Insurance scammers get more creative – the economy

The forest fire is spreading. A house is also burning not far from there. The owner wants to claim damages from his insurer. But the man is not a victim of a natural disaster, but wanted to take this opportunity to defraud his insurer. That’s why he set fire to his house himself. The attempt was foiled because the drone filmed a man doing it.

Andrew Enochs from Dutch fraud specialist Friss reports the case. Friss specializes in fraud detection for insurers around the world. Cases like the arsonist are common. “We all know that fraud is extremely common in the face of disasters,” says Enochs. The General Association of German Insurers (GDV) also warned in August 2020: “German insurers fear that the economic consequences of the corona pandemic will lead to more fraud attempts.”

Friss has now analyzed his data over the past two years to find out how the uncertain situation since the corona pandemic really affected insurance fraud attempts: Contrary to expectations, the percentage of fraud cases has actually decreased during the pandemic.

As governments around the world relaxed, the number of claims filed rose again. However, the number of cases of fraud and suspicion continues to decline – even to a level lower than before the pandemic. In 2020, 18 percent. claims were suspected of fraud, in 2022 only 16 percent.

Verification is more difficult in a home office

Friss has a very broad definition of the term cheat. Anyone who estimates the incorrect value of stolen items after a break-in, perhaps because they actually no longer had the number on hand, is already an insurance fraud. For years, the GDV has assumed a fraud rate of ten percent in Germany.

Friss sees two possible reasons for the move towards fewer fraud cases: either there have been fewer frauds since then, or the scammers are more skillful. The company is leaning towards the second possibility that insurers are more likely to fall victim to fraudsters. This is probably because companies have changed the way they operate. Investigation units were often relocated to a virtual environment where specialists worked from home.

Working from home does not help with a fraud investigation, as close personal exchange of experiences between seasoned experts is the first line of defense against fraudsters for many companies. Friss experts believe that practically suspicious cases can be handled faster and cheaper, but that teams may investigate cases less effectively. What is certain, however, is that the number of detected frauds has been relatively low for over two years. The move to the virtual world has been one of the biggest changes in fraud prevention in recent years.

At the same time, scammers are also evolving their methods. It was the same at the beginning of the crown pandemic. At that time, for example, the client tried to get the car interior cleaned from the insurer. Reason: the car has been infected with a virus.

According to Friss, three factors lead to someone becoming an impostor. One of them is chance. “Fraudsters always choose the path that offers the best opportunity and least risk,” the study reads. Other factors are the feeling that you are right and the pressure someone is under. For many, insurance fraud is not, or hardly ever, morally reprehensible.

The most common fraud attempts involve damage to cell phones, false or exaggerated burglary damage, and the misrepresentation of the facts that led to the damage. Some victims also like to increase the value of the insured items and hide previous damages.

Sometimes the cashier also helps with fraud

There are also unusual attempts to cheat. The classic are false deaths, mainly in life insurance. Friss reports on a gruesome stalking case in which a man took out funeral insurance for his ex-wife. And again and again: insurance brokers cheat themselves or help clients cheat because they hope it will give them better opportunities to sell more contracts.

Friss reports several instances where people deliberately harm themselves “by cutting off a finger, for example” in order to pursue claims against insurers.

The criminal energy is huge: a US court recently sentenced a 34-year-old to five years in prison for identity theft and insurance fraud. A man under a fake name stole nearly half a million dollars while applying for unemployment insurance and additional benefits from the Covid 19 assistance program in three different states. He had money in prepaid cards and flew to California to cash out his loot in a week. Authorities, including the Secret Service, conducted the investigation for two years until they managed to confront the man.

The pandemic has given fraudsters a chance to try out new strategies on digital channels. Researchers at the University of Portsmouth found that Corona-related cyber-fraud increased by 400 percent. Friss analysts concluded that this meant that scammers could change their orientation and become more adept at their actions.

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