Many Foreign Banks Remain Unclear on How the Wholly Owned Ubsidaries

ABSTRACTInsurance, a very well-known concept today and many people could relate to in more than one ways. This is the influence of the changing times that have changed the concept of insurance in the minds of the young and the old. People have changed their attitude towards insurance and accepted its new look from being an entry of luxury to an investment and necessity. The number of people taking insurance has increased considerably in the past few decades due to the entry of private players in the market. One knows that every coin has two sides. Similarly, insurance also has two faces. One of which is investments and getting regular returns from financial institutions for oneself and for loved ones. The other, awfully, is of which people deceive insurance companies for their undue advantage and cause intimidation to many others. Though, there have been many laws and agencies all over the world to impede such criminal activity, it is not a full proof solution to all insurancefrauds. In a world today where every person seeks their right to information and demands the same, it is very difficult to scam them. One must know all the loop-holes of their business to scheme someone. This could be the act of someone who is carrying on criminal bustle on the vigor of his acute knowledge about their business. Lack of knowledge and not knowing ones basic rights on behalf of the prey could land them in scrambled scam bisque. There have been many institutions and agencies formed all over the world to detect fraud and penalize the one conscientious for such mishaps. There is Division of Insurance Fraud, International Association Of Insurance Fraud Agencies (Iaifa), etc. through the enduring and conscious endeavor of these institutions insurance fraud tempo has declined by an enormous amount. Several have studied preceding and enduring market conditions to identify with the diverse frauds that take place and the reasons behind committing these frauds. One cannot diminish frauds, schemes, swindles, scams but can positively be alert of them so as not to be a victim of it themselves. Tumbling fraudulent situations is a unremitting and collective effort of countless. One must be sensitive and offer their helping as much as they can.One can either grumble about how things are all going wide of the mark or swallow the consequences. Or put their foot down and make an attempt to change the immoral to the right. The wrong will change and everyone will see the bright light of truth and right with the revolution of knowledge, awareness, an attitude for change amongst the humanity.

INTRODUCTION Fraud occurs when someone knowingly lies to obtain some benefit or advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and to which someone is entitled. Depending on the specific issues involved, an alleged wrongful act may be handled as an administrative action by the Department or the Fraud Division may handle it as a criminal matter.In a broad strokes definition, fraud is a deliberate misrepresentation which causes another person to suffer damages, usually monetary losses. Most people consider the act of lying to be fraud, but in a legal sense lying is only one small element of actual fraud. A salesman may lie about his name, eye color, place of birth and family, but as long as he remains truthful about the product he sells, he will not be found guilty of fraud. There must be a deliberate representation of the product's condition and actual monetary damages must occur.Many fraud cases involve complicated financial transactions conducted by 'white collar criminals', business professionals with canalized knowledge and criminal intent. An unscrupulous investment broker may present clients with an opportunity to purchase shares in precious metal repositories.For example, His status as a professional investor gives him credibility, which can lead to a justified believability among potential clients. Those who believe the opportunity to be legitimate contribute substantial amounts of cash and receive authentic-looking bonds in return. If the investment broker knew that no such repositories existed and still received payments for worthless bonds, then victims may sue him for fraud. Fraud is not easily proven in a court of law. Laws concerning fraud may vary from state to state, but in general several different conditions must be met. One of the most important things to prove is a deliberate misrepresentation of the facts. Some employees of a large company may sell a product or offer a service without personal knowledge of a deception.

DEFINITIONDefinition as per WikipediaInsurance fraud occurs when any act is committed with the intent to fraudulently obtain some benefit or advantage to which they are not otherwise entitled or someone knowingly denies some benefit that is due and to which someone is entitled. According to the United States Federal Bureau of Investigation the most common schemes include: Premium Diversion, Fee Churning, Asset Diversion and Workers Compensation Fraud. The perpetrators in these schemes can be both insurance company employees and claimants. False insurance claims are insurance claims filed with the intent to defraud an insurance provider.Definition of 'Insurance Fraud'An illegal act on the part of either the buyer or seller of an insurance contract. Insurance fraud from the issuer (seller) includes selling policies from non-existent companies, failing to submit premiums and churning policies to create more commissions. Buyer fraud includes exaggerated claims, falsified medical history, post-dated policies, viatical fraud, faked death or kidnapping, murder and much more.Definition as per INVESTOPEDIA Insurance fraud is basically an attempt to exploit an insurance contract. Insurance is meant to protect against risks. It isn't meant to be a tool to enrich the insured. Although insurance fraud by the policy issuer still occurs, the majority of cases have to do with the policyholder attempting to receive more money by exaggerating a claim. More sensational instances such as faking one's own death or killing someone for the insurance money are comparatively rare.Definition as per www.Helpstopinsurancefruad.orgWhen someone provides false information to an insurance company in order to gain something of value that he or she would not have received if the truth had been told theyve committed insurance fraud.Definition as per www.businessdictioner.comThe defrauding of an insurer through false and fabricated claims, which can range from minor exaggeration of claims to the intentional causing of accidents.

HISTORY OF INSURANCE IN INDIAInIndia, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily. Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it contributes to about 7 per cent to the country's GDP. Insurance is a federal subject in India and Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. 1818 saw the advent of Life Insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business.An Ordinance was issued on 19th January, 1956 nationalizing the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. The history of General Insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation.General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalization) Act, general insurance business was nationalized with effect from 1st January, 1973.107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1st 1973.

Present Scenario The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 12 life insurance and 8 general insurance companies have been registered. A host of private Insurance companies operating in both life and non-life segments have started selling their insurance policies since 2001. Nationalization of Life Insurance The nationalization of life insurance is an important step in our march towards a socialist society. Its objective will be to serve the individual as well as the state. We require life insurance to spread rapidly all over the country and to bring a measure of security to our people. Jawaharlal NehruThe first step towards nationalization of life insurance was taken on 19 January 1956 by the promulgation of the Life Insurance (Emergency Provisions) Ordinance, 1956. In terms of this Ordinance, the management of the controlled business of insurers was vested in the central government. The period between 19 January 1956 and 31 August 1956 was utilized as a period of preparation to facilitate the subsequent integration of the various insurers into a single State-owned Corporation.Before nationalization, the insurance industry was organized into 243 autonomous units, each with its own separate administrative structure of office and field staff, its own separate set of agents and of medical examiners. Their offices concentrated in the large cities and their field of operation was confined to the major urban areas. Out of 145 Indian insurance companies, as many as 103 had their head offices in the four cities of Bombay, Calcutta, Delhi and Madras.

When the Corporation was constituted on 1 September 1956, it integrated into one organization, the controlled business of 243 different units, Indian and foreign, which were engaged in the transaction of life insurance business in India.The total assets of the above 243 units as on 31 August 1956 were about Rs 4,110 million and the total number of policies in force was over five million assuring a total sum of more than Rs 12,500 million. The total number of salaried employees was nearly 27,000. These figures give a broad idea of the magnitude of the problem involved in setting up an integrated structure.When parliament set up LIC as a monopolistic public undertaking, it was argued and believed that elimination of competition and the malpractice that competition has given rise to, would lead to:a) Better and more economical management of the Business of life Insurance.b) Reduction in administrative expenses.c) Improvement in the quality of service.d) Increase in volume of business.e) Maximization of social advantages that insurance can provide through higher returns on investments of life fund, consistent with safety and liquidity of the invested funds.

