~ with J)el'$On'll lu{(), 

or~nized rings and m('(Hcal provide~. 

Conclusion 

T<xlav's nnti-fraud tcx.hnologv contint.ICS to t>xpnncl 3Jl<l become- more<ffecth'c-, and ju t ~ 

import:lnt. co.vlv<:: o:<: fr.al.•d sdlc.:mc-::- ::ohi(L So£tw:-.r(! rolutions lod:.v h:wc :-. :m•~l to whc:re thc..'V (':)0 

.. leam" from experience and ger even bt>ner at fraud d('{«tion and idemifying po.n ern.s. 11lis 

"l ~m n.g" <nabi('Ssoft\\"Jre to adapt and incr('Ol$e in sophinication M it g:\thers mo rt> data. The 

more,imelligem ~ tools. che greater chance o f detecting fraud in the early st:tge"S. and even 

pred cti ~ ).X)Icnli:tl :lre.'L" o f fral.ld bd'Orc ('rimil'lal" t.mcovcr the ovpc>rtunitv. 

One:: term th :~ t i:; :'1 huzz phr'::l:o< lOr manv n~urc: :t i:t ",<: pec:<_l of dctcxtion." Thi$ de!'$c ri~ an 

aspect of u•chno logy rh:n is dpin~ ~"t"t more claims handlers co embrace thde llt\\' cools.. For marw 
50 


803SIFT10.eps

in the- d:;1im:t :utn::l. Hl:tpect f~ud:ot t~kc- cxtr:'l time;; :.nd work, 

and lengthen C\'cle time. A natural tension existS in many 

i0$umnce compa.ni<"S between claims dcpo.rtmcnts that (OCJ$ 

intentlv on do::in~ ril¢t, ::lnd SIU:: th:'lt W:lnl to ~low tht vnx::~ 

toinv('Sti.Jr.tte. 

Nc:wer t«::chnolo.~,-rit'::' $1..1Ch :'1..." prc:dktive modding c~n mcct 

both ~L~: hdp detect fraud eatlier in the proc<"$.~, and thus 

shorten C\'cle time. Com'e~ly. the technologiC'$ more quicldv 

v:llid::lh: l~itim:lte claim~ :;1nd a llow n~ure~ to pay them 1110n: 

promprly. 

\tlhile n:fcrral$ from dainl$ ~taff will ah\1"3\'$ he a r::lctorin 

ami-fraud \\'Otkllow, t"Xistin.g and future technolot:,oiot likeh will 

"lnsuren dun embrace: 

the rigltt mix of tools, 

sroffing, trnining and 

technologies uilt 

COrtti nue: to t.xpe:ritJ\Ct 

reduced claims costs, 

more acauate pricing, 

(and) a competiri<>e 

edge ... " 

accderate fraud detection. allowing {~'ter ret"olution$ o( l~tim::lte and suspect cbim.s. 

\Vhile not ('()\'creel in thi$ :!tvdv. th..- human eiC"ment ir, wins,! lcdmok'!fl''- ~long wich 

traditional im'estigatiw functions- $hould n04. be overloo<.ed. Disc-ugsion~ with nsure~ th~t are 

gcttin.sz C"xcdlcnt rC"$Uh$ from their anti·(r.lud progr.uns \mder'$COre th..- importanc(' of h::wi1'!t 

ki'H."'M•I~l.ge-ablc- 3nd well·tr:.ined ~tnf( ro U.i:e ::md support te.~h tool~ to their full~r degree. A!. 

proml~ing <'1$ ~lllhf'Se tooL!. m::ly be, unle$.~ they ~ce empl~.ffi in conjunction with inves:tig:J.tors · 

in."tincts and ~vvy. rtHIIts likdv will fall short. 

nsure~ that embrace the ri~ln mix of tool~. sraffir1g. training :~nd technol~if'S will ccmtinue 

to txperiencx redu('ed claims COISts. mor<Xl.ccl..•rate pridn.a. a comlXtitivc e-dge: and lov•cr prcmh.uns 

ror poliCl'holde.-.. 
51 


803SIFT11.eps

About this research 

Tht Sfol.: off,uuuu•a h-mtd Tec.:hnolog)- was undertaken bv the 

Coalition Atminst lns(.lrnncc Fraud to b<tter 1.1n dc~ta d llow and to 

what extent in!11ur::mce «unp:m e.~ use :uni·fraud technolog.•. This iS- a 

foiiO\""UP to similar st1.1dies conducted in 20l; and 2014. It ddr~~s 

Tcxhnical a..~ s.~:ance a.,.:t provided hv SAS ln:;.tin.•t<. an inh:rnational 

comp:uw !'o<-u)l.if\g 01'1 tcchnolos.•y :-~o ut OI'l~ for bus~. n~~ tnu _<.'()l.'ertune 'l~. 

h\ :uldition. t~hnical review and O\'etsight for the med\Od<.)(Og\', su \'~' n..-"~ttumcm :mcl thi)l. 

report wa.."' prO\'idN ~· rhe Coalition's ~rch Comminee: 

• John KkX'. Sentry h\.'~U~J'Ice 

• David Rioux, Erie Insurance 

• Steve Friedman, l ilxrty M\.a tual 

• ]:tC'k De,.cr, An'leric:m P.unilv 

• JO$eph Theobald, Cititel\$ Proper tv Insurance CorPOration 

The ~~rch for thilt rcp()rt tlrt.'W on L\VO m:til''l ni li:'tti\'e~: 

• Online ~urvcy in which 86mo:.-th- vroverty/c.."t:S-u:tltv in~urent <YVid ~d d:ua in June: :md J'''" 

2016;and 

• Qualir:niw research. including ir'l-deprh irlterview~ whh a range of subjecr·maner expec-~ and 

senior i1-..surance executi\'~. 

The Coalition AJ:,-ain.·u ln.~urance Fraud th:mk~ all whc coopel':'lte<l 01' rh ~ re~:"'rr.h fC.)r their 

time and insight. 
52 


803SIFT12.eps

The State of 

Insurance Fraud Technology 

Survey instrument 

l. In whkh ar-eas does vour com.p;Jnv currcntlv ctnplov 4\ nti~f ud tech nologies? (check aJI that 

apply) 

Detection of claims fraud 

Ur1derwriti1"'g. or j.X)int·ol~le fl':lud/ r.ue C\'i~tim'l 

lntc-rn:tl fr.1ud 

Anti·lnOnc=v bundt"rirlJ: 

Cvlxr (r:.ud 

Other (ple>;e ;peri(y) 

None 

l. Concerning fraud detect ion, does your system incoq>Crate? k hec.k all tluu apply) 

A\ltom:ttt"d r<"d fl~ I businffi ul~ 

l)r«<kth·e modding 

Ex<-eprion repoHing I anomaly derecrjon 

Text mining 

Link analy~i~ I $o0Ci:tl network analv~d s 

G('~phic data m:tppin.g 

Re-porting C':lpabilit\' I dar:. 'tisu:tliz.·uion 

C.1$e management 

Other (<peri(y) 

3. ls your fraud detection system! 

Maintained in house 

Hosre<llw a third p:uw (e.S!. ,,.endor or doutl) 

4. \Vhat data sources are used by your anti--fraud tedmo!Oogy? du~ck aH that :\fJply} 

lntc:m:tl ~'~tent~ data (d~in~. pOiiC\'. '-mdcm·ritins:. application etc.) 

Unstructure<l d:tta (adj'-•ster notf'S. email$, etc.) 

Public records (criminal. civil, Motor Vehicle. <tc) 

lndustn• fraud alert~ or watch li~t data (N ICB. etc.) 

Thin I ponv doto I doto ~"<IZ"tO" (L;xi• Ncxi,, ISO etc.l 

S<xial media data 

Data from connected d'-'Vi~ (td<"m~tks . smartphones etc.} 

Other (speci(v) 

II 
53 


803SIFT13.eps

S. \VhatjXr<::ent of ~ferral$ come from your :tutoma1ed fraud detection solu1 ion ? 

~...;~~ han 10% 

IOto 19% 

20to 29% 

30 to 39% 

40to60% 

More than 60% 

6 . \Vhat are the top three benefits you receive from a fraud detection system? 

or~ referr:tl.s 

HighcrtJu:tlity rd r:~.l~ 

ln<'rf:t..;ed lflitig:.'ltion of lo.~~ !Nennin~d tO be ( rauduJCJ'I[ lftcr ii'I\'CS.t iJ:~,ti il 

M(,re ron~i~t<nt claims nve~is:at s 

B.:ttc;r un cn;t~mding of reftrr::~ls 

ntprO\~ I m'e:':ti~'ltor efltdei\CY 

El'lh:lt'lce<l reporrin.u. 

U ncovtrifl$: romplcx or or;tr.:~ ni Z«I fraud activity 

Other ('JXrifv) 

1. \Vh_at 'vere the biggest challenges in d eploying fraud d etection technology? Please rank the 

top three with "I" as the biggest challenge. 

l.:lrk of ro<t I henellt onah~i< (ROI) 

Limited IT fC$00fC('$ 

Odaye<i cbirns adjudi~tion 

Data im~'Tation and poor data qual it)' 

SIU <':li1J'U.X handle \'Oiume of pcxemiall\' fr.tudulem claims 

Exc~;r;i\'e f.'\Lite1'1e~":\ti\~ I 1'3l;r;~)Siti\'e ratC':'> 

S. ln wh:u areas does anti·fraud technology ha\'e the greatest impact in your company? (please 

check up to three) 

Per::<)J\al auto - c<>tnpr<!hCJ'I:<;ive, C'OIIi.i:ion 

PIP/No (ault (,.,ud 

«<i<-~'ll providtr fr::1ud 

Org.miz<:<Vp C..~ion::~l fr.tud ~t:a'--«1 :)(..("idt nt.'$, compl~x d:aim$, ~) 

Soft or opportunistic fraud (10\v impact soft i~~.~~~) 

Application or und('rwritin.g fra1.1d (pr('mi\.nn fraud, m repre:;.en~ ion) 

Propert\• claims {homeO\vners, commercial property) 

Conuncrdal cl3im,:; rk ~ N.>mp. li::~b lit\•) 

Agency fr:u.td 

Internal frn1.'d 

12 
54 


803SIFT14.eps

9. How frequenaly do you review and refresh you.r business rult.s a nd analyaical fraud models 

Monahly 

Quarter I" 

Sc:-mi-annualt" 

Annually 

More than ~mnual 

Never 

Dnn't know 

11. How do you measure success of your anti·fraud technology so1utions? 

Number of re(emh: 

F~ucl <lctt:<'Jion r:.tt> 

Ave~-< cla)rs to d<:t<ct (ravel 

~ralio 

Or her 

12. During t he last chree years, has a he amounl of suspected fraud o-.gainst your company: 

lncr<:::t:-tt:<.l :;;i~nificmtlv 

lncr<a.<ed ,(ighth• 

Rt"mained chc $:llllC 

O..Crea<ed sli~htly 

Decreased •igniltcanth· 

13. ln w hich areas does your company a_re you considering i1wcstin.g anti·fr:'l_ud tcc;hnolog·ics in 

Lhc ne:,:t 12 lo 24 month5? (chcc.·k all that apply) 

Detection of claim:.t fraud 

Underwriting, or poinr-of-s.'\le fraud I rate evasion 

lmernal (r:~.ud 

Ami·mone)' lau1'1deti1'lg 

Cyber froud 

Other (pbl.<e •P«ifv) 

14. \Vhich of the following anti-fraud tec:hnologies a.re you considering in\'est.in.g in withil'l ne"-1. 

