Insurance fraud continues to be an investigative priority for the FBI's Financial Crimes Section, due in large part to the insurance industry’s significant status in the
During Fiscal Year 2007, 209 cases investigated by the FBI resulted in 39 indictments and 47 convictions of insurance fraud criminals. Currently, the FBI is focusing a majority of its resources relating to insurance fraud on the following schemes:
Arson Fraud Related to Mortgage Industry Credit Crisis - Whether unable or unwilling to meet their mortgage obligations, it is believed that a number of distressed homeowners, property flippers, and/or other real estate investors have resorted to committing arson to avoid real estate foreclosure. The policyholders for these properties are then able to extract otherwise unattainable proceeds/profits through the filing of false insurance claims. This inherently dangerous and illicit means of collecting insurance proceeds and avoiding loan delinquency is being prioritized as a focus of inquiry due to market forecasts calling for increasing numbers of real estate foreclosures.
Hurricane Katrina Insurance Fraud - In late August 2005, Hurricane Katrina made landfall along America's Gulf Coast, severely damaging the region and causing approximately $100 billion in damages. According to the CAIF, Katrina generated approximately 1.6 million insurance claims totaling $34.4 billion in insured losses. The destruction caused by the storm resulted in a marked increase in insurance fraud in the area. Of the more than $80 billion government funds appropriated for reconstruction efforts in the region, it is estimated insurance fraud accounts for between $4 and $6 billion. The Insurance Fraud Task Force (IFTF) was created to investigate the spike in insurance fraud related to Katrina.
Insurance-Related Corporate Fraud - Although corporate fraud is not unique to any particular industry, and certainly not the number-one trend in the FBI’s open investigation files, there has been a recent trend involving insurance companies caught in the web of these schemes. The temptations for fraud within the corporate industry can be greater during periods of financial downturns. Insurance companies hold customer premiums which are forbidden from operational use by the company. However, when funding is needed, unscrupulous executives invade the premium accounts in order to pay corporate expenses. This leads to financial statement fraud because the company is required to "cover its tracks" to conceal the improper utilization of customer premium funds.
Premium Diversion/Unauthorized Entities - The most common type of fraud involves insurance agents and brokers diverting policyholder premiums for their own benefit. Additionally, there are a growing number of unauthorized and unregistered entities engaged in the sale of insurance-related products. As the insurance industry becomes open to foreign players, regulation becomes more difficult. Additionally, exponentially rising insurance costs in certain areas (i.e., terrorism insurance, directors'/officers' insurance, and corporations), increases the possibility for this type of fraud.
Viatical Settlement Fraud - A viatical settlement is a discounted, pre-death sale of an existing life insurance policy on the life of a person known to have a terminal condition. The parties to a viatical settlement include the insured party, insurance agent/broker, insurance company, viatical company/broker, and the investor. Viatical settlement fraud occurs when misrepresentations are made on the insurance policy applications, in effect, hiding the fact that the party applying for a policy has already been diagnosed with a terminal condition. On the investor end, the fraud occurs when misrepresentations are made to the investors by the viatical companies about life expectancies of insured parties and guaranteed high rates of return.
Workers Compensation Fraud - The Professional Employer Organization (PEO) industry operates chiefly to provide workers compensation insurance coverage to small businesses by pooling businesses together to obtain reasonable rates. Workers compensation insurance accounts for as much as 46% of a small business owners' general operating expenses. Due to this, small business owners have an incentive to shop workers compensation insurance on a regular basis. This has made it ripe for entities who purport to provide workers compensation insurance to enter the marketplace, offer reduced premium rates, and misappropriate funds without providing insurance. The focus of these investigations is on allegations that numerous entities within the PEO industry are selling unauthorized and non-admitted workers compensation coverage to businesses across the . This insurance fraud scheme has left injured and deceased victims without workers compensation coverage to pay their medical bills.
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