WHY TO WORRY ABOUT FRAUD?Insurance crooks are picking your pocket to line theirs. These thieves are committing insurance fraud.Insurance fraud occurs every day, and in every state. People of all races, incomes and ages are victimized. Insurance schemes steal at least $80 billion a year, the Coalition Against Insurance Fraud estimates.But look beyond the high-dollar costs... Honest, hard-working consumers and businesses pay a steep price. Lives, businesses, careers and families are damaged or even ruined by insurance fraud crimes.People lose their savingsTrusting citizens are bilked out of thousands of dollars, often their entire life savings, by insurance investment schemes. The elderly are especially vulnerable.Health is endangeredPeople's health and lives are endangered by swindlers who sell non-existent health policies or perform quack medical care to illegally inflate health insurance claims.Premiums stay highAuto and homeowner insurance prices stay high because insurance companies must pass the large costs of insurance fraud to policyholders.Consumer goods cost morePrices of goods at your department or grocery store keep rising when businesses pass higher costs of their health and commercial insurance onto customers.Honest businesses lose moneyBusinesses lose millions in income annually because fraud increases their costs for employee health coverage and business insurance.Innocent people are killed and maimedPeople die from insurance schemes such as staged auto accidents and arson including children and entire families. People and even animals also are murdered for life insurance money.

WHY FRAUD DOES TAKES PLACE?Insurers sometimes back off Most insurance companies take a tough stand against fraud, but some companies unwittingly encourage fraud by paying suspicious claims too easily. These companies believe it's cheaper to pay some smaller suspect claims than fight in court, and a quick payoff also may avoid multimillion-dollar lawsuits for bad faith.

The health system is an easy targetThe health care systemsare huge and vulnerable. The sheer number of patients and treatments plus complexity of billing attract cons who are skilled at looting our overworked health care system. The pressure to control costs also encourages many doctors or health firms to cheat so they can recoup lost profits or meet rigorous treatment quotas.

Immigrants are vulnerable Insurance cheats consider large and growing immigrant groups easy targets. Asian and Hispanic communities, for example, report extensive insurance fraud as con artists prey on immigrants' trust, lack of English skills and ignorance of how insurance works.

Low-Risk CrimeInsurance cheaters view insurance fraud as a low-risk, high-reward game, and far safer than drug trafficking or armed robbery. Courts are getting tougher on convicted schemers, but too often jail sentences still are light, with courts often reserving space in overcrowded prisons for people convicted of more-violent crimes. Professional societies overseeing doctors and lawyers often are reluctant to discipline peers convicted of insurance fraud.

Low Legal PriorityProsecutors often give top priority to combating drugs, violence and other high-profile crimes. Though prosecutors are tackling more fraud cases than in the early 1990s, too many prosecutors still believe insurance crimes often are too complex and technical to successfully prosecute.

People Tolerate FraudToo many consumers believe insurance fraud is justified. This environment of tolerance makes it much easier for con artists to operate safely. Research by the Coalition Against Insurance Fraud reveals: Two of three people tolerate insurance fraud to varying degrees; Two of five people want little or no punishment for insurance cheats; they blame the insurance industry for its fraud problems because they believe insurers are unfair.

WHY FRAUD PERSISTSDespite much progress in recent years, fraud fighting still needs improving. Here are several holes in the system that fraud fighters are working to close:

Health system an easy targetThe health insurance system is vulnerable. Swindlers can skillfully exploit computerized billing systems with large volumes of well-disguised claims. Low reimbursements and pressure to control costs also encourage many medical providers to cheat.

Low-Risk CrimeInsurance cheaters view insurance fraud as a low-risk, high-reward gambit. Even drug dealers have entered insurance fraud. They think fraud is safer and more profitable than working street corners.Nine states lack fraud bureaus of any kind. Fraud bureaus are agencies charged with investigating suspected insurance schemes.Court sentences often are light, limited to probation, restitution or short prison terms. Courts often reserve overcrowded prisons for people convicted of more-violent crimes.Professional societies overseeing doctors, chiros and lawyers can be reluctant to revoke or suspend the licenses of peers convicted of insurance fraud.

Insurers sometimes back offMost insurance companies actively fight fraud. But some insurers may pay suspicious claims, believing it's cheaper than fighting in court.

Low legal priorityProsecutors often give top priority to combating drugs, violence and other high-profile crimes. Though prosecutors have tried more fraud cases in recent years, many prosecutors still believe some insurance crimes are too complex or not serious enough to pursue.

Climate of toleranceThough most people are honest, too many consumers think insurance fraud is a victimless crime, or that insurers won't miss a few stolen dollars. Thus they justify defrauding insurers or not reporting other people's scams. More troubling, people's tolerance of fraud is growing, reveals research by the Coalition Against Insurance Fraud.

Weak public outreachMost public outreach efforts by fraud fighters are poorly funded and may have limited effectiveness. This makes it harder to reverse people's lax attitudes about this crime.

CLASSIFICATION OF FRAUDFraud claims are wide-ranging, from misrepresented services, services not rendered and services rendered to 'rented' patients, to a broad spectrum of revenue-enhancement mechanisms.Internal and External:Internal frauds are those perpetrated against an insurance company or its policyholders by agents, managers, executives, or other employees. External fraud schemes are directed against a company by individuals or entities as diverse as medical service providers, policyholders, beneficiaries, medical consumable vendors etc. Hard and Soft:Hard fraud is a deliberate attempt either to stage an event or an accident, which requires hospitalisation or other type of loss that would be covered under a medical insurance policy. Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim. Soft fraud may also occur when people purposely provide false information with regard to the pre-existing illness or other relevant information to influence the underwriting process in the favour of the applicant. Provider and Consumer:Fraud can be committed both by the insured member or the provider and at times are a concerted effort of agents, brokers, insurance employees, insured member and the provider of services and other stakeholders of the healthcare system. One of the largest single sources of fraud is the healthcare providers. They usually have the detail knowledge of the policy condition, re-imbursement process which makes it very difficult to detect such frauds.

TYPES OF INSURANCE FRAUDSInsurance fraud is not a victimless crime. When people cheat insurance companies out of money, the honest people that pay premiums pay through increased insurance costs. Insurance companies lose anestimated $30 billion per yearin insurance fraud costs that have to get passed on to bill-paying consumers.

Stolen CarThere are two ways that criminals perpetrate thestolen car insurance fraud scam. The first type of stolen car fraud is when a car owner sells his car to a body shop to be cut up for parts and then reports the car as stolen. The body shop is in on the fraud, so the authorities are never told about the sale for parts.The second most common way that criminals commit stolen car fraud is to sell the car to an overseas buyer, make the transaction without any paperwork, ship the car overseas and then report it stolen.

Car AccidentIn most cases, the driver and accident victim are the only ones in on the scheme. In other cases, the driver, victim, insurance investigators and even some of the bystanders that give statements are in on the fraud. The value of the vehicles is greatly inflated and the insurance payoff is for two totalled vehicles.

Car DamageAny form of insurance fraud is illegal and damaging to the insurance company. Some people will report a small car accident, get an estimate for damages, collect the insurance check and then not get the car fixed. This is single most common form of auto insurance fraud going on, and it happens constantly. The people doing it see no harm in it, but the money the insurance company pays out comes from premiums paid by other customers, which will go up the more often this fraud is committed.

Health Insurance Billing FraudUnfortunately, health care professionals will sometimes get in on the insurance fraud act. One form of insurance fraud; is for health care providers to bill health insurance companies a high fee for a standard procedure, or to bill for services that were never rendered.For example, you may go in for a regular check-up but your doctor decides to bill your insurance company for an in-office surgical procedure that never happened. The patient is the victim of fraud and does not even know it.

Unnecessary Medical ProceduresIf it seems like your doctor is ordering you to go for unnecessary testing, then you may be the victim of insurance fraud. If you go to the doctor for a sore arm but your doctor orders a series of blood tests that have nothing to do with your arm, then that could be a common form of insurance fraud.

Staged Home FiresHome owners insurance fraud costs insurance companies and their customers billions of dollars each year. One of the most common form ofhome owners insurance fraudis the staged fire or act of vandalism. This can be done in one of two ways. The homeowner either removes important family items before the fraud takes place, or the homeowner makes sure that the insurance company knows the value of the expensive items and then has them destroyed.In almost every case of a staged home fire, the homeowner is not home and can account for his whereabouts when the event took place. Criminals are hired to set fire to the home, or break in and vandalize the home to make it look like the homeowner was victimized.

