When disaster strikes, insurance companies immediately mobilize their catastrophic ("cat") teams to deal with the accompanying sudden increase in claims.The aim is to provide expedient customer service to policyholders who have been injured or who have lost property or loved ones-and rightfully deserve compensation from their insurance company.

The problem with processing claims quickly is: It invites unscrupulous people to take advantage of the situation by committing insurance fraud.

"We know that the number of questionable claims that come in after a disaster is a lot higher than normal," says Michael Erwin, spokesperson for the National Insurance Crime Bureau, Palos Hills, Ill. (Normally, fraud occurs in approximately 10% of claims, according to industry statistics.)

In the case of the World Trade Center-which could cost insurers an estimated $70 billion-instances of suspected fraud are just trickling in, industry sources say. "But it's coming. We know it's coming," according to Irwin.

At this point, insurance companies are paying claims upfront in deference to the tragedy, says James Quiggle, spokesperson for the Washington, D.C.-based Coalition Against Insurance Fraud.

However, investigators are compiling a large dossier of suspicious claims, he says. "And they will be returning to that dossier with greater attention once the dust settles."

Alert to red flags

In addition to fake death claims, the dossier that investigators are compiling contains the usual suspects: inflated claims for business interruption and property loss, nonexistent or exaggerated injuries for workers compensation, padded repair costs, phony auto claims and bogus contractor schemes.

Of course, claim adjusters and investigators working on Sept. 11-as in other disasters-are trained to notice "red flags" that could indicate fraud.

In addition, fraud detection technology has improved enormously, says Rick Worthington, director of the special investigations unit of Safeco Corp., Seattle.

For example, he says, people who commit fraud more than once develop a claim history, which can be tracked using an industry database.

Safeco uses the ISO ClaimSearch database, from Insurance Services Office Inc., Jersey City, N.J., along with ISO NetMap for Claims, a link analysis tool that enables insurance investigators to find patterns that could indicate fraud.

Travelers Insurance Co. uses high-tech tools to detect fraud as well. The Hartford, Conn.-based carrier's cat teams have access to those tools in fully equipped high-tech vans, which are dispatched to disaster sites as needed.

Each van contains generators, five workstations, photocopiers, fax machines, printers, onboard policyholder databases and multiple voice and data communications capabilities, including cell phones and satellite technology.

Travelers sent two of its four vans to New York within days of the Sept. 11 disaster. Policyholders can go to at the van to report a claim, and-depending on the complexity of the claim-can walk away with a check or debit card for their first payment within 45 minutes, says Raymond Stone, Travelers catastrophe manager.

A longer tail

Like other sources contacted for this article, Travelers so far reports few instances of suspected fraud associated with World Trade Center attacks.

Some attribute this anomaly to the speed with which New York mobilized its response team, as well as to the sharing of information among the governmental agents, insurance companies, the media and the general public.

But it's still early in the process. As of Nov. 6, 144 insurers reported 18,000 claims to the New York Department of Insurance, amounting to $8 billion in losses.

The Sept. 11 disaster has what investigators call a "long tail." With claims for extended living expenses, business interruption for companies that depended on those that were destroyed, and potential medical claims that could linger for years, "these are the types of claims we'll have around a bit longer than the typical wind storm or hail storm," Travelers' Stone notes.

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