12 to 2·4 months? (Check all that apply) 

A\.lto matccl red a~ / bv.:-tinc~ rul~ 

Predicti\·e modding 

Exception reporting/ o.nomalv <l('(«tion 

Tcxtminins:: 

Unk :maly:;;h: I ~orialnct\\'(.lrk n::~lv~ilt 

Geographic data mapping 

Ca.--e managem<nt 

Reporting I data vi~ualization 

Other (:,pe<ifv) 

13 
55 


803SIFT15.eps

None 

lS. \Vhich of the following describes the overall anti·fratad technology budget during the next 12 

months? 

D«reo.""d bud!«'t 

Flat I no m:.jor cha ~ i" fund in¥ 

Additionll i'undin~ lPPM'<U or lnticiPl«d 

16. \Vhm i.s your company's pr-imary business! 

Accident & Health - go to 19b) 

Auto - go to 19a) 

Commen:ial - go to 19a) 

Disability - go to 19b) 

Homcowne" - go to l9a) 

Li(e - go to 19b) 

Workers compensation - go ro 19a) 

l?a. What is your company's direct written premium? 

l..e;$than $250 million 

$150 million to $999 million 

S I billion to $~.4 billion 

$2.5 billion to $5 billion 

Grc~tte r than $5 million 

l7b. What is your company's size of business? 

Fe\wr than 250.000 li\'et CO\'erei.l 

~50.000 to 500.000 li'"' <<J\'crod 

More th:.n 500.CX'l0 li\"eS ("'()\rt'retl 

IS. Wltich of the following best describes your job function? 

Senior m:ln3.,!..~ment 

SIU <lir«tnr/lll::tn3J..>c::r 

Cl::tiltlJt director I ru:ln::V,.«r 

IT dir(("tOr I m:;1n3J,.~r 

Other (specilv) 

·~ 
56 


803CAIF1.eps 803CAIF2.eps

A passion for progress: 

Eight trends that shaped fraud 

and fraud fighting in 2016 

\ -

~-~Mf~i __:..._. l _., \\~tmttrk$~~t,e~f'OUt~ill((lm!»lli .. I~W~rniiCt! 

ft;~llid? Nun'IMr of fll'tt5U afl<l toov\ctll)jl$? Ktfffl'<l;b to Sn.:.s or 

stilt r ... ud bumu$? 

I low about i•l'lp;IC:'t:ttudiesdinwm-bo1uun lwes?Orcba~ 

in ~~~t·slOimuliOt olfr.tud? 

t>f!rNp:c niJ<Il ~rn.IIO!l:w!,C'lrmaylx> ot.hc!r.c. 

ln•Co.alition.studtlastytllt, '"~lhil'dsofW .u'eN;sa:id they 

S~~" mo"*frui.Wl.lsthen: rta!!y111.orefraod~Orare ns lfff'$j ~ 

SC"llin& btttt:r lit drtttliQ& $('i'IIJU? Ptrbnps lbt best qutStion is how 

tnlldl fnud l<IOII "'~ filA" if inwn"fl!:lltldfPoentnw.lll "'~'' 

Kh• s nuny cnillion.• ol dollan~tooom~t tlli:u:ri.11w.? 

1'1\eCn.11ilion ""liMI IR.liUJ'!li'IN' ~00 i,sthfo()Oiyflii'Wllli1JIIion 

th:•t monilnl'lt thf'fr.1ud f~&ht from 11 mill- hW'I. \\'r ;11ther nnd 

a ll.'llpll'dl'ltll fmm all ~on;afthr anti•fnu1d co1nnumity -

wl=i•'llt thtJM•IM-afthr f111ud f13ht.. O.•r Major~ (ln tor (S« 

QPPQS-irt~)PWJII' I~!Of'ofnr;<~tiy 14 pt"fl;lt'nt fro•" :x.n,stJ> 

2016.. n~dOI! to I.TIOI"t IUTtA$a.nd C'OO'id!OitJ in nwdi.otel. 

,.'Ofi;;,trscosl\pllildbfotlf.sW'$OOt. 

IJ; PI"'SJ'dll. bt!ing ll'llldf: in (:urllu~& fnr.ud ?The a•w.-w is)~­

,,,.;IJJ ca"~al.i. Most a'11ilable ~riel m~l a contU•uif•g.. robwt, 

a••tHraud effort that is bf!uer counttritl& t .. aud :kbemes att<IS$lhe 

111.1Ur.ll'ltt S{lf!C.1t'ILIIl ... (.I'C(JHbfftrentlhld, (tOO• pfh11tt iru:urm 

topublic llQ)'tN.. 

Withf~ t')(CI'pdnns.thi$Jmt ·frnudf~J;I'O'I\'$1.t.~fft~h 

,lm'.ln 1016. W1!lli1wtbe ooulinuot'<le,·ol tl(lnoflechnc~ .~ a 

'1t.allool odet«t• >d1n -estip~lldlft'l~ot~S. ~~Of&3.llll.f'd n."~ 

.,.~ W.end<W•••- ~ ~et p.UOO senl«letShat'ldtd 011t. 

h•Surtl'9 also laul'lthtd rnore affim~atn'e iti~t.i<M:• at,:U•.st<:rooktd 

mtdl(';).}prov"tdm. 

Oul.l'Nda 16 oonsu:c~- hol~estllfOI'l&ea d t~ tempttdh:L~ 1\e\W bMof1 j;A!Ill« . 

W~a.l~$.l'A modl'rntf' ~intn.1ct.lnA "'-'$10crn(tdo~o.11 
57 


803CAIF3.eps 803CAIF4.eps

<>ot'J"'Ol:edfOI\tt'~ors.andbocty~lhaotin.stallf••l~ 

AI a.MI all. 2016 wat II posith oe )l!at of Pf'Oir\SS itl tooaOOtth.'\g. (rand. 

Uu'l daai!.MgtS dfd fl'llftle. AI koasl \.,.'0 Wilt.$ bed.tl'l'lcktd M prooNlum 

thllt made it ~ ri n\~l.iptcn nd~JIQnl. Acocart lin~ 

1U:'n.l1.in.g 1M U.9t' or ~.m Nllon$ tndtr~ e.l$0~mptrtd !,..ud fi.gbttll. 

SUte fnOO burta~G !<!.)' &O<Xf ttit rd'emb (rom t~Sll~r:t; ~~~ 

edmi ~ 

And.<.t\l'll' 'A'fati'll'r f'\ l'nli 1111\AAII$- fR~m lfunirnlll' M1uhew W 

ao ~in(;ffil1,b odJII'l~ lll Mil .lilonm indlf' Mil,h.,l'4'1t. •'mud 

rti L>~ Ilnck U)lltomu 11nd a lb« V.'n1hl'u,mts, bu ~lrn ~ ..-ork 

a.rdtO~ liW Uillchl;lel:. 

So lool.ul&b&<.i: oo 2Qa6. how v.oold )'OU v-<~~ lhe nauoa'U•\ll· 

fraud efforts? Uow v.t ll did ,oor Ot&atu;.tatloll ((llf'llxu ti\IS M •nt? More to 

lht point •.• howt~t .\'Oia .sun\g.tbtni~)'OQrdJONfottbe <halltaws 

.....,, 

Startups tout easy ,.,.,..., 

insw·ance, less fraud ....,.,.... 

C'Sinrwn~ 

during. daiuu -fsr, llllliet)'. hope. a:u;u. Coi~ UIM!d .,.,.bo lhiak 

thtirlll5QI"tt'U'HU lMtn .. ·oedatt ~Ldytodd"MI~t~L lll."l1"$Me 

OW.:Uioii~J()/1 ~11 AllilyOfhow a1~<'118 dri\'41 llt0fllt'$t1.bk.J 

,,.,..., AIW)'I'Cifl$lltn«SllftC ~fll~tadJrande!l lf'ciaJI)"~tbtJ: ~liCI')'S.' ~14ndy lfObtd~ S 

tthic.t;l~"'""or(l~.Still.ll~JiflQ~ v.h) Man) 

cll'>nr~nDy bol-t fl"'(lll! bilk itl£11n'1"11 l'>ith "'nnl.,.,. bam.f' Of" anJo 

dai•.u-orm:.,.W1ltlt to. 

Peol)lt\Oho ~~ tbey had II p()61li>'t da11D e.\~ tolfnt.e 

(nmd~ lhl.n ~ v.•ith woplhl!I"X~triOt.ll. tbt.Cnatilion'• 

nntion.l.l con.M~mtr-.tti!lllk lltudymnfimlftl in~. 

l m1•liu tton. Cautcw1wn: wflothink thfoy'n! liNI.td Ulrly •nd 

"ttl •• ,. tnen ll\tl.) 1.0 -~ hontl>t•n lbdt liUIIII'ai~<t: dNiifl$1l. 

ll-valf\d$H"i~tbull~•namMnudJoCra tJ,Y. 

Major Case Monitor Aa.sb ~ 

_....,. __ .1015 _ '2016 

....... 

--

----... ~~~~= 

----.---;;'--' 

d.~>t.llion.. Yd. rt"btllioo l, WEI<ki"Ail)'• YOU.I)I. t«b~W)' 

l~llni!W'Iftntll'PffiM'UJ'I ~fiUI:Id11f....,.,._ t'afr(W'fiOII ~· ~ 

oonlffid iMI•n•~N> ceutoow M!'nbnlff.4Jolot dimp!'O\~ ~ 'lhf> 

rawanotioclSof diffirultdai~ c:.u1 m«urage tlllln people to 

dd",.lld.lheybtiJto-t. Tht 61~ oliiUIIrl«b n-pMal'ltlll.11.1 

t.ll~)-dOAIW"' thlt~loJr«.-.'tf'"'h;)l~bAood~ 

ll'l:llillrllllll:lel'~l""'ril'lll't'. 