Storm FraudCriminals will take advantage of any situation to commit insurance fraud, including a major storm. A common form of fraud that happens in the wake of major storms is homeowners will either enhance the storm damage to their home to get more of a settlement, or the homeowner will take advantage of how busy the insurance company is and call in a claim even if there was no storm damage.

Abandoned House FireOne of the most common forms of home-owners insurance fraud is the abandoned house fire. It can happen for a variety of reasons, but the end result is always fraud. The homeowner could have been transferred to a different city because of his job and cannot sell his property, or a landlord owns a home in a neighbourhood that is no longer popular and cannot get tenants to help pay the mortgage.If you have ever been at the scene of an abandoned house fire after the flames have been put out, you will see at least one fire inspector for the insurance company on site. This is an extremely common kind of insurance fraud that not only causes premiums to go up, but it also puts the buildings next to the abandoned home in jeopardy as well.

Faked DeathThis form of insurance fraud is so common that it has been the plot of many movies, television shows and books. A criminal will take out a life insurance policy on himself and make his spouse the beneficiary. After the policy has been in effect for several months, the insured criminal fakes his death and his spouse is paid the death benefit. When the funeral is over, the spouse suddenly disappears and the insurance company is out the death benefit.

Renters InsurancePeople who rent homes or apartments will often take out inexpensive renters insurance policies to cover the cost of their possessions. Prior to moving out of the home or apartment or when financial times get bad, the insured will sell their possessions and then report them stolen to collect the insurance money.Insurance fraud affects everyone in some form or another. If you know of insurance fraud that has been committed, then you should report it to your state department of insurance immediately.

Contrived accidentsThese can be Submitting a claim for damage sustained in a collision that did not occur as the result of an accident i.e. transporting pre-damaged vehicles to an accident black-spot to create the impression an accident has occurred.

Induced road traffic accidentsThe deliberately induced accident or slam-on consists of organised criminals targeting innocent motorists by provoking collisions to facilitate compensation payment for this such as injury damage, hire vehicles, recovery and storage. Commercial vehicles are particularly popular targets.

Phantom passengers claimsOpportunist and organised phantom passenger claims can arise as a result of both genuine and staged accidents. Many induced feature vehicles packed with claimants, all of who claim to have been injured

Staged AccidentsDepending on the complexity of the fraud, two or more individuals will deliberately crash their vehicles into each other, potentially resulting in claims for: damage caused, injuries sustained, car hire costs, vehicle recovery, storage etc.

Application FraudA policyholder dishonestly misrepresents or fails to disclose material facts in order to lower the insurance premium. This can include non-disclosure of claims history, points on a driving licence, and/or car modifications.

FrontingA type of application fraud where a policy is purchased using anothers details to gain more favourable terms

Opportunistic Fraud Opportunistic frauds can be committed on all types of insurance, from motor or commercial liability personal injury claims to property, pet or travel insurance and beyond. It consists of an individual submitting a false claim either on a single or multiple occasions.

Commercial Liability FraudEmployers Liability (EL) insurance is compulsory and insures for injury, disease or death to employees arising from their employment. Public Liability (PL) insurance relates to bodily injury or death to members of the public or damage to their property as a result of the companys business activities. Claims can be made by both the insured company and third parties. Some are highly organised with a large total value, many are petty and opportunistic. Frauds include the exaggeration of genuine injuries and / or the loss incurred as a result of a genuine incident, or fictitious incidents.

Illegal Intermediaries (Ghost Brokers)Illegal Intermediaries are described as an individual or group, who set up policies for members of the general public, deliberately misrepresenting themselves as an insurance broker, agent or insurer for profit.They are a real threat to those in vulnerable communities such as non-English speaking communities or students looking for cheaper insurance. Illegal Intermediaries work by acting as a middle man between the customer and other brokers/insurers. They provide a fraudulent insurance policy by using incorrect information. Or give a completely fake insurance policy.The customer will provide correct information to the broker, but they alter information provided to the insurer in order to reduce the price. The insurance policy the customer pays for will be invalid because it will not match their true details. They could be left uninsured without knowing about it.Another tactic is to provide fake insurance documents for an inflated price which leaves the customer uninsured.

Professional EnablersProfessional enablers are the associated professionals e.g. solicitors, engineers, doctors and vets, who are complicit in submitting and progressing fraudulent claims, from staged accidents to fictitious personal injury claims. Other specialist service providers such as Accident Management Companies (AMCs), recovery agents and engineers also come under this.

Internal FraudEmployees of insurers are in the unique position of fully understanding insurance processes and the triggers which may indicate insurance fraud. This knowledge can enable them to submit fraudulent claims and remain under the radar or aide the progress of false claims submitted by others.

Data TheftInformation illegally obtained from insurance companies can be sold on to accident management companies or personal injury solicitors. In turn, personal information is misused to solicit and induce potential claimants into submitting personal injury claims, sometimes with little regard for its validity.

Fraudulent contractors.Homeowners should be wary when contractors knock on doors after severe weather strikes, says Frank Scafidi, spokesman for the National Insurance Crime Bureau. Traveling contractors who request money upfrontcould be planning to scam you. According to the Better Business Bureau, fraudulent contractors were in the top 10 consumer cons for 2013.The fraudulent contractors will urge you to get busy making repairs before supplies disappear and will say your insurance covers the repairs, Scafidi says.These con artists are also known as storm chasers.And storm chasers can be very creative when they try to con you. "They may gouge the tiles to make it look like real hail damage or use shoddy materials to do repairs."

Fake car crashes.In urban areas, fake car crashes and auto-injury claims add up to more than $5 billion per year nationwide, says Jim Quiggle, director of communications for the Washington, D.C.-based Coalition Against Insurance Fraud.Heres how it works: Youre driving at a relatively low speed when the car in front of you stops suddenly and you rear end it. The car is packed with passengers who are coached how to lie about painful back and neck injuries in order to pull in thousands of claim dollars in chiropractic tests and treatment.

Many times, the cases are part of a "crash ring," which involves fake witnesses, doctors and lawyers. Doctors bill insurance companies using counterfeit medical records, and lawyers threaten to sue the insurance companies unless they pay the bills."It puts the insurance companies between a rock and a hard place to challenge these dishonest bills or face the possibility of an expensive civil suit in front of a potentially sympathetic jury,

Health insurance and medical fraud.Medical fraud and fake health insurance claims are some of the most lucrative fraud schemes, particularly the "slip-and-fall" routine. This is when a consumer falsely claims that he or she fell inside a business and should receive reimbursement for medical bills. They may even sue for emotional distress and lost earnings.Fortunately, many stores have good surveillance cameras, and the video often shows the person looking around and pretending to fall, which reveals the scam.Medical fraud is so lucrative about $70 billion annually that the National Insurance Crime Bureau began establishing medical fraud task forces in 2002. Eight task forces now exist in the U.S. Medical fraud is particularly common in Florida, New York and Michigan and is extending into states such as Minnesota and Kentucky.With the implementation of the Affordable Care Act, con artists are playing on the misinformation about health insurance requirements, Quiggle says."Crooks are cold-calling people and saying the new law requires them to sign up for a new and non-existent national Obama care card," he says. "Then they ask the consumer for a Social Security number, bank number and credit card number to get registered -- all the tools needed to steal your identity and ruin you financially."

Business insurance fraud.Experts are seeing a trend of small businesses carrying out workers' compensation fraud, where they try to avoid paying fullstate-required workers compensation premiumsfor their employees. Workers' compensation fraud is especially prevalent in high-risk professions, such as contracting and construction.Sometimes the businesses claim fewer workers or classify workers under a different job title. High-risk jobs such as roofers, for example, are sometimes classified as desk clerks for the lower premiums, Quiggle says.In New York City alone, about 50,000 construction workers are paid off the books or misclassified as independent contractors, according to the Coalition Against Insurance Fraud. Nationwide, workers' compensation fraud adds up to $500 million each year, the Coalition reports.The number of employers involved in workers compensation fraud is difficult to track because states generally audit less than 2 percent of employers a year, according to the U.S. Government Accountability Office.

Reporting Stolen Property that Is Not StolenRenters insurance is a convenient way to protect your personal property if you are renting your home or apartment. The policy pays for damage or theft to any of your belongings while you are living on the premises. Rental insurance fraud can occur when the insured sells their possessions and later reports them stolen in order to collect fraudulent funds.

METHODS OF FRAUD DETECTIONInsurance companies have many ways to detect insurance scams, and most have full fraud detection departments tasked with both preventing scams and recouping money paid out for false claims.There are two main categories of insurance fraud: false or inflated claims, and a too-high risk to premiums ratio. The first is the major cause of insurance company losses but the second is more insidious. Insurance premiums are set based on the perceived risk of coverage to the insurer. When clients hide risk factors in the application process, they pay less in premiums than they should be. Here are four ways that insurance companies track down fraudsters.

Whistle-BlowersThe insurance industry relies heavily on reports of fraud from third parties. Most companies have "whistle-blowerlines" set up to take anonymous calls. Whistle-blowers are afforded legal protection against retaliation in many cases if they report their company's fraudulent insurance claims. Individuals can call hotlines to report what they know about the potential insurance scams. If the fraud is perpetrated against government insurance plans, such asMedicareor Medicaid, the whistle-blower is awarded a portion of the amount recovered.

AnalysisAnother method of detecting fraudulent claims and scams is through analysis of the claim compared to others. Claims for certain groups of insured risks tend to fall within a range. Any claims that are on the high side of the average are turned over to insurance investigators for further review and analysis. If a claim seems particularly high, the insurance company may require extra proof of loss or may inspect the situation in person.

Claims HistoryExamination of a client's history of making claims against an insurance policy can shed light on potentially fraudulent activity. Many insurance companies only allow a certain number of claims before the coverage is terminated, in order to protect the company against risk. If a client has filed claims for losses incurred in three home thefts in the past year, for example, the insurance company will examine the details surrounding the claims, and confer with police officers to determine whether the client is inflating the theft claims or even inventing the entire incident.

SurveillanceInsurance companies can also monitor clients directly. This is most common with health ordisability insuranceclaims, where the client is claiming injuries that prevent them from working. The client usually fills out a questionnaire when applying for benefits that asks to document daily activities that they can perform after the illness or accident. The insurance company will review the video surveillance tapes and compare them to the questionnaire. If it appears that the client has more mobility than the application would suggest, pay-outs will cease.

CAUSES OF INSURANCE FRAUDThe chief motive in all insurance crimes is financial profit. Insurance contracts provide both the insured and the insurer with opportunities for exploitation.According to the Coalition Against Insurance Fraud, the causes vary, but are usually centered on greed and holes in the fraud fight. Often, those who commit insurance fraud view it as a low-risk, lucrative enterprise. Drug dealers who have entered insurance fraud think its safer and more profitable than working street corners. Compared to other crimes, court sentences for insurance fraud can be lenient, so scammers may try to take advantage of the system. Though insurers try to fight fraud, some will pay suspicious claims, since settling such claims is often cheaper than legal action.Another reason that this opportunity arises is in the case of over-insurance, when the amount insured is greater than the actual value of the property insured. This condition can be very difficult to avoid, especially since an insurance provider might sometimes encourage it in order to obtain greater profits. This allows fraudsters to make profits by destroying their property because the payment they receive from their insurers is of greater value than the property they destroy. Insurance companies are also susceptible to fraud because false insurance claims can be made to appear like ordinary claims. This allows fraudsters to file claims for damages that never occurred, and so obtain payment with little or no initial cost.The most common form of insurance fraud is inflating of loss.

THE IMPACT OF INSURANCE FRAUDMany states have enacted victims rights laws that allow victims to make a statement in court either during a trial or at sentencing. All victims of insurance fraud are encouraged to take advantage of this opportunity to spread the word to judges, juries and others in the courtroom including the news media about the nature and severity of this crime. Below are facts and figures that can be woven into a personal statement of how fraud has affected you and/or your company.For a good example of a statement used in court,Insurance fraud is a major crime that imposes significant financial and personal costs on individuals, businesses, government and society as a whole. Fraud is widespread and growing. Insurance swindles victimize people from virtually every race, income, age, education level and region of the U.S.At one level, insurance fraud is an economic crime costing individuals, business and government billions of dollars a year. But fraud also is a violent crime that can involve murder, personal injury and serious property damage. Insurance fraud also imposes other personal costs such as disrupted lives and families, humiliation and depression, lost jobs and bankruptcy.Overall financial costNearly $80 billion in fraudulent claims are made annually in the U.S., the Coalition Against Insurance Fraud estimates. This figure includes all lines of insurance. Its also a conservative figure because much insurance fraud goes undetected and unreported.

Higher insurance premiumsFraud contributes to higher insurance premiums because insurance companies generally must pass the costs of bogus claims and of fighting fraud onto policyholders. This contributes to a premium spiral that can price essential insurance coverage, often required by state law, beyond the reach of many consumers and businesses. For example:

Auto insuranceFalse injury claims involving deliberately staged car accidents, for example, are a major reason auto insurance premiums in New York, Florida and New Jersey are among the nations highest.Workers compensationWorkers compensation premiums are rapidly rising rapidly, in part because of fake injury claims by employees and fraud by some employers to lower their premiums. Many smaller businesses, especially, report that workers compensation insurance is increasingly unaffordable. Rising cost of goods & servicesBusinesses must pass the cost of rising insurance premiums onto their customers by raising prices for goods and services. Many larger corporations also spend millions of dollars a year for investigation and fraud-prevention programs that aim. This cost also is reflected in higher prices of products and services.

Jeopardize health, lives and propertyPeoples health, lives and property are often endangered by insurance fraud schemes. Here are several examples:Staged auto accidentsInnocent motorists lives are jeopardized when they are maneuvered into car crashes staged by crime rings to collect large pay-outs from auto insurers. One family of three was burned to death when a staged accident went awry after their car was hit by two large trucks at high speeds on a California freeway.Murder for life insuranceA common life-insurance scheme involves murdering a spouse, relative or business associate to collect on the victims life insurance policy, which often is worth $100,000 or more.

Health insurance swindlesThe safety of people is jeopardized when they unknowingly buy fake health insurance. In addition to having their premium money stolen, policyholders needing chemotherapy and organ transplants have had to pay for life-saving medical treatment themselves when they discovered their insurance was fake. In other health schemes, medical providers often perform potentially dangerous and unneeded surgery on healthy people solely to increase their insurance billings. In many cases, the victims are elderly, poor and homeless.ArsonHomes and businesses often are burned down for insurance money. The lives of fire-fighters, family members and nearby residents also are placed at risk. Numerous people have died or been seriously injured in arson-for-profit fires. Also, the property damage is often magnified because arson fires frequently spread to nearby dwellings.

Lost personal income, savingsMany insurance fraud schemes steal money directly from policyholders. The varied schemes can cost people from a few dollars to their entire life savings. Here are several examples:Phony health coverageSeveral hundred thousand people, have unknowingly purchased phony health coverage. They lost the premium money they paid, but many also faced catastrophic losses when they became ill and had to pay large medical bills themselves because their policy was worthless. Some people incurred hundreds of thousands of dollars in personal debt.Fraudulent viaticalsThousands of people also have lost money to viaticals, a quasi-insurance product where people invest in the life-insurance policies of dying people. Viaticals can be legitimate, but many people have lost large investments in fraudulent viaticals. Some have lost their life savings.