Ol'llu..eJM'f'r-t~iet'l:ll..n!rstu"Wpt.(OC'inst~.daim 

tlwy"n: murc tr.ln.~plt'e tt and maUi115Q""&tK."f!~.ll3ffl 

tll$tomtt"Jba\e lt.ssdtstt'fl0dd"t81tdani••rer.the lla.nl:iq~ 

1bfo ._. itw~m noonadot"f~tllft:Cll n10hi"lf! app that 

pi'Oda.u"tlt •~. fast IIUI.lni~~(J)K'I!I)Ot~ t:ako(t~j~t, 

ti'IH'ISfli:'l"ftl()'and t•~a·~·r\tmsJlfOGI$iti!IOtlalallfd 

n3bonast~ l~li)cd)• to pby f11ir il Mum, Vmonllde 

"""""""' Wbatr.1"r tht:1natb •.. 11w a~ olnc.\l'lttperiiMnL< 

thdlllt!'lldall iii5UI't'rftl) bntft'~II'IM14'hllw!OM~n", Wtt and 

f'llim ~nc't (an IIUikf" honntvOC"tnlblftl' fra•ld. 
58 


803CAIF5.eps 803CAIF6.eps

~ Coai tion ~nst ~ lnsut3fl<e fraud 

Plentiful and JJOwerful Antl·fl"'lwl.ttm 

detection tools I'crsist ::::•'-" 

lliii'-'~,...Jnb\~t ~ polf:JltialtC)bt n,~lllfllQI'$tilt lJMo 

b*.l~llpii'ISIII'ISIIRD<'t'Cri!M Ttdl's~l~• aluest~llfro.n 

Its •~Lltsuppo t«lh~ s.twy. ii'IShlltUand 360 •·ision offrn~ad 

(~lfflt. 1llat partntnlliJ'I is l'louri.<1bia'lg. at the fisbt turtt. 

lnct~ran('l' frnud U ire, and more imn.ln!l'llal't'd.-plo)inJl. 

JUI'I(llnlltf'd $}"J.ltmSlOc.kt«t fn_htdalnu, ~IN'I'UIIY W!Ciwt 

Coa!itiM's 20l6$Ut\'t)'<llln!i*irer u.se <l f'Cb ~O,.V. Autoo~atfd 

!)'Stft uatedelt!dh~S fa~ dainl.'lU ~~~i \§Urer.tado t lhe! 

l«hoolog:•,UI..'Ialn!rsabo$;11· 

t:S(l«iall)·. at~lll)'bd btl!> in•eti&;t-tonJ; di.'llfl&lltle C~rS~~ni1Jt'll 

(ra!Jtl ri~ and uool:t!d IMCiiell l)r'U'oiden. n.ocu.h!n~~y in the 

O»litkll\$ur.ey. 1'~h,~th\ti oonl.ln~ pll!)in)l.an r.tf'ola~ 

rolt lai.SUI"f''11 (J(.stwteftaud r'f,htfi'J. 

Ntwtl!dl i'liw!l('ing im ~a ~dUoo\w lind nn111)"1.e 

l'l'tlla.rlmbly mO)N' tbu., fiL5tff, na'ld abQI•l larvr in,;uraa"'" etinW':l. 

1be ('1)1\SUUII cbll lftl&~ d; l() protettla"'{ul Pfi•·aty nsJits ak:Jtlg the 

way. A•nnns tiW' Y>'t':h'Mn" lld\'aJKej! (I( ~O i>; 

'1'!!~mAii~ $().(oa )l!dbltd:~pJu.J~MI~ffl 

lh~bout \tblddare ~ "*WI.Soi tlu~ tlwitean btlp614!Utb 

oo .llll~llehal t!:l. Wid puin!ul wb pla.~h fro1n a daitlwd aa~h 

~il ? Adri\tr'S mcl\l.'$('11.n btl~ from ttlt•nlltlc$datll. S~. 

bnl.ul,ftadioo, G.foret, \~l»elt kx1!ti011 all g,\~ westi~Ma 

1\IIW.y'I'ISI>ol'adai•n'.stn.th. 

O•'Oflts. l.ook for PilOn" drones bwli~ 0\'tltlead.soooting for 

1'\'il ., •rf'. '1he •'M n'l:IU'd n. e~1oallowo::unm~ dt'ot'le 11-w 

1119:)~'· 

Coming :Wlt:m: \V'iill'-.a•~Sll' dtone im.,llnd \'idr.o rouhnely 

IW.'Cltdi"'RhnnW>damJiV aRtr,;tornu-- thu,; I)R"'f'f!ti~ 

('Qitlta(:t(lt'$:01' bQnwo .. 'lW1$fi'OM lnOlldt'l roof dow~. Also 

viewed lro•n 11~1!; buikl111&liru _ ''dlide c~ So."e.•W ... 

$t1 lop0St'd nju~ wuktr.c inactioo ... CN >dll~ Oronec 

t.§pt<UIIy rao $W«"h i11 hsu~l·t~ pi;,(!($. 

ce l.~c Ulld~~"c s. Li\'1! in high·prt•nium ~"- York but fal'lt'ly 

$!) ' dri\..-i••kwo"ff-pn!lllium $1Ait? AuiDin.o~unon m~ thl! 

deo.irf:ti~Pd k'MW li'rn#n~sdw nw ~hat llyt~hJM" a11to 

~lliUd'I!I.MOtoti.it$ .. lthf.aktot~\:pifed lSlllratlct~t.a lbe 

round OUL \\'rwi:Pn eo~np and •lilOllhi.ti\Y Gf"riioft lin' mdng. tl'w. 
59 


803CAIF7.eps 803CAIF8.eps

Socl•l a ~~n:hf'S. ~tll y praplt lm'f'IUI iiTMiqih6fo nrp.'" 

10 Jl(l« liSP 4ttall$on$0dtl~ • -no ro;)l\('r~· &n<nmlnoWl'" 

n,~ig;llorsueyoo.• -s lntl't!aSin~ y ade11t 11teombil\g~i11l nlf'diJ. 

lor~ ~kiiiSI'IW:I.'<IQ;f.i..~ ide(lf:lanclothtl'"'t! Ml'f'. 

l>tl.,.,.'"'r(ulanabtlesan llilkd tlJi.b.~crlns~cn.I'I('S.C'Iost 

tiel; lllllOII~ IIW'Inbrr.t dtl1'1;.t' 1t11'dical Ql'a'a$h ri~~ anbei-.g 

cnnnectr.d fi"DDIllllwcr.corial ~in&C. P.\vor-irnrrr:l\· n&llnnl)t~abln 

unkd: cnott'COOSU.Mt1'-~d$t:l llS.f:\'ft'l prh_.,. 

{lrol«tftd: An ·•njcl~·....,..~..n~ts\ d(!Oo(hl$ 

lWrliQS nt<:abOou oo 11C't!b0ok. 

UIAI.bl*. IIU(Irtt$W;oft'andhll\'t~W'~ 

tn'Y>'t!$ CJ( dllta lhat ean iW"Jp f!,.Un s...oond on (nmotl«ltn. 

OJ!tl tq~il irn~lqp.1i\1' J)0\\'1'1'. rniQtlinJ:.lht! 

Examinations under 

oatil unde r fire 

lmnghwll¥~'(11'\d 

"'·lll'rea•l)'(tllof! 

ranll'pllyMy 

·,10. when an inwrw tllt~ nn inteni.ew about a cl:u1n. MOft 

cri•nlnnl1 Nltlld 11f.fraud "'i1h t~ff'.Ar ofbfoing f(llllwl out. 

Crltb$0Ut)!t t.., ... --a,~rdt:M·I) too.f;.-held lns1~ ri;Shlll to 

Urtmitwdllil•.anl1 W Washing.oon state'$ ~~l.llW'I! 111\d 

t:l'nlucky':o~«~~•rts.At $lllke"--;).~ llll'tir~l~ Exnmi1U1tion l.)'ndl'r 

();lth,ord•npl) F.l.'O. 

M.e-SP«tfulq~oteStitol\l~ ol dllu!Wit\tttaut.-'ii)09e ~-liN. and 

\>t11dlllt hont:u t'lllilltS. Clllt'.S to the ltlrth often"" boe llflC'0\~00 

Ot\)y b)• :l:O!I. Mil•l) (rn~dsttN cbft bodltl'$~~ 11p. 

tiiStl'ltii.llly~II$,lbeil'd:tlll'llllwletthtlhrt.&l(l(qu~\il'l&-

A lnlljcN'vic:tol)·mlne•kwo·n in \V:,llhil'&lan 6-tatedrty in 

2017. f'nuld fi&hlffl qu:l$lwd an ill•lld\iwd ht11 nn!TC)Ytilo& lht 

dfftnc)-,lll_. ltod;loC':rurnt-y. Crunchi~ 8i3 ~til u.'i'-'5 higl'l·lQ 

;uull)tict 1:1; alinutJe.,;:c •utt·fomd tM (ron!M!r. 

l nlt.rn(:t 11\l ~:,~. 'rtnscfbilliOOS<o thltl~ t\'tl'fY•btrt<'an 

g.:tt.herullonnaliOn.Spiderwt'bJGl OOU wt~ sa"~.'IOr-dm>t!!lde\~te9 

mc1ld l'e\ eul mntherlodec ol d ul'!C for rnnnngl113 cbim.i and 

dbloo\rnng:Gt'~ ~ 

Sc''-'-'ON trnbeddll'ld into Yt'Oit. clothing 101' irut:mc.~ c»~n help 

nlllbt.rarlleohanl. :m rmpiD).e·• WCI~p inj1uyehum. Sot'311td"v.'t.anlb n" SaBM~ ... ~dd~&c*n:td 

da\llwtth liUh·ff'811d nto«t.ll•\~~tor.-aJso(Jilotd a 

halrM!()Ytfli!r's hl'IU't puce1Ntkft' dat11, l.ntftlding lO clillpro\ e b~ 

\~oit~ xun"itl'l'.,'-.pp~~into:~llthis~A'tb-«iol)t(tNJ 

dau, Alii t61)f'W.00 fotmltoq•; it·~ atwdw1't~l1fl3 otW 

fro l11 M<~:\Vllltinr,t n'e!ll g;ttOD. 