Dishonest agentsDishonest insurance agents will pocket client insurance premium checks themselves, leaving the clients dangerously uncovered. Dishonest insurance agents also increase a policyholders premiums by secretly adding unwanted coverage to clients policies. Agents often target the elderly with these swindles. Ruined creditMany seriously ill people who purchased phony health insurance found their credit ruined when they couldnt pay large medical bills after their policy refused to pay. Lost jobsSome fraud schemes can cost people their jobs. Convicted swindler Martin Frankel gained control of a small life insurance company called Franklin American and secretly siphoned the companys assets into his own accounts. This sent the company into bankruptcy, costing hundreds of employees their jobs.

Diverts government resourcesFighting insurance fraud is a major expense for federal, state and local governments. This dilutes the nations overall anti-crime efforts by diverting often-limited government resources needed to fight other crimes. Here are several examples of this:State fraud bureausStates conduct extensive anti-fraud programs, funded by taxpayers and insurance companies.Police and other law enforcementState, local and federal law enforcement all are involved in investigating insurance-fraud cases, often jointly.ProsecutionsTaxpayer funded prosecutors devote considerable time and resources to pursuing fraud cases in court, many of which are complex and require extensive time to build viable cases.

Federal governmentThe federal government annually allocates several billion dollars to fighting fraud.Personal costsInsurance fraud also can impose large personal costs on its victims. Many victims feel embarrassed, humiliated and even violated. Often their lives and families also are disrupted for long periods of time. Many must recover from serious financial losses or fraud-related physical injuries. Victims also may have to recover or replace property that was stolen, damaged or destroyed by schemes. Many victims also must spend considerable assisting law enforcement and prosecutors as material witnesses.Diverts from essential servicesFederal and state government fraud-fighting efforts costs taxpayers billions of dollars a year, thus diverting scarce tax money from other essential public services.

FRAUD CLAIM TRIGGERSConsumerWith the increasing awareness of the insurance benefits, many policy holders have got involved in healthcare fraud. Consumer frauds mainly fall in three categories: claims fraud, application fraud, and eligibility fraud.

Claims Fraud: Consumer claim fraud occurs when a consumer makes an intentional misrepresentation in order to receive a benefit payment he is not entitled to for such claims can be categorised as:

(a) False claims: For instance, maternity claims which are not covered under the policy benefit and member is making a claim of hysterectomy with fabricated medical papers. Collusion with providers: Both provider and the member collude to submit a false claims where the physician receives the benefits from the false claims. Insurance speculation: An insured applies for several health insurance policies without revealing his/her other insurance coverage. Insured makes a claim from all insurance companies.

(b)Fraud rings: A group involving consumers, agents, physicians, provider, making a false claim

(c)Application Fraud: This is committed when material misrepresentations are made on an application for insurance with the intent to defraud. Application fraud differs from claim fraud in that the perpetrator is not seeking to illegitimately obtain a benefit payment-rather the perpetrator is seeking to illegitimately obtain health insurance coverage itself.

Here, an applicant denies serious medical condition at the time of taking the policy to obtain coverage that might have been denied or excluded from the scope of coverage or to avoid additional loading of premium. Another case is when the consumer is having pre-existing disease, but does not declare at the time of filing a claim. Also, in the case of corporate changing the joining date of the employee by passing an endorsement from the insurance company with falsified records.

(d)Eligibility Fraud:In such cases, the benefit is paid illegitimately because the beneficiary was not truly eligible to receive benefits because of non-disclosure from the insured. Eligibility fraud most commonly involves misrepresentations of the status of a dependent or of someone's employment status. For instance, a member submitting claim of his siblings/relatives/dependants, which are not covered under the policy. Or, a business's group health plan covers all full-time employees but not part-time workers. A part-time employee colludes with another employee in human services to falsify records so that it appears that he works full-time and is covered by the plan.Also, if insurance staff members, agents, TPA's and brokers create false documents and processing false claims against genuine member's records. And, stakeholders involved in unfair trade practices to clear non-payable claims.

NEW TRENDS, NEW DANGERDespite the encouraging progress, insurance fraud will remain one of largest and costliest crimes for years to come. Here are several trends:Troubled economyInsurance schemes tend to spread when the economy hits a downturn. People dump unwanted vehicles or torch their homes for insurance pay-outs. Dishonest businesses try to cheat their workers compensation insurers out of premium money. Fake insurers could sell bogus health and liability coverage to small businesses.Newer schemes are emergingInsurance schemes are fueling two rapidly spreading schemes illegal diversion of addictive prescription drugs, and medical identity theft.Large fraud ringsIncreasingly, organized criminal enterprises are entering insurance fraud. They know insurer payment systems well, and can loot insurers with large volumes of claims in short periods of time. Staged accident and health-fraud rings are especially active and spreading.Aging BoomersAs millions of Baby Boomers approach retirement, seniors will remain major targets of insurance swindles. Schemes in life insurance, long term care coverage, Medicare and others likely will continue spreading. And as more Boomers come to need increased medical care, health-insurance fraud likely will continue spreading as the nation's largest insurance crime.Immigrants vulnerableThe large and growing immigrant groups are frequent fraud targets. Con artists prey on immigrants' trust, lack of English skills and ignorance of how insurance works. Most immigrants are honest, but many also are recruited into fraud schemes themselves. Staged-accident and health-fraud rings, especially, promise quick cash payments for little effort.Fewer federal resources. The FBI has shifted resources to anti-terrorism efforts and uncovering crime involving the nation's financial meltdown. This has reduced federal resources for fighting rampant health-insurance fraud.State budget crises. Passing tough state fraud laws is becoming harder because many legislatures are focusing their limited resources on solving widespread budget crises in today's troubled economy.LOSSES DUE TO INSURANCE FRAUDIt is hard to determine the exact value for the amount of money stolen through insurance fraud. Insurance fraud is designed by fraudsters to be undetectable, unlike visible crimes such as robbery or murder. As such, the number of cases of insurance fraud that are detected is much lower than the number of acts that are actually committed. The best that can be done is to provide an estimate for the losses that insurers suffer due to insurance fraud. The Coalition Against Insurance Fraud estimates that in 2006 a total of about $80 billion was lost in the United States due to insurance fraud. According to estimates by the Insurance Information Institute, insurance fraud accounts for about 10 percent of the property/casualty insurance industrys incurred losses and loss adjustment expenses. The National Health Care Anti-Fraud Association estimates that 3% of the health care industrys expenditures in the United States are due to fraudulent activities, amounting to a cost of about $51 billion. Other estimates attribute as much as 10% of the total healthcare spending in the United States to fraudabout $115 billion annually. Another study of all types of fraud committed in the United States insurance institutions (property-and-casualty, business liability, healthcare, social security, etc.)put the true cost at 33% to 38% of the total cash flow through the system. This study resulted in the book title "The Trillion Dollar Insurance Crook" by J.E. Smith. In the United Kingdom, the Insurance Fraud Bureau estimates that the loss due to insurance fraud in the United Kingdom is about 1.5 billion ($3.08 billion), causing a 5% increase in insurance premiums. The Insurance Bureau of Canada estimates that personal injury fraud in Canada costs about C$500 million annually. India forensicCentre of Studies estimates that Insurance frauds in India costs about $6.25 billion annually.

ANTI-FRAUD PROGRAMSSeveral large insurance companies have joined forces through the National Health Care Anti-Fraud association to develop sophisticated computer systems to detect suspicious billing patterns. The Federal Bureau of Investigation (FBI) and the Office (OIG) each have assigned hundreds of special agents to health-fraud projects. The Coalition, a public advocacy and educational organization founded in 1993, includes consumers as well as government agencies and insurers. The Omnibus Consolidated Appropriation Act of 1997authorized a HealthCare Anti-Fraud, Waste, and Abuse Community Volunteer Demonstration Program to further reduce fraud and abuse in the Medicare and Medicaid programs. The program enrolled thousands of retired accountants, health professionals, investigators, teachers, and other community volunteers to help Medicare beneficiaries and others to detect and report fraud, waste, and abuse. The Inspector General's office has recovered over a billion dollars through fines and settlements. Its Operation Restore Trust, which began in 1995, was a joint federal-state program aimed at fraud, waste, and abuse inthreehigh-growthareasofMedicareandMedicaid:homehealthagencies, nursing homes, and durable medical equipment suppliers. The questionable activities included:Billing for advanced life support services when basic life support was provided. Documentation may be falsified to indicate a patient needed oxygen which a key indicator in establishing medical necessity for is advanced life support.Billing for larger amounts of drugs than are dispensed; or billing forbrand-namedrugswhenlessexpensivegenericversionsaredispensed.Billing for more miles thantravelled for transportation.Falsificationofdocumentationtosubstantiatetheneedforatransport from a hospital back to the patient's home. Medicare will only cover transport from hospital to home if the patient could not go by any other means.

Insurers Antifraud MeasuresInsurance companies are not law enforcement agencies. They can only identify suspicious claims, withhold payment where fraud is suspected and to justify their actions by collecting the necessary evidence to use in court.The success of the battle against insurance fraud therefore depends on two elements: the resources devoted by the insurance industry itself to detecting fraud and the level of priority assigned by legislators, regulators, law enforcement agencies and society as a whole to eradicating it. Many insurance companies have established special investigation units (SIUs) to help identify and investigate suspicious claims; some insurance companies outsource their units to other insurers. These units range from a small team, whose primary role is to train claim representatives to deal with the more routine kinds of fraud cases, to teams of trained investigators, including former law enforcement officers, attorneys, accountants and claim experts to thoroughly investigate fraudulent activities. More complex cases, involving large scale criminal operations or individuals that repeatedly stage accidents, may be turned over to the National Insurance Crime Bureau (NICB). This insurance industry-sponsored organization has special expertise in preparing fraud cases for trial and serves as a liaison between the insurance industry and law enforcement agencies. In addition, it publicizes the arrest and conviction of the perpetrators of insurance fraud to help deter future criminal activities. Insurance company surveys confirm that SIUs dramatically impact the bottom line of many insurance companies. In the mid insurers said that for every dollar they invested in antifraud efforts, including SIUs, they got up to $27 back, but these returns have become harder to achieve as the more apparent fraud schemes have been uncovered and more effort is necessary to ferret out the sophisticated fraud that remains. A 2000 study by Conning Research& Consulting suggests that results vary widely. Using the ratio of claims exposure reduction to the expense of running SIUs, the study found ratios ranging from a low of 3 to 1 to a high of 27 to 1, depending on the year and line of insurance. Although some insurers are cutting back on fraud investigation by outsourcing investigations and dissolving their fraud units, advances in software technology, especially programs that sift through the millionsof claims that large health insurers process annually, are proving effective in fighting fraud. These data mining programs can uncover repetitions and anomalies and analyze links to fraudulent activities or entities. The consolidation of insurance industry claims databases has put available new tool in the hands of investigators. The Insurance Services Office Inc.'s system, known as Claim Search, utilizes a data-mining program. Claim Search is the worlds largest comprehensive database of claims information. The NICB has developed a program called Predictive Knowledge that collects and analyzes information which can be disseminated to insurers and law enforcement agencies to detect, investigate and prevent insurance fraud. In addition, the NICB, in partnership with iMapData Inc., introduced CAT fraud, to identify potentially fraudulent catastrophe/weather-related insurance claims. A national fraud academy a joint initiative of the Property Casualty Association of America, the FBI, NICB and the International Association of Special Investigating Units was designed to fight insurance claims fraud by educating and training fraud investigators. It offers online classes under the leadership of the NICB. An emerging issue for insurers using data sharing services is their impact on privacy. Financial institutions, including insurers, must respect the privacy of their customers and protect their personal information, a practice that may deter efforts to combat fraud. Insurers may also file civil lawsuits under the federal Racketeering Influenced and Corrupt Organizations Act (RICO), which requires proving a preponderance of evidence rather than the stricter rules of evidence required in criminal actions and allows for triple damages. Since 1997,some of the largest insurers in the country, especially auto insurers, have been filing and winning lawsuits against individuals and organized rings that perpetrate insurance fraud.

Insurance Agent Fraud on the RiseTwo years ago, at the age of 90, Thomas Pickering was doing the twist. At the behest of his trusted insurance agent, Pickering was buying and selling one annuity after another in a deceitful industry practice called twisting." That's when dishonest agents persuade clients to cash in one investment for anotheragainst their clients' best interests and for the agents' own financial gain. In Pickering's case, he followed his agent's advice, sold investments before they matured and lost 11,000/- in forfeited interest and penalties. He was about to lose another 35,000/- cashing in one annuity to buy another, netting his agent 20,000/- in commissions. When the company holding the annuity intervened. It suspected Pickering was getting ripped off and called the authorities. An investigation led Florida's Department of Financial Services (DFS) to revoke agent Peter Waldon's license for fraud. Barry Lanier of Florida's DFS says he's fielding more complaints about greedy agents earning whopping commissions upfront by pitching unsuitable investments like annuities to older people. But Lanier and other experts say some annuities are not considered to be wise investments for older because they're based on life expectancy. Growing concern over the sale of annuities to older people prompted the National Association of Insurance Commissioners (NAIC) to adopt regulations that assure that the annuities are suitable to the buyer's needsDivision of Insurance FraudTheDivisionofInsuranceFraudwasoriginallyformedin1976toinvestigateonlyfraudulentautomobiletortclaims.Intheearlyyears, investigators had arrest powers but could not carry firearms. Today, the division investigates all types of insurance fraud crimes.Investigatorsareassignedtoworkgeneralfraudcases,workerscompensationfraud,medicalandhealth-carefraud,andagentand company fraud. Areas of assignment may include:Insolvency - Fraud committed by insurance companies that fail financially due to internal fraud by owners and corporate officers.Unauthorized Entities - fraud, both criminal and civil, committed by insurance companies operating illegally in the state.Health Care Fraud - focuses on organized medical and healthcare scams.WorkersCompensation-investigatesemployersforworkers compensation premium fraud.Public Employee Fraud - investigates state and local government employees for workers compensation claimantfraud.

Insurers respondAnti-fraud unitsMost insurers actively fight fraud with Special Investigation Units or SIUs. The investigators typically have strong law enforcement backgrounds, or come from elsewhere in an insurer such as the claims department.Anti-fraud softwareMany SIUs use sophisticated software to identify schemes, especially large and complex fraud rings. One of the most powerful programs, predictive analytics, even can forecast the likelihood of certain schemes happening in the future.Educate consumersInsurers educate consumers how to protect against being scammed. Insurers also often sponsor toll-free fraud hotlines accept tips through their websites.Train employeesMost insurers train employees such as adjusters and claims staff how to spot fraud.Sue swindlersSome insurers aggressively sue swindlers in civil court. These insurers seek to bankrupt the swindlers and send a strong message to other cheaters that cheating that insurer isn't worth the risk. Staged accident and health fraud rings are frequent targets.Sponsor national effortProperty-casualty insurers sponsor the National Insurance Crime Bureau (NICB), whose agents help investigate suspected schemes and refer the suspects for prosecution. NICB also runs a national consumer fraud hotline. Health insurers formed the National Health Care Anti-Fraud Association, which offers training and data for investigating fraud.Investigations recoupHealth insurers save more than $11 for every dollar spent fighting fraud, says the Health Insurance Association of America.