WIWW!af limit:lliOil.'l (Mnliltt f.IJ()$. S~kn.fll ri~'­

i!Sfl«iJ.tly, Clln ~ke ye:u'll loetv.r o~k <lpt'tl-.O[Ipt~ing thl! bill 

Wlll! • unil«< fro..- ofinllurn~ lnton.CN lition and nthtor 

llnielt. 

h1 Ktnluck)·.aeowt n...lt ll'la'llbm:d a511Sflttled~ 

I'l ~ oould rtfust Lo$how up ((ll' iJ~rtt ;l:Os. a~<tt~t«i;yOOt;&l1 

n.led. Jott fraud I'Utpl•kdy ... u~pedtteciJQf' ...-ithOII' t:t.:O&.. 

thtCoillition and N!Cft COOtl'nd«< i.1111 joint llrnltnll hni'C. 'nw $UIU' 

Su(lfftllol' (no11 tD~"'l' in•u,norV.CO rit>hlll. MOI'I' clnimant~ 

nl1o "'ill aMwl'r truthfully if they-know they anuld I'.M)ro jail tb1w for 

llln't.dlin&the trulh. 

Attad.l1'fj. policy• proviJ>iOtlS lll}o...,,l3 11~11WS tO.qllltSliOil 

tlau~alll$ tikdy " ,II C'OIIhl .. t 8$ a stl'ati'g,)' (~ flft'$01ial Wjul')• 

l~"')'tN. ·nw Coolt-t.oo thu.s wm l'OOliilut to dd'('l~ t-:liOII 

·-· 
60 


803CAIF9.eps 803CAIF10.eps

--il torm . weather' ~ 

StormJJ times ::.;.::~;:. forswinlllers? , ... ,.,..,,. ,....., 

paUttn\. tA1tr.me \'!·t.ltlwr ~t .U.sucb MCalifom~·, t..'ittndtd 

droctg.ht (lCluld !)eoome tht.; IW'W nonn in many n-Wo•\~ ofttlf' l,.'.S. 

'11Y...w eo.enti bring mnR" os!plll'l ni1~bcontrarlr.w'$1llld elhic.all)' 

eh.l.llmgrd homeownt-n; fl')inlbte dllm:t.v.C'binu. 

North Atn('rica AW ITIOR' ~l)f('lifT'f'fl( i.n::o 6t~n in •ny 

04htr)'t:lt~i~ 198o, whh 6ol'\1'n ~ 

"""""'· 

t 

1\ltt•ttiol/rQ•tdi.mpoa: l)ro~ht WJ d$1KlrcnortC.I$t~ 

LkSUt'lliiCedalti\Jby~''td fDtmeN;, tlood$. bu.!TI«<IeS, hail 

and tot'l~roul.i ttly llttt'ilctlnlllkd lo6!idair&byoppo~tw•as1 

bom(!t}'l\'flrr'S. )i;shoe~tS~ roNradOI'S abo lhth e by fX(lklitltl& 

f'Motllf"'''o'llffll;. 

M<•re ln!il<rt:nun·t ,.'(M\lnll tt.t ttndtt$tand how otr'ft'nie"''fatht-r 

(l(ltttm!l"ill a.fftot:e tht r,.ud!IC'olPt - l'l.nd h(l.,. tn bttterhend o« 

~'I$"'Cllthtf'>i~n-4dllln~. 

Rlftt'-1ie .. ~lbtt toOb slldl as Dop!*r t~Jdat .dd 

~t.urbbl)' det11ikod. hf&b-altilude 11tfti.'lion to 

IIWl'it'.we~taU ItWC#!IISC'd~ ~nd-k\d imo'I ~Miol\$. l)n)(!Uit()()IIW(I) 

~Nigt on the rut<Axlsl. T~&Ut wd 

t.&ool'l$ Hln'ltllJ~. tloodin,UI 

l..ool$il:ln:.. Md ~hrr S(.l,tt$ll'll(~Qif('d $10 billion 

lnlol;l;r$. 

;.,op- .... FJ.,---~ pthtor)'d ~~ldttK'ttlOW!liiJltbe Mha$ 

llf\PI'I)\td oomnwrdalcl9t~ t;\·tn <bin-s f«,t"llkW 

eN.~ i.n\l)Mtlii.Sil.pptry('lll\'l'mtnt, r.Mn. f(ljt ()II 

..__...;....;.,;.a..,; ___ ..J $1 fl$brtf'~n~m~O('f'l ra ~~ u. p.-d. 
61 


803CAIF11.eps 803CAIF12.eps

Painkillers : 

AnW'!ri.;:t'Jiapioidl'f' nic 

Pill mill crackdown lspartdru&h~hlJJldpan. 

gains morneutunt lnlltlltJ~h gh. we·ru 

o.r.tlonstn.I.AA!i._tooonWn ac.klkthoepoY1 pills, m11$de rtl;t-u•CS. 

at~tl-w\~1> (IWI(I$. 1'be ~ptlct in~«d0Sel dtaths.lo8t 

produt-t.hh)' aoct I'U.i ~ li~esls .. dl~hrooid~. 

111~ 111Uolci $tdry: ~SUrntltt (nmd l<1 a llliljorblll'lk«tl)fwd 

i\ ne~'!IJiil coo~. lhtC<uibl.iOf t:~fit!CM'S. WOI"'"' 

CO.Ill)('ftliatiofl 111'1d 1\itahh hiSUft:Dbie up tO UIH0$72 bila.oo II 

)e3tll'l bosu:$ pres.:nptioud&itns • )"ear. F1111Jd is btl ph~ ll11111Ke a 

uatiMal hNltb thrt:tt. ,_hdl pi'()S16i in ('()Q•Utril'IS the ~demit 

und ~W~ I'il ll."e~"'' !l.,.(oot i:n 2C'n6. 

~('pidrll'lic-1(1()&: n·uul)' (omtS. Qwl:ecl p!l n~bfl.nd(ll.ll 

iMu.rt!'1Mikll)linkill«flf"!'ritJ(ionslOA<JIIli1A. Tht l)fO'oidto~ 

ba1\'J)' f:\a~Dil\t l)altf:IWI$ for (Mdi(:"llllft'd, l>«.t<W$lbtn O• ttbiJI 

~ri,'l t: II'I!IUre!'$. t.tlt<IM':kteor Medielid. l'ha•VIOin ~~I& tesu: and 

~h"'~ca.rta >til•tl&ted.Crooktd phaMl~d s• r.n t.he 

~it'9trii)IJI)(\$, 

)octor-:shnppi"3add~ 

-- may !01)1 dlx:tc.w$ intop•i.n 

prunlpt)on$, lnl!'nN:'I pba~~ittWrtofill fW 

pmlt'f'lpl.ioo dMlb$. Mll(tl ts bt\~ ~to npOOwn fl)):s.ed<tlms 

Qlldopiaic:labust.Arnanathe~it "et>IAJ.'Ip!li;U: 

Soo~49 .st:ttd ha\e p~plinn·m011ilnrins;cb.1a.lwe. 

l>octol'll, pll:.rmliW:t.~. ""'~llh iluurus ;1nd otlwn can tn.d. O(lklid 

u~b) patifnts. Lawtl'lfOrttn)tlll CUI cbtrl:i£11~ ,,.,.,..ideN 

:ilftO\·tdNiin&; 

II.>CU.rei'JlOII~btuerd~';!rin& ~prtSIO'iptionda tn.'lwllh 

ilnpn)\'edMal)1iola•MI ,; ·op im..-~iptioru;; 

MMd()cto)~~ briRJ;C'I!IIllou$ tlbol.lt ptN'tlblllg ()flkHds 

esJlft'WI> IJ()doct~ 'S~JCU at~d 

~lrt wnlli(ll'lofbua~.bi\ C"~t nndpemnW".n1a"' 

catl'hin; Jnllft pill•nillll11nd di~hnMA: p~rm:•fiM~ in tht nct. 

Amerir.utln AtofidH ('O()C'(bl~attd Dalloo:ti opiold slnlttf.Y, 1md 

rar~jo tl'foru: llrttsSft'ltllll.'l'bat.,.'tkoll:'lt.,~<io6otr 

tb&nt\tl'. 
62 


803CAIF13.eps 803CAIF14.eps

Messages louder, social, eye:friendly 

thuctr~f'Ntt•jo)-eda 

vil.lrnntyl!:,rof f'\ff'o 

gro .... in&~q;ililyin 

n:-.adli•ISC»n$1ll'llt'nwithm.tem-nt r~Crt~ th'e~JW'rim~l$ 

aOOutld(d - f'·lfll dllff)'ld~ wo 1dn~ttJ>pln ~'&lllttllljon 

n•~AAturattd!IQeleiY. 

Wt'n! relll3,1111!&howwtdl:tlll(li(m«l•l'JU•ner.~ t<t ~)' OO.~e<t. 

1bf, tltllt· g.l'll em o( public: Ouln'.11Ch b: llil:oloe't1"1g iudl'. aklog with 

tnldi iOcllll:~~ pr<t~tthet lhat abo JlmiU.lldt""oril. 

Soflte 83 t'lui!J()C'I r.J,I)e«Jiblsare OOIJ'IUlSOf *3t ¥ i1\iw'111lC. 

bu:yti"S. So 1\UI..t.Outtlollll·ftaud t'OOJ'utl'tt &p~ \Mid ... bhnn ... 

k>uci .M.s«:ial - \'is!Qll•~as:il~y.tbltl's tn.e for Au.'ltrit".ulS ()/ 

~ft)'~ lind ~)le. 

Thi,;mN.n:s Uppin~,1fw penma.<h-e JIO"''tt()(~ medi:. a.~ 111 

di~tiul m~nni~and ~"tn:~lioOO~tart(r. Al.nhun111nhtin& 

fr.toud with ~..,..pbinJ:, vl<IUI!(. Ou:t·lwa ~<IU1' 0!'4A•"'ii'NI inuAA 

~.COII.$U ni'rfid~illfQ~rnphi(-sand•n m.l ede.~~ortocms 

told t~4111li·ftsud Stoly qukiJty (){ltitA ~ .,, at II &fa!l<'t. 

Mobil~> ~n~p l'led much In clw.« about 11..1 well A nrw app 

made (r;,ud inl'onnation<lllln~ lient fDr milliCIIl'l ufmobi ~M:innt 

An'lt:ricmb•. Nu1neron.< illilbl.h..-~drm,.. hcwne 11nti..fmud ~se~ 

itl dh~ Wll)llliSI )l':U. $or\W.I cltbe l!'IIUl)' ~Ol6bi3b!ightx 

ersuas -ep<h 'lt' Cftl~d<l8t$of!IOcialtJW!dil,,id~ 

find l)()b klrieudlitH'#ddu•~ u1udl ollheCOo.J lio., ll~iiJ 

m:ad!i.l•;oonllu.!nf!B\a,( )"'i!llr. 

l)).n.on'l""'ilt~r.- cfloe\'ft')'Ollt· Ill waol«<tomak~(l ~aln 

01111 "'-;a.ll- one tNt I c:o .klno!nm.~ilfu.r- ~·CQUicll dGiL 

Coabt.iotl: .. \\'eli,()tlt,d<>o'L '"''C'>.- )'OU'd fli'Obabl)'t,tt diUed 

oot enlbll~or~~(or ~lea.t)'119C':Illl.. 