Insurance fraud prevention trust. The section shall have the powers necessary and convenient to carry out and effectuate the purposes and provisions of this article and the powers delegated by other laws, including, but not limited to, the power: (1) To employ administrative, professional, clerical and otherpersonnel as may be required and organize the staff as may be appropriate to effectuate the purposes of this article. (2) To initiate inquiries and conduct investigations when the section has reason to believe that insurance fraud may have been or is being committed. (3) To respond to notifications or complaints of suspected insurance fraud generated by State and local police, other law enforcement authorities, governmental units, including the Federal Government, and the general public. (4) To review notices and reports of insurance fraud submitted by authorized insurers, their employees and licensed insurance agents or producers and to select those incidents of suspected fraud as, in its judgment, require further investigation and undertake such investigation. (5) To conduct independent examination of insurance fraud, conduct studies to determine the extent of insurance fraud, deceit or intentional misrepresentation of any kind in the insurance process and publish information and reports on such examinations or studies. (6) To prosecute both on its own and in conjunction with other sections and divisions within the Office of Attorney General any incidents of insurance fraud involving more than one county of this Commonwealth or involving any county of this Commonwealth and another state disclosed by its investigations and to assemble evidence, prepare charges, bring charges or, upon request of any other prosecutorial authority, otherwise assist that prosecutor authority having jurisdiction over such incidents. (7) To report incidents of insurance fraud disclosed by its investigations to any other appropriate law enforcement, administrative, regulatory or licensing agency. (8) To pay over all civil and criminal fines and penalties collected for violations and acts subject to investigation and prosecution into the fund. (9) To undertake programs to investigate insurance fraud and to meet, at least on a quarterly basis, with the Insurance Fraud Prevention Authority.PROTECT YOURSELF: STAY ALERTYou can protect yourself against insurance scams: Stay alert, ask questions, and go slow or back out if an insurance transaction seems suspicious. Never sign blank insurance claim forms. Demand detailed bills for repair and medical services. Check closely for accuracy. Make sure "free services" aren't actually hidden in your insurance bill. Be wary of buying insurance from door-to-door or telephone sales people. Be suspicious if the price of insurance seems too low to be true. Contact your state insurance department to make sure the agent and company are licensed. Keep your insurance identification number secret; insurance crooks can steal it and involve you in scams. Be wary if a car suddenly pulls in front of you, forcing you to follow dangerously close. You may be set up for a staged accident. After an auto accident, be careful of strangers who offer you quick cash or urge you to see a specific medical clinic, doctor or attorney. They could be part of a fraud ring.

FIGHTING BACKInsurance companies respondFraud-busting unitsMost insurers have made fighting fraud a priority, more than tripling anti-fraud spending in recent years. Most insurers have created special fraud-busting units, often staffed by former detectives and police officers.

Educate consumersMany insurers actively educate consumers how to detect and protect against fraud, and often sponsor active fraudhotlinesso people can phone in tips.

Train employeesMost insurers train employees and alert insurance agents to spot fraud.Track down cheatersInsurers also sponsor the National Insurance Crime Bureau (NICB). The NICB is increasing the number of fraud convictions by gathering detailed data about suspected fraud crimes, and referring them for prosecution. The NICB also runs a national consumer fraud hotline.States increase pressure

More fraud bureausState insurance regulators have created 37 fraud bureaus in 45 states, whose job is to investigate and hunt down fraud.

Closer scrutiny of companiesState regulators have created a model law that makes it harder for con artists to set up fake insurance companies. Many states also are scrutinizing insurance company finances and market practices more closely.

Tougher fraud lawsIncreased crackdowns in the 1990s uncovered far more insurance fraud than anyone realized existed. To give prosecutors better legal tools to convict crooks, the Coalition Against Insurance Fraud developed a toughmodel state fraud law. Some 15 states have adopted or strengthened their insurance fraud laws based on the Coalition's model. Among other provisions, this model:- Creates state fraud bureaus that help hunt down fraud artists and build strong cases against them. Many fraud bureaus even have power to subpoena and fine crooks.- Requires insurance companies to develop thorough plans for preventing and detecting fraud.- Requires insurance applications and claim forms to warn that fraud is a serious crime.- Provides immunity to insurers when sharing fraud information with other insurers, investigators and law enforcement.

INSURANCE FRAUD: THE CRIME YOU PAY FORInsurance crooks are picking your pocket in order to line theirs. These thieves are committing insurance fraud, one of Americas largest criminal industries. Insurance fraud is a crime, and one way or another, honest consumers and businesses pay the price. Insurance fraud occurs every day and in every state. People of all races, incomes and ages are victimized. Insurance fraud costs Americans at least $80 billion a year, or nearly $950 for each family, the Coalition Against Insurance Fraud estimates. But look beyond the high dollar costs youll also see honest, hardworking Americans whose lives, businesses, careers and families are damaged or even ruined by insurance fraud crimes.1. People lose their savings:-Trusting citizens are bilked out of thousands of dollars, often their entire life savings, by insurance investment schemes. The elderly are especially vulnerable.2. Premiums stay high:-Auto and homeowner insurance prices stay high because insurance companies must pass the large costs of insurance fraud to policyholders.3. Consumer goods cost more:-Prices of goods at your department or grocery store keep rising when businesses pass higher costs of their health and commercial insurance onto customers.4. Honest businesses lose money:Businesses lose millions in income annually because fraud increases their costs for employee health coverage and business insurance.5. Innocent people are killed and maimed:People die from insurance schemes such as staged auto accidents and arson including children and entire families. People and even animals also are murdered for life insurance money.