Vl't Annthf-rOa!Ohllltlf!lft'lt f)( ad\•isinJ;.t.(H'If;llmft'l(tnnab 

sn'Ulnllftc~oo ttii\SU:nlt'IOe f'rAud tt'•the~tlnsU1111k'flr.,I'Cibubooi"Wiutr. l)tJI) l'll~OO lt'IJIIIII,BI)l $od 

odltr!loda1 pbtfOI'lYIS funhtru'l,f'd u.prigbt ins- mt~tt dea iil~ 
63 


803CAIF15.eps 803CAIF16.eps

~Oit'tlgt't hu:utd. O'll?lblo:ltrt«H'd/~'!ly<Oua-eey•t.•/tm'>, l'O!ir" 

jMand ilk'()mc-gorw. ·5o ""11n'lll • lteWI'(ll)lkWI:t'ltt\illeo tbe Coolilifxl 

produutd-the! Ofll) \tel~ of' it.sb•lll 

l)id )'OI.Ila'M)Wth(o ni!l.yn(lsu(){!f.llQI1d~a.n- I(I().OI.'Iu li~ 

!>1l'OO&fflbsu:l ,)WI'$? Mf(D()('llll*(~ud (;toN<:WJk •li'-oe ,ifuAI,y In a 1\t'V> 

~lnbilt' D$f'l'$ CliO qni(i:ly di:d up dli~· fr:md l'ltV>'S 1111(1 a(twr !,N{ul 

tnfonn11tion •·•th ll'nu<IWifl', the firS mobile: 11ppfor ii'IStlr'IIIIC(' 

See how l11eylie:. Rlus'lt tit~ to~ n.edidue ftOJn a !>h.a:•nil'l& 

cau'IJlllqr,!l sbowu\{; quil:l.:.-llil 'idf(l$ fNturi~ •real Mf@.ttallk$. cui 

l•ooll\h. in ra~ !ldlerne~. Aimed at )'OUnserptJOple. they're from the 

St.mngn~bcine: inquid.drl.ftTftltlV .spoU by(mu•l 

.. ,icti.:nu.. ·n~tre l>;trtcli C!JC );l ~h~ l<Ll~illl!outreaeheafflll¢'!i.glu 

by the New Yortt. Altillnce Ag.'linA Jru;ura:nc:e 17r.tud. 1ht $f!Ot.~ ain'JCI 

in ulia.- an-a~ wund thut.Jlt. thltd by$d(wm dllret:qtoo 1111 

NewYOtUtt.tbe•n~e3(>e$. 

brhi&<'i e:~am bu.stinx,. "f.ITI!.b; g.nmted a little g.irl dl>ll 

u&he ~·"lwd a pla lk ttf't(ll\1(1 htrtill)' f'Q(l( ~~a ntW 

n<~~ttr b«<room fr~m hl't lA$U~ t "<a:slln JU)UlUit«< 'id«t b)'lhfr~tkaoti·frn»d<M.ll.,..il('hprov.lmoltht\1rxlnla8ult~ ~ 

Tbt Aa~~ ag.wcy I'VIlpfd up dl'<MU to ~t'h ro•lSI.Imtrs oo 

k•tiki•nagililllioc"• oltM Pftll'ls-'hat~ia ll~mtl<'e f'r.'lLtd r.! nk>a 

AutbcM\ty. 1be lflOCS f;umt'dout thtou.gb Pf!culSyh·aniHia dig,rlaJ adl 

ft.nd .tochll-nw:dia d!anoel~ lbmu.gboul lbe ye:ar. 

Anal~ln~ttf'dc•::•'rtool' "'t'.&~ frnu~~r ilth .. ·llrted b)• an inH$lh;<•J.or 

att et'Ytum.t>aUy~31'11fl\ltfd,idfoos.oolintlnttl'llltCh~«~t~lt'tll, 

tmdutbergr.u.."roo"*r.na.rl:ding. 'l'htJ~JJipil~ll IKtil'll !.he 

~t"'1'S" (l~and f');('lt.~)and mn-IIN'Irt'lld .schl>nwoto Milleoniah 

(18-3$) ,;a ~ialmeclia, \'ouThbf..lh"-t\l!tltJUild 1t1on!. 

,... ,.,ad h u rls. "lnii1CI11111Ct frnl.ld mao,k en(' fffl$.Sh.1m(d rtl '"Y 1~.­

Sl.YU '~ wboo4> fu.tbtrwtn\ t.Qjasl fOt'fJ bog!IS hot.lll.h .::bim. 

"Mylilewill~ttbt the &arne beel s~ olit'I.'IUn.I"K't (r.l.ud." !la)'$a. 

guy wbnool! ,.;re $el :a riA! and dabnor.d it "1U 11n acDdent. 

RurNII. NIC!i ln"l.:.lte:l todi.'lll!-ll.« .see~ ,...,lingt'Of\Sunwn,.itb 

1VJ>llblic#.r.·ict fln )I'KI \IlmW. "-.<I~ :HI' V~~ W;atdl !Or~l 

Clll"ll bri1'13 .iOid lo w1~i1tingdth-«S: 11ft« llwMC:(If'd naielfllll in liM' 

IJ.I:I<lll ~a~ Newsstom \\"ffllOOttRI'r hail .POITII$ hlt..14fd 

C<>lonuiowld flunicll'l(' t~wdflug.td theCaroli•W. 

NIC8a1!11C:l airNI nntionaii'S.\.~an cantmtlM .'ll'nm.<~ and cm"l\ 

lit<>ldl v.htn<:I""'Tll"nileO tht ~'\li~ 

SlirTing lt.•nonade, Wailt a~ ollemooadeli'Oin !he 

ndg.blM:wtiOOd IUd's wu1d? Pri('f ~ onl)' $1.,100. 'I'Mfll what 

(roud «~SU cadi New Jersey ~f!l•t a )'ear. wan'led •••n..m11~ 

ndtO P'!b.llt: !ilel'\'lte atli.'MII'IC'ftl~nl tbatal~ thi'Ou~IOu.1 tbe scale. 

Want to dud fnwd lombiesordht. into a whirlpool tblll's 

roo Tube. A pa t(l(3~>91!«1 ;d ,.,deospou wtrt' ~d th;()u.gb 

lheCoot;)e,;dm neho,'Oit, 'Ill!! 1''"16-""n sr-' its dig.t~l (uo!Jirinl by 

II'IOI't th:J:nso.ooov~'Sin ((Kirmonlhs.'lbe~lt. 

vldoo9dpal'\rlerC~nw0tt.~ 

~tbanh•O•naliOilwtJlfl:ites. & ::::~~;.:,.,..,..._..wt.....:;!:.!: .,..-..,. ...-w-~.,·-~•.t 

putl.a13 stolen i•U-1•r:w'H.'f •noeley down il)l() 

obl.i~ion?COttw.~hitd tl..drpho~ 

ttbn with3•1):11reel att 11nd .dlntwl 

virnllyM Jr~~:~eilll rn«<U.. Thl! v.~ kingdnll 

bighlig;hted )IIIC'lUln':tchnml"'ign by tht. 

Nrw..honlfl)•Orfi~ a(IN;llr:ll)()l' 17nmd 

tor. 

S:tmns. \idto"''aminp alxlut 

a1fk.Nnobtll' plo)~ lkwo~ from the 

N;WonallMntanc~ Crimi: 
64 


803CAIF17.eps 803CAIF18.eps

Putting a hu.manface ~::;r:::!~;,' onfrautl drunage ... ~!ldlem~tC'$Mm~lOlht 

JAAtta.~~ II"J.ud MiclShat•w~ 1be No-Olssol 20 6~-' ts an 

import.tmt ddermtt pul'fl(I.W. 'Ill!! Sh.11111t'~ (lat a human (.l()f on (l'ltud. 

rublidy .-..ning.. ~ba ng.1VId bb•nillg ~1-"'! 1.\e Mhttl\eriiii.Ukfoil 

im uranc.-e fri1nd~t.11nd ont. be 1nt>montble ;md zr:tb leO ~·:~ un.i ed 

Mtft1tion.An~IASt )'IW".S: ei&bt ma.dtr.tof di..ta!l:tu: 

l)uming df'..$1N>. •()h ,.,·tlt,thrydil!4. .. &ob ,.('Qil~ f'('ln!Jd:td 

wi1blM> ~ •l\trbolchi1)8ti ~~&NOO tbllt bltw ur• hoa§t 

Skillet! statecraft 

pressures auto 

scammers 

l'boo)' "tlipl:lsbdarustott 

h~ou•dttd~ olmitli01U ol 

insunuli."e do ta.~ a.tou1MI 

tbeU.S.III.'ll)'fllr.I'H.-Ipil'lg 

drin! Ut>premiumll. 'bo.-&rt 'lgl:uu~fleel~ (r.u"l«.f'n\\OU 11 

drivitl& theme h1:1tatdl0u~"' tbrou&hout b.-It )-&r ud tighten 

$0\ldll ti&rol'~""' fltNitid to t.a1np oo .... ,) $1alj.fd~rosh rinltoi - .. kl 

othtraut(lmobcle~btmes.. 

~l CH"elat«< billtsu~ ut f'l'oOI'e lluon wpe.uutor sutes 

Jajl )1!¥-br f.artbt! l11rvM Q'lf'&<N)'Of(raud ltpslation. Se!l.unl 

h«:ame law. M<•l'\' than 100 11nti-lmud hdb ol nit kind>'""~"' 

introduc:.,d l;uc >"'"'• '";t,h 11 A"-$pl'('llllllf' :U~t~~~l into 

haw, 111 .... 'illti ~d.Ubonnl <'outnldon;v.~ 1111otllt:rNt.e:tbrrne 

unpott.a~n tOfl'aud r~lt:t$l'()II'IS!UlV,, 

A\tulf!,;tat«ra~exerti!d it;;i.ml:oci in tht!J~. Ma11ybilb: 

mtUi.ml h•'O OC ~ )noB tO huiklthf! .tUI"!IOit 11«-ded 10 bml1ne 

bw. Thit in\ oh ed lhf' ~~: f'ady work or crnll.in& blt)"'in •moe1~ 

>'lnt«hnw:f' cooun UMt.biUspo.~~ ga\'tmoor.. Manybil ~ thu.<1 

Comp Sf'X rnmp. .\ ,;t"( t»ttn" $hot and p.u~ ~ .k)hnAIIOnll!() 

S.nilryaRnS.niley•nd hi:~ wiCr~~(llll111r'fl'l with 1lw Mnolt'r 

and his"''f~at 11 Sl•• f r&t\dsro9e'< elub. Srniky ""asaprisoft""atd. 

lie •:nil&!• f;))st S4·l1'101101\~I'S-<'Oin~tloodaim bylylC~~,thlt 

a fonneru•mar.e .. ,th a srud&eshol bu~. 