CASE STUDIESSupreme Court of IndiaUnited India Insurance Co. Ltd vs Rajendra Singh & Ors on 14 March, 2000Author: ThomasBench: K.T. Thomas, Nd.P. MohapatraCASE NO.:Special Leave Petition (civil) 8479 of 1999PETITIONER:UNITED INDIA INSURANCE CO. LTD.Vs.RESPONDENT: RAJENDRA SINGH &ORS,DATE OF JUDGMENT: 14/03/2000BENCH:K.T. THOMAS & nD.P. MOHAPATRAJUDGMENT:THOMAS,J.Leave granted. If what the appellant-Insurance Company now says is true, then a rank fraud had been played by two claimants and wangled two separate Awards from aMotor Accident Claims Tribunal for a bulk sum. But neither the Tribunal nor the High Court ofAllahabad, before which the Insurance Company approached for annulling the awards, opened thedoor but expressed helplessness even to look into the matter and hence the Insurance Company hasfiled these appeals by Special leave.Fraud and justice never dwell together. (Frans et jus nunquam cohabitant) is a pristine maxim whichhas never lost its temper over all these centuries. Lord Denning observed in a language withoutequivocation that no judgment of a Court, no order of a Minister can be allowed to stand if it hasbeen obtained by fraud, for, fraud unravels everything( (Lazarus Estate Ltd. Vs. Beasley 1956(1) QB702.) For a High Court in India to say that it has no power even to consider the contention that theawards secured are the byproducts of stark fraud played on a Tribunal, the plenary power conferredon the High Court by the Constitution may become a mirage and peoples faith in the efficacy of theHigh Courts would corrode. We would have appreciated if the Tribunal or at least the High Courthad considered the plea and found them unsustainable on merits, if they are meritless. But when theCourts pre- empted the Insurance Company by slamming the doors against them, this Court has tostep in and salvage the situation. Facts are these: One Rajendra Singh and his son Sanjay Singh(first respondent in the respective appeals) filed two separate claim petitions before the MotorAccident Claims Tribunal, Bulandsahar (for short the Tribunal) in 1994 praying for awardingcompensation in respect of an accident which happened on 9.11.1993. The claimants put forth-identical averments regarding the accident which are in substance the following:Rajendra Singh, the father was travelling on the pillion of a two wheeler motorcycle which was thenridden by his son Sanjay Singh and an Ambassador Car (DL 2C-9793) driven by Jai Prakash collidedwith the motorcycle of the claimants and caused injuries to both of them. The ambassador car wasowned by the second respondent.Rajendera Singh made a claim for more than Rs. 4 lacs and Sanjay Singhs claim was even above that(Rs.5.5 lacs). As the ambassador car was, at the relevant time, covered by a policy of Insurance withthe appellant Company, the claimants made the appellant Company also a party in the claimproceedings before the Tribunal. Though the owner of the Car as well as the Insurance Companyresisted the claims on the premise that there was no negligence on the part of the driver of the Car,the Tribunal found the driver guilty of negligent driving. Hence, the owner was held vicariouslyliable for the damages payable to the injured claimants. Accordingly, two awards were passed on15.1.1998, one in favour of Rajendra Singh in a sum of Rs.3,55,000/- and the other in favour ofSanjay Singh in a sum of Rs. 1,52,000/-. Both the awards were to carry interest at the rate of 12%per annum from the date of claim. An interim order was passed already for covering no fault liabilityand we are told that the amount towards that had been paid by the appellant Company. The awards became final as neither the owner of the ambassador car nor the Insurance Companyfiled any appeal thereon. Thus far, there was no problem for the awardees. Hardly four monthselapsed after passing the awards, a gentleman visited the Divisional Office of the appellant Companyat Ghaziabad and delivered the photocopy of a report prepared by the Assistant Sub-Inspector of Police, Subzi Mandi, Police Station, Delhi on 9.11.1993 in which contained a narration that SanjaySingh and Rajendra Singh received the injuries in a different circumstance at a different placealtogether (i.e. while they were operating their own tractor, it jutted into a ditch and in the jerk theoccupants of the tractor slipped down and sustained injuries). The gentleman who delivered the saidreport to the company was prepared to disclose further details of the above accident only on acondition that his identity would be kept in anonymity.On receipt of the said information, the Divisional Office of the appellant Company made freneticinquiries and they came across statements attributed to the claimants and prepared by theSub-Inspector of Police, Subzi Mandi Police Station, Delhi, on 9.11.1993. Such statements containedthe narration that the injuries were sustained by Rajendra Singh and Sanjay Singh in the accidentwhich happened when the trailor trolly had slipped into the pit.Almost immediately after obtaining the above information, the appellant Insurance Companymoved the Tribunal with two petitions purportly under Section 151,152 and 153 of the Code of CivilProcedure in which the appellant prayed for recall of the awards dated 15.1.1998 on the revelation ofnew facts regarding the injuries sustained by the claimants. Those applications were resisted by theclaimants solely on the ground that the Tribunal has no power of review except to correct anyerrorin calculating the amount of compensation and hence the Tribunal cannot recall the awards. Itappears that the Tribunal accepted the said stand of the claimants and dismissed the application forrecalling the awards. It was in the above background that the appellant Insurance Company movedthe High Court of Allahabad with a Writ petition for quashing the awards as well as the steps takenpursuant thereto.Learned Single Judge of the Allahabad High Court who dismissed the Writ petition as per a shortorder passed by him stated thus:Heard learned counsel for the petitioner. The present Writ petition has been filed against the orderrejecting review application. There is no power of review in the Statute. Learned Counsel for thepetitioner argues that fraud has been played. It is a question of fact, for which writ jurisdiction is notthe proper forum. The petitioner may avail himself of such legal remedy as may be available to him.The writ petition is accordingly dismissed. There will be, however, no order as to costs.(Underlining supplied) Thus the Tribunal refused to open the door to the appellant Company as theHigh Court declined to exercise its writ jurisdiction which is almost plenary for which no statutoryconstrictions could possibly be imposed. If a party complaining of fraud having been practised onhim as well as on the court by another party resulting in a decree, cannot avail himself of the remedyof review or even the writ jurisdiction of the High Court, what else is the alternative remedy for him? Is he to surrender to the product of the fraud and thereby became a conduit to enrich the imposterunjustly? Learned Single Judge who indicated some other alternative remedy did not unfortunatelyspell out what is the other remedy which the appellant Insurance Company could pursue with.No one can possibly fault the Insurance Company for persistently pursuing the matter up to thiscourt because they are dealing with public money. If they have discovered that such public fund, in awhopping measure, would be knocked off fraudulently through a fake claim, there is full justificationfor the Insurance Company in approaching the Tribunal itself first. At any rate the High Court oughtnot have refused to consider their grievances. What is the legal remedy when a party to a judgmentor order of court later discovered that it was obtained by fraud?In S.P. Chengalvaraya Naidu (dead) by L.Rs. Vs. Jagnnath (dead) by Lrs. & ors. {1994 (1) SCC 1} thetwo Judges Bench of this Court held:Fraud avoids all judicial acts, ecclesiastical or temporal- observed Chief Justice Edward Coke ofEngland about three centuries ago. It is the settled proposition of law that a judgment or decreeobtained by playing fraud on the court is a nullity and non est in the eyes of law. Such ajudgment/decree- by the first court or by the highest court-has to be treated as a nullity by everycourt, whether superior or inferior. It can be challenged in any court even in collateral proceedingsIn Indian Bank Vs. Satyam fibres (India) Pvt. Ltd. {1996 (5) SCC 550} another two Judges bench,after making reference to a number of earlier decisions rendered by different High Courts in India,stated the legal position thus:Since fraud affects the solemnity, regularity and orderliness of the proceedings of the Court and alsoamounts to an abuse of the process of Court, the Courts have been held to have inherent power toset aside an order obtained by fraud practised upon that Court. Similarly, where the Court is misled by a party or the Court itself commits a mistake which prejudices a party, the Court has the inherentpower to recall its order.It is unrealistic to expect the appellant company to resist a claim at the first instance on the basis ofthe fraud because appellant company had at that stage no knowledge about the fraud allegedlyplayed by the claimants. If the Insurance Company comes to know of any dubious concoction havingbeen made with the sinister object of extracting a claim for compensation, and if by that time theaward was already passed, it would not be possible for the company to file a statutory appeal againstthe award. Not only because of bar of limitation to file the appeal but the consideration of the appealeven if the delay could be condoned, would be limited to the issues formulated from the pleadings made till then. Therefore, we have no doubt that the remedy to move for recalling the order on the basis of thenewly discovered facts amounting to fraud of high degree, cannot be foreclosed in such a situation.No court or tribunal can be regarded as powerless to recall its own order if it is convinced that theorder was wangled through fraud or misrepresentation of such a dimension as would affect the verybasis of the claim.The allegation made by the appellant Insurance Company, that claimants were not involved in theaccident which they described in the claim petitions, cannot be brushed aside without further probeinto the matter, for, the said allegation has not been specifically denied by the claimants when theywere called upon to file objections to the applications for recalling of the awards. Claimants thenconfined their resistance to the plea that the application for recall is not legally maintainable.Therefore, we strongly feel that the claim must be allowed to be resisted, on the ground of fraud nowalleged by the Insurance Company. If we fail to afford to the Insurance Company an opportunity tosubstantiate their contentions it might certainly lead to serious miscarriage of justice.In the result, we allow these appeals, set aside the impugned orders and quash the awards passed bythe Tribunal in favour of the claimants. We direct the Tribunal to consider the claims put forth bythe claimants afresh after affording a reasonable opportunity to the appellant Insurance Company tosubstantiate their allegations. Opportunity must be afforded to the claimants also to rebut theallegations.We make it clear that while disposing of the claims afresh the Tribunal shall not be trammeled byany of the observations, if any, made by us on the merits of the allegations.

CONCLUSIONInsurance fraud means many different things to different people, & therein lies one of the biggest challenges in measuring fraud. There is no universally understood definition of insurance fraud.Any monies that are received wrongfully through insurance fraud can be required to be repaid to the insurance company, along with penalties, at the conclusion of a trial for the insurance fraud activity. So not only will you be out the fines you are assessed, but you will have to repay the money that you received illegally by defrauding the insurance company. In extreme cases, this type of repayment can enter tens of thousands of dollars, depending on how much money was fraudulently received and what sanctions the court imposes on the perpetrator of the fraud.These fines vary depending on the severity of the crime, and they also vary from state to state, as most insurance fraud crimes are still considered to be state matters rather than federal matters. In any case, you will be liable for a large sum of money as a result of fines imposed due to an insurance fraud activity.

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