Stan·int l('~t . Uomt ral'l'j:,hw O.laltil" f'<li'MI'Ill~ be¢rio$dl"n t.,-n 

'<'tl't'W'efull,y 1)06lttooed last)'flltfotdttp« rum t:ot (lOl«lti.al 

tc'ladnl\'nt nto awdt~ri l3 2017. 

~«'<~ dts:tul)'abo abou..uded. Frn~t-sbtns bwltdh'ti'!Vt 

ta: .oes tOMif>pott bab astyear.tnaliU &n~~JcH••tl)' 

dutn IU1J ooeyoopaditt&aklnt. StUf' .!del. llntl·frJ.lldgoliP\o 

ft3P)fl.sibleoon~nttrad-.'0Ci t~. ~·tnf()C'Ctn~nt.JUte-(tdtral 

tuklor<'fS• )((othmea.net~l. t'-.itd()()t'nbllllltiiCIIU. 

Sed:lng,stro)n.soer<:ra.sh penflltl~$.JIIi tlmef«!l.l!o 

<nosht.<t l11 Nt-·ada .shoukl be .n..m l'lrot~. P~lOI'$ .. ,11 pi•) 

•l~• k'ff'lth~total.eoom.. .. hc:tnll'ls.s~u~ in the stu~ 

stelib ~& mil:lious 0( ddla.f1; in q.u whiplash dainu. A bill with 

$tiff JM'N f~ ""'li!l fi.ltd latf' in 2<.116, • •-' '"illllllrf;l('f' t:nr an 

fnllt:tnttntnrnin::ot?. 

Crea ,ln~ • .sU•le •111 o-f raud IIJ;.CH()'. Cnad\ rinp ano 

lnQtilt$aulo in.<illl'ft'$1:11 Mithij!,;Jill. '11\i.< mt.lii:S 1m IU'J~rnt twd til 

"".alf:aS:tale.n()'IOhd,.~ II C'OOO tr-1 1'16U.f'51l'l~'. •tt~OO 
65 


803CAIF19.eps 803CAIF20.eps

llll,ftlf)' ld:rly ,.;u bt.c;xMnt bow on I)· il it.$ p.ln",nl biB - rtWrnu ()(the whnle 

II.UUuysltm -is tnact«< in W 17. 

Co••l'llJIIng ~-.s- ·e prtmlllm tnu.lt:r$. ~drh~usea 

de\"'rdod~ todldt thnriMu:tetS: ft~t« l.llrir,!hide 1na mlfl ... ilm 

a.utorrm~incm an IO't\w-- cnaybl' U!W! a P.O. bo:c..or;u,ldno.uola frieadar 

n'bti>t•. 

Soo'f Ncw\'q,rk. drh~rs~n-d;s~ri.n~in$&11 uti e NQI1hCIIroi;Q.a. 

Anlt.fnlloCioJiie~~ol'lil$11f'f'f'l(.$UI\ni:I'I~A.tMCotlltictn••wl ~t..d a 

blh.l\h stro~$U!Ct~ U.nroduetd. ll"6 oow lntMtlof'l for • fulrun fn 

2017. 

~OS.I .Ut()(lnomiunaabo ~a prol*m in M;•l)iaiML 11lc> Ccl;•lilinn 

.,.,rbJcl "'ith tfw. Mal)ll•nd n.~•.m•ne.o Mministral.inn loha\e s.cldi(lla 

intr-.1du«'d lu.'4. )Ur. l'otenti;•l ~<n.1ll ~ for2()17111~ beinJ;dl.'lbi:IM!d 

ilm.Lr.li1Ct$)11tftl\ 100 t..-<peU3he and frtlld·riddl'l'l ttl ru?lbat'S; ~ 

shOrt \ I!Nion o( a IUtl& dot!tKiteM~ n'l lltid ~ ~u;lt that l\Oirted 

J~O 6. 

BiiiiiR'fW'~,tin.g IM)"Uult llre rt;;)rilltt up in :l'I)J7. Coi\Auntr 

r,roap~. a\lto in!SW'I"I'l(, trial b"')'~r.c. dlifoorr:•clOc"J ;~nd ottwinttt'f':ltgro~ """'ill"''ri;hi l. 

t Ud e and r •·ash !l«k. 'l'f'llli;Stould ~a ha'w f<Ktrub 

ril,g.t•ftbey<an eatllOil~ ~·sdalru llll'll)II~~Umate ontt 

lhe O>alltiOil w ill a ll lllf(\1._~ btwl to d'lt sc11tt S:.is.'l't•ne Coutt. 

'lbt> Coa lbOI)~Pfl(ltlt-(1 Alblate'!I.JUitllt,au\St a •tledktl clitlit that 

3llq.edlylnf'lllttdcrasb itljlu•yda:ill'l.'l~ .... ll p~nltht 

dat~t'3j)l'e<'edet1t ro."s{lfWidu1310otbft'Aa~sJ•t•1tlw: 

SUilll .. of f'llli;S~fU. 'llle CoeblJOO atwl AllsUit~lltt~ toO\~rtllffl 

alower-roun~~. 

OeOati gairb11gM:11 ~. 011i 7.1lrn.$0ng tried to flood lbe 

U.S. ,.;lh Ukea•~~ ly(o~inChina.ll :cro nterff'iU 

nplode!d fll' IW'\'f'-l inR11~ in ftdfnl f'I'Mh 1~$. ~ bndy 

Fraud fighters built diue•·se 

allianCliS to support bills 

last year, making more 

pi'Ogress joilltly titan any 

~also bill itlsurtf8fullpricdouht~pl. )C)('koi&. htt:tba oe 

ditdllln'tihes"'ithOut"''OI'king,ahb:tp. 

l.i~'$l,;I'IS lnwupinPI mU'h nirh-1&~~ W'f'rt boob!d tn 

(aur $bi1'.Sl.ut }"t.1r. Mnl)-bnd,SoothCarolin;l, Wl!..""hil'l!lklll and 

Cnlil'omia mad~ it illfWJifor 11111o bod)' :cfl(~pSlotl'llirte in 

rountttkitll. A Coab.tinn llliiJ'1_1llefllhip "'ilh f lm111la Nortb Aml!ri~ 

lw.Jptd Jilutllfo thl' t~ intnbw. Mon: Mllt(';'I~C)fl tip in :!Qt7-

UUI5 crash Mn.&s M~. CI':\Stl81ld 'l'lt~l r'l•~f;$tau~ 111'1 

lltldtsttw:d btt"l..l•l NtwJcn;ey.A r~tw b"' dool•"''a.Y "'alb~ 

IJ'ialdeet'otJOO ctrnu.cl Sldptrtt. u, ..... lt""od tf<I'IU~.«:tof cr.c>brl~<t 

ha--eltM;It'l(ftlb,UOt~:~mitltbeOptttliOt'l'$bi3Sft"rtSbitl~ 

for~fl'l(e:. 

SU.;C!dcrll~~ .... onkl g.a.i"lnt>rel~tolllNI itl Neo.-

Oiita ~e~ ndera liUik biU. Potu. wouldn't ha\"e to rt'S{IOad to 

fendrr l:~nden~.Ju;t g.t'lanolfiCial ~..a tfw. poli~ .tt:ation. Who 

~ toe'\~ cr.1.'1hG~N.?'Tbl! Mil i.~ in plf•) (or21)J1.thongh i.~ an 

11rhiDctmtll'•"tt for fnlllll flf.,hw~. 
66 


803CAIF21.eps 803CAIF22.eps

Uurril:lloe S..nd) b.arrtt.d l.nto ~ 

Closing door on oome~w.tktln:w• ,'f'twl 

contractor C()rls ._ .• rltoclw.,.,...,..N.Y.,.,'OIYIIm hlml• 

('l)l!li'WtOJr 'lllf' hllll!'"l him $11).000 iCJn dq)08t. 1nd ••no~tma ~. • llw 

¢'011lf'lldj)t boltl'll 'lulb hft' t'IW'Ih'. llf, ltl\ dlt\kt-~1) w.alh 1nd 

l'loewo''tifN'k..l.._...-.n.lih\\ilb$ ..... ~--....,...,.. 

m-...,_.,_,.~.nd«a~'t'c.t.W~iii20"'­

Aa...._fJ--'""IIIIWII..._~~"dwdn''-~ 

thtc.-&•t ..... •••fo ,..,..~11M-bi1•.-.c-a""'•n'...,c"'lof'd• 

20t6 ..... Mlllt)· fl:lf" ll-017 rNd.mmt ~!p. 

l 'forida l)l'll('o!"""l tQI\IrnriOf5art' COO\ lOCUli lnl!CIItl h<om .. 'I'I•>IIHI 

toJ~M;iKf! ll'lffll rotlltnl (lr dllnQVchimJI uflff .'IIQnl'l'-'llw C'l)lfltt';.c-t..-

tbfon ~· .... llyltlO...r rflllllt !kit~. and allm llllf' Uil!Uil'l'!l. holblNI h'fliUI'W 

doiiiN.,....*l4'\~l, .. tN'Iiluu~n,..noi~n~~~.-r(lh'o11hi«MRrianiU .,.1.11 t. 1 f'I"'O''h In :lQ17, 

Dishonest conn·cwtors ore 

convincing trusting 

homeoUJn~rs to <lSSign them 

control of damage claims 

aft~r stonns. 

· ick I e care' . 

r·a ckclo~ns :;;~~~·.:~:"• S(fllCCZC CrlmC nngs ~ 'I'IM!'t'f"'l.•tlt'-

t.l~<·h. nun hlrl'd ~ PlllltlllUIO htcoold bl lfor~111Gm 

~tw...,_,..,....,lftf..Wd'lr:IIOOdsft'W~olflhttJ3•&ll•ll'l 

Wfd.aft ~-·"-llilbqpd ...... "nwftdfni(II)Wt 

~ IJ.o fiMr . ......._Wdl.ood 30YNB • ....... M ,..., 

AaMII'ftM~~~.._.... .... 

~"""-"-.dri·~·-<!Qot(J.AI!Idb..,odrMIIM 

lt~thrM> fr.ud rrmMiwd hy larl.lw a..y. foMfJIIM&IfiiiMY 

(NIW lAIOhlllaf),Sftdlt"an'IU'IdMf'dicaid.e. ~l;-.l!~,aolf. 

'-'•-' fit b!ltkln>o (lft&'\l*)'C'I' dollan. 

...,liiXM'IIt II Cf'!ll. f'lkl"'llc:otu'l$n:~! tl•ltl:t~ntf'l~l hfo1t1h 

(rnil.~tlt 'll tn t(}-30 )W.t'9m (f'dtral pn.s.!)•t U'$" .. mtllland 

pti,jl•ll'~-t lf't'I.CI fA kl¥r jiNiieialtoltrotiC."II! (I( IJidt MIYIGI. Jnflr 

L.ot\olttOdilmf'dlwpndlwor1dtl&~l"fMtttlw 

.,.,.... ..,. ,_•ftll'hooOI'tGibQcla~!lptll'..-IIIM..,.ol. 

.-n0.f40.._'"-Ufdiinn>Widt .... llw ........ 

8f'll''kts. l..ortnro""' .. ~N•m•S t/2)1'~1•' (tdtftl J>ri.soo lMI.)'tar. 

C.•~ht e;IU'Iief', bol(ll'l' t.\l'dM .. fl! (rn•lo(l;c toJ '-'ff'"NII~lf'J!rli(or 

in tbedaim e,"dl! bv lln'dK't•H• •n..~,_.._ ~ c:>kl•l)(l ine-Cfedn .. 

-.n ~ol~-~tf. tMif\f'fjlor\IQI~a&l).'i"J•11\ 

)olofdical'l'~f'IMI: .. nJIII""'~~.-.IOH'iolJw.pn:l('I!M. 

... ptfdittl'l•...,_,_...,....,,.......-...1)~ 

Slrike ((lll'ft "rib$ -...eli:. Noft •w..n-~ ~ 

~~ • .,-~ ~Mkbtt. ..... 

~lft~l"-101•11111~-- ..... t.u.~ 

Jr,1('ddftCI'UM~proil(ll' >aoDM.IJifcrolt.IM~J.IIUIII 

Uld <lthm. ltCMnt hoMJ~M. ....::ollrr ~blood t~lna.ancl 

~t ,t;h ~ll•l" .-.n\11 1*1'\"l't' Ulry.ftfd. 

l'tw- ;"J.q:~ WI~M ... di'M'illn Mfdlntrtohlsuwynobllotd 

mort ll!r<U1300 flltlil"l\11('hli'JI,II'd llllil)Ut ~~rith Af'II IA~ IJ'II)ft th11n 

$900 milliob I•• ·~ned C...I ... .Mhtll flku It! tltld around tbl" \: ~ 

:at'i.n&dillt•. AMw«\ol~_.dinie$ ill South 

t1oricbl:llbMtd.,.,-.NMI IJ"'I"'MiiriiNilll-.ftft. ~ .._, • 

...... .... 4oon.~•tftdlfJ ........... I'WIP 
67 


803CAIF23.eps 803CAIF24.eps

'fhe old ond ineffective 

strategy of cl!asiug suspect 

claims after payiug them is 

giuingway. 

'ha ~ prho;tlt Mtdlffi iMuftrsoflen &<~aft~ Mtd~ :tOO MtditJ.ld, 

Prh1)Ae "~~~ public: htllhh in$1 N'I' ~ far !)dt.-nL-:eta lllurint.-'11¥i.flt the mi:<.Oon 

ofllfllllllbitKltr.1f'Xperin~uaimin£10di~''C" $1 b.11ioo in f~dni'D»- ,..11-nlt~ 

~ra d Pm\'fllinll l"nr1JIM'llihip h.:).i 0011hu; ml'mi:ll-l'll from lhe (lllbticand printt 

hea t~rt$tti.Oil, :twtn~~taodol.hotn. 

IU1'1' manber:talnoady ba\·ejomtly t~C~t)<'o\'A':d more 1Mn $28omiUiOtl ltl 

IIU.'Iptd dnitll't. N'ol'111l00W'lflbr.$t•b.lltnn ni~oof'. ,htiii;'J>Pbfoy\n in :!CU!t. 1b'l" 

C<oal11inn wall a founding mtt'llbl!r lind Mntinntd 11 lt;uii!OOip n!lt. 

20160ffitt~ 

.~o~~rtS.,... tcJ .. re(to-dlrlir) 

Oonlllowolh - 'f'lwC.XW.nWt"i\llilltn(co-dtoirJ 

IWdi"""'-* -Aalfrioo•J)~(Im'ASO<rrr} 

O..WcO.., -~ IJiof#IOft'ftflflllor 11iootrin Anlln~(Mmo\'m'\I'J 

Coc!-(IIIJ•Iitrio.D•Amro..-.. •C...•••I-c...-. ,,.,....,.oto • C.UuA.<- • 

o.--.lec>rllu•- F.<"CNW~•Jitoon .... >.C ... Wl-.,..f't • '"*"6:M<'-mro 

Alto.•M.'-..~~tcl'f.'-..W.tot-bor Coto_N~ou.,,Co-ntn • c...-.... All .... c.-......AJI.II(i ~-~o:.r~ ~~­

oi ltotS...~ f',.lfll ..... l'Vo ~c..-.-..................... ,.., • • ~-fo, 

t.-~1-'N!oo!-&.. M~~In • ......... t_,.., • ._.,.,.,....~­

olu-.'-"""-'- • M..._""-p__,.._c...-,I • N-t""""IS«odv 

~~ .. -··-·fl(t'~-~ .... ....... -a~utc.-tAil>lt< M oo_..,.. • '•'*"ICfflln ..,,..,,._.._,..c. "-~--• ,_, • ~...-•c.-- ......... . -'l'u""J"• ..... ·- c..-. ' . .... _ ....... , ...... .,.... .s. ...... ,L't.oh.L'-

Gowr_... Olfllltlulioou Alol•..,.s.-f" ),!.o"'-lt• Qtl,..~ • llwb(:.(~ 

0\<ouoiM\Oitn • OCQ.I..-~«'bl!\-m(no • 1 ......... 1~--......,-- , 

n...lt .... ..._«hooo; ......... fnoul • n.-t. ~ l~n•-,..ou t ..........-.lflll 

~ ... ...., · •a..:..o, .. ,. ... ..-... "1- ...... 1-t.._....,.,.,,,,"*""'"'"'....,~ 

••~ ..,_.., ........ _r~e..- x.-~-<~ten-..... ..-•. '-~>-"-"~ nw ~ •- .... ~r,_,,.._!<'-.Aoll"-"' • t..•-~»• ~ · j,of'IW~Ir lo _ _,.,_.., • M,.;,....s-,-.J\dmlnl!op_ ....... ,_. f,_,......._)OI ~"-.. ~1111(4t.d\,c oo1Moko<!o • ,.._.,., 

....,.m,..""Wr..<.odl\l- ' ~oo.owi~-J'-.,•~eon-- • "'~ 

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68 

Senator MORAN. In that 2016 annual report, it highlights the use 

of technology to combat insurance fraud. Would you elaborate on 

the increasing use of vehicle telematics, drones, social media 

searches, insurance company databases, the Internet of Things? 

The broad jurisdiction of our Commerce Committee has a lot to do 

with these things, and I’d like to hear how we can combat fraud 

and what you’re doing. 

Mr. JAY. Absolutely. And as we said before, the use of technology 

and trying to uncover some of the suspect fraud schemes has really 

just exploded over the last few years as new technologies come online and as more players in the property/casualty industry utilize 

some of these. And, frankly, I think the Internet of Things, everybody is focusing on that right now. 

We recently had a case, and we had the prosecutor do a briefing 

at our annual meeting in December, where a gentleman was 

charged with arson with burning down his home. He happened to 

have a pacemaker implanted in his chest. And the prosecutor got 

a court order to force him to sit and so they could take the data 

off his pacemaker, which somewhat demonstrated that what he 

said as far as the arson could not have happened. And the court 

just ruled in the last 2 weeks that the data can be used in court. 

And I think that’s one of the extreme examples we’re seeing as 

far as use of data. But we’re going to have a lot of these examples 

come forth, and with that, I think discussions as far as the privacy 

of Americans and, when is going too far even if it’s looking at criminal fraud schemes? 

In another recent case in Arkansas, and it was a murder case, 

they were able to take a look at the data in their Amazon Alexa— 

and, you know, maybe some of you own these devices, but you talk 

into it and it gives you answers, but all of the questions are maintained in a cloud that can be pulled down and listened to. And basically a woman was murdered in a hot tub, and her husband said 

certain things about the incident. They went back and got the data 

from Alexa, even though Amazon tried to squash it, and they were 

able to show that the story he told about her death was not true. 

And so I think, as our cars have more computers, as our homes 

have more computers, everything is hooked to the Internet, as 

there are cameras everywhere in society today. The generation 

that’s coming of age is going to have much less expectation of privacy than we have now, and that’s a separate issue, but it’s helping 

fraud investigation to no end, and that’s only going to continue. 

Mr. DOAK. Chairman Moran, I may make a comment there. 

Senator MORAN. Please. 

Mr. DOAK. The NAIC has just formed an innovation task force, 

which over the last several months we have been listening to the 

emerging technologies in all different areas that you highlighted, 

and it’s one of something that the regulators have a very focused 

effort to stay on top of, whether it’s cyber issues or the use of 

drones, telematics, big data. We have a big data working group 

that many of the commissioners are involved in. So I want to give 

you some assurances that the National Association of Insurance 

Commissioners are very focused on the emerging technologies and 

the uses of those. 

69 

Senator MORAN. I’ve seen evidence of this in the crop insurance 

world where big data can mine information about fraudulent behavior. And, again, you’ve testified today about finding fraudulent 

behavior in one kind of insurance arena that translates to the same 

kind of perpetration or the same individuals perpetrating those 

kind of criminal activities elsewhere. There’s a lot of information 

out there. Does law enforcement have the tools necessary to—are 

they behind the curve in regard to this as compared to the insurance industry? 

Mr. DOAK. We partner with law enforcement on a regular basis. 

We make any of the tools available to the investigations, no matter 

which way we’re going back and forth. Mr. Lynch may have some 

comments related to that. But the regulators, through proper procedures, we’re embedded in my state, as is the other states, to provide assistance, as a state agency, to any law enforcement agency 

that might be seeking some of that data, which is proprietary to 

an insurance company. 

Mr. LYNCH. Mr. Chairman, yes, thank you. NICB is at the very 

early stages of working on this issue. Given our relationship with 

law enforcement, we’re able to get into these communities earlier 

than most. And we’re at the forefront, I think, of some neat things 

relative to social intelligence and helping policyholders and law enforcement better detect fraud. So I think more to come on that. 

Senator MORAN. Ms. Weintraub? 

Ms. WEINTRAUB. Yes. Thank you, Chairman Moran. I would like 

to add that, of course, as new technologies emerge and help all of 

the entities at the table and law enforcement, police, to enforce 

fraud more aggressively and effectively, it should be used. However, there should always be consumer protections as well. And we 

know in terms of privacy, we know in terms of the use of big data, 

being used to price for auto insurance, for example, that it provides 

opportunities for other factors not related to a safe driving record, 

but other aspects which are not directly related to safe driving to 

be used that cause a discriminatory impact on pricing for some especially low-income consumers. So that needs to be taken into account as well. 

Senator MORAN. Thank you very much. 

Let me turn to the Ranking Member. 

Senator BLUMENTHAL. Thank you. I’m going to try to be as quick 

as possible, but perhaps with the Chairman’s permission, if we can 

take a break and then come back, let’s see how far we get. And I 

would just like to ask at the outset whether you are available for 

another 20 minutes or so. 

[Witnesses nodding yes.] 

Senator BLUMENTHAL. Well, let me see how far I can get. 

Senator MORAN. What you’re seeing is the Ranking Member trying to supersede the Chairman’s intentions. 

[Laughter.] 

Senator BLUMENTHAL. I am asking the Chairman’s permission to 

do it, but let me see if I can conclude before we go to vote. 

I don’t know how many of you—I’m sure Mr. Doak has seen the 

60 Minutes piece on audits leading to life insurance companies 

being discovered to have uncovered a systematic industry-wide 

practice of not paying beneficiaries who were unaware there was 

70 

a policy, something that is not at all uncommon. The 60 Minutes 

piece uncovered that insurers routinely use the Social Security 

Death Master File, but only to their advantage, to cut off annuity 

or retirement payments once the policyholder has died. 

When it came to life, insurance would claim that they had no 

idea that a policyholder had died. Even worse, an insurer would 

continue to pay themselves life insurance premiums out of the dead 

policyholder’s nest egg. To put it most simply and bluntly, the insurer put the burden on the beneficiary to come forward, but often 

the beneficiary had no idea that the policy existed, and the insurer 

used that ignorance to its benefit. They have acknowledged, some 

of them have, their responsibility, and they have settled litigation, 

but some 35 still have not done so. 

When one of your colleagues, Mr. McCarty was asked about this 

practice, he said he would release, quote, the hounds of hell on 

these insurers because, in effect, they were failing to pay benefits 

to beneficiaries, and that misconduct, in my view, was absolutely 

fraudulent. 

We’re here about insurance fraud, and I’d like to ask you and 

Mr. Jay what you are doing to prevent this kind of fraud? 

Mr. DOAK. Well, thank you, Senator. I did have the opportunity 

to see a couple of those segments, and we do know some of the 

work that has been done by the NAIC and some of the settlements 

that have been basically run by lead states in that area. 

One of the issues that the NAIC has recently put together is 

called a Lost Life Policy Locator Service, which was pioneered in 

a couple of states, and that has now gone nationwide. And for the 

record, we would provide, through the NAIC, an update to you on 

the actual stats of the findings of beneficiaries through that. 

Senator BLUMENTHAL. I would appreciate that. 

Mr. DOAK. So the NAIC is continuing to work on those settlements. And Commissioner McCarty is highly respected. And Commissioner Altmaier is the Florida commissioner who is continuing 

to work on some of those activities. So it has our attention, and we 

are remaining vigilant to make sure that those consumers get the 

monies that are due them. 

Senator BLUMENTHAL. For the record, about 35 insurance companies still have not settled in that case. 

Mr. DOAK. Right. 

Senator BLUMENTHAL. Thirty-five major insurers have not settled. 

Mr. DOAK. I would ask the—— 

Senator BLUMENTHAL. So people are going without these benefits 

as we speak. 

Mr. DOAK. Yes, and—— 

Senator BLUMENTHAL. It needs to be a really urgent issue. 

Mr. DOAK. Exactly. And I would ask your permission to have the 

NAIC put together some information on an update to those 35 insurers and follow up on that particular item. But I can tell you it’s 

a high priority. And we are having some success in some other 

areas relative to finding beneficiaries, sir. 

Senator BLUMENTHAL. Thank you. 

Mr. Jay? 

71 

Mr. JAY. We’ve looked at the issue, and I agree with the Commissioner as far as it’s a regulatory issue and administrative issue for 

the insurance departments to oversee. To my knowledge, in taking 

a look at the companies involved in this, there was no criminal 

fraud. It may come in the realm of abuse or certainly bad practices 

on the part of the life insurance industry for not proactively trying 

to find when benefits are deemed to be due. But we support the 

insurance commissioners as far as their actions on the issue. 

Senator BLUMENTHAL. Well, perhaps in your further response to 

my question, you can tell me what you’re doing proactively to prevent these kinds of practices in the future because, as we all know, 

this kind of practice may not have constituted criminal fraud, although as a former prosecutor, I would have been interested to investigate it as criminal wrongdoing. Kevin McCarty, the Insurance 

Commissioner, probably doesn’t have criminal jurisdiction, but I 

would respectfully suggest that criminal authorities ought to have 

a real interest in it. 

Mr. JAY. And we would support any attorney general, insurance 

commissioner, or fraud bureau to investigate it, and if they do find 

that there are criminal violations there, to prosecute it to the full 

extent of the law. 

Senator BLUMENTHAL. Let me—— 

Mr. JAY. It’s just not our knowledge that that’s happened so far. 

Senator BLUMENTHAL. I understand. 

Mr. DOAK. And I would make a comment that through the process here, I think one of the things that I would like to note about 

the Lost Life Policy Locator Service is that we’ve had the opportunity to find these for Oklahomans, and it’s a very impressive 

chart since it has been rolled out by the NAIC in assisting consumers. 

But when the National Association of Insurance Commissioners, 

to the best of my knowledge, like in Oklahoma, when we find a 

beneficiary or match them up, there is no charge to them. There 

is no reduction in those fees. And I do believe that under some of 

the other circumstances, through the treasurers’ departments in 

certain states, that there is a fee redacted. In my opinion, that’s 

the wrong thing to do. Consumers should get 100 percent of the 

money that’s owed them. 

Senator BLUMENTHAL. I have one—I have a couple more brief 

questions. 

Senator MORAN. To demonstrate my firmness, but also my accommodation, the floor is holding the vote open an extra 5 minutes, 

so if you can wrap up in the next 5 minutes, we will both accomplish what we want to accomplish. 

Senator BLUMENTHAL. This is bipartisan cooperation at work before your eyes in real time. 

[Laughter.] 

Senator BLUMENTHAL. I will have more questions for the record. 

This area is very important to me. I want to commend Commissioner Kevin McCarty, of Florida, and your colleagues who have 

joined in the Task Force, as well as, of course, 60 Minutes for exposing this fraud. I don’t use that word lightly, it is a fraud, and 

exposure of it provides a tremendous warning to others to avoid 

this kind of fraud. 

72 

And I think you and we have a special responsibility here given 

that we’re talking about life insurance. We’re talking about insurance people buy in the expectation their sisters, their brothers, 

their children, and their spouses are going to rely on it to survive, 

to live, and to reap the benefits of that life. 

A lengthy article in the New York Times last year detailed a new 

and disturbing trend in the whole life industry. I’m sure you’re 

aware of it. Insurance companies have jacked up premiums on 

whole or universal life policies and have shifted the burden of dividend payments from the insurance company to other policyholders. 

People who bought universal life policies in the 1980s and 1990s, 

some of which guaranteed annual returns of 4 percent or more, are 

seeing their premiums now soar. 

So the new exorbitant rates have left many older Americans with 

no choice but to drop coverage and lose, you guessed it, the entire 

value of their policy after years and years of investing in it. 

And I am raising this issue. I know we’re not going to have final 

answers today, but I want to ask Ms. Weintraub, realizing that 

many whole life policies were underwritten during a decade of high 

interest rates that could support more generous dividends. I also 

understand these insurance policies gave a guarantee, and policyholders seem to have kept their side of the bargain. Are these exorbitant increases in premiums fair and justified, or are they simply 

a way for insurance companies to reduce their liability and eliminate the most expensive policies, I understand they’re expensive, 

but don’t they have an obligation to do better? 

Ms. WEINTRAUB. It certainly seems unfair to a consumer who has 

been paying into this policy and then only to find that it is 

unaffordable for them and they can’t get the benefit of what they’ve 

been paying for. Certainly that has an unfair result. It’s entirely 

the reason why consumers have insurance to begin with, and being 

unable to use it in the way that they’ve been paying for, for years 

and years is certainly problematic. And I would definitely recommend more research looking into how the disproportionate effect 

it has on especially older Americans and their ability to obtain coverage, and the investment they put into it. 

Senator BLUMENTHAL. Thank you. I would invite other responses. I know we’re short on time. Perhaps others can answer 

that same question for the record. 

And again my thanks to the Chairman for his generosity and indulgence. Thank you. 

Senator MORAN. Does anyone want to include anything? 

Mr. DOAK. I would just close by thanking you from the National 

Association of Insurance Commissioners, the regulators. We believe 

that state-based regulation is the best place for insurance. We’re 

the closest place to the consumer. Like in my state, we’ve been regulating insurance since statehood. And my colleagues that I represent, we’re very proud of the work they do protecting consumers. 

So we appreciate the opportunity to be here. This is a very, very 

timely topic and evolving topic relative to new trends in fraud. So 

thank you, Senators, for having us. 

Senator BLUMENTHAL. If I may just make one concluding remark. 

I sat exactly where you are, Mr. Doak. I don’t know whether it was 

5 or 6 years ago, on a panel, actually I think I sat where Mr. Jay 

73 

is now, and to my right was the Attorney General of New York, 

who argued that insurance regulation should be turned over to the 

Federal Government. It has been, as you say quite correctly, a 

state role and responsibility. I said no, insurance regulation should 

continue to be a state responsibility, but I said that the states have 

an obligation to do better, to be more rigorous in their oversight 

and scrutiny, and I would hope that they would be because I’ll continue to be an advocate of state regulation. 

Mr. DOAK. Thank you, sir. 

Senator BLUMENTHAL. But I would hope that we can work together and improve the efficacy of the regulation. 

Thank you, Mr. Chairman. 

Senator MORAN. I appreciate the cooperation from the Ranking 

Member. And I appreciate the witnesses testifying. And the record 

will remain open for 2 weeks for members to submit questions. I 

will have some, and it appears that the Ranking Member will, my 

guess is that other colleagues. We would ask you to respond to 

those. And again we thank you for your presence with us today. 

The Committee is adjourned. 

[Whereupon, at 11:15 a.m., the hearing was adjourned.] 

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