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A Refresher on Workers' Compensation Claims-Related Fraud

Posted By Chris Prewit, Monday, February 26, 2018

By Samuel King, Vice President of Fraud Investigations, EMPLOYERS

In November 2017, Sam King, vice president of fraud investigations with EMPLOYERS (NYSE:EIG) presented a continuing education course to the Independent Insurance Agents of San Antonio on workers’ compensation insurance fraud. Following are key takeaways from the presentation and best practices for agents to help their clients start 2018 off strong and protect themselves from fraud.

What Are the Different Types of Fraud?

While most insurance claims are legitimate, studies indicate that 10 percent or more of all property/casualty insurance claims are fraudulent. In San Antonio, 1,624 workers’ compensation fraud cases were received by the Texas Department of Insurance in 2016. [1]

When it comes to workers’ compensation insurance, there are two different types of fraud that can directly impact businesses: “claim” related fraud and “policy” related fraud. Policy-related fraud occurs when either a policyholder or insurance agent misrepresents information about their business to obtain a workers’ compensation insurance policy or a policy at less than the appropriate cost. 

Claim-related fraud can be perpetrated by the claimant, a medical provider or vendor, or the policyholder during the workers’ compensation claim process. It frequently occurs when someone tries to gain a workers’ compensation insurance benefit by falsely stating that an injury or illness occurred at work, or by exaggerating an existing injury or illness.

While both types of fraud are serious crimes and can negatively impact the workers’ compensation system, more than one in 10 small-business owners are concerned an employee will commit claim-related fraud. [2]

Workers’ compensation claim-related fraud costs the workers’ compensation system billions of dollars every year and can lead to higher insurance costs for law-abiding businesses.

How Can Agents Help Policyholders?

By helping policyholders understand workers’ compensation claim-related fraud, including how to detect and prevent it, agents can provide a value-added service and ultimately strengthen their client relationships.

To educate policyholders, agents need to be aware of the warning signs of claim-related fraud, basic procedures for addressing it and the documentation required to report it to the proper authorities.

While there is no silver bullet when it comes to identifying claim-related workers’ compensation insurance fraud, there are patterns that can help spot fraud. Experience shows that when two or more of the following “red flags” are present in a workers’ compensation claim, there is a chance the claim may be fraudulent and the employer should notify the agent or carrier.

·        Monday morning (or start of shift) injury reports. The alleged injury occurs first thing on Monday morning, or the injury occurs late on Friday afternoon but is not reported until Monday.

·        Employment change. The reported accident occurs immediately before or after a strike, job termination, layoff, end of a big project, or the conclusion of seasonal work.

·        Suspicious providers. An employee’s medical providers or legal consultants have a history of handling suspicious claims, or the same doctors and lawyers are used by groups of claimants.

·        No witnesses. There are no witnesses to the accident and the employee’s own description does not logically support the cause of the injury.

·        Conflicting descriptions. The employee’s description of the accident conflicts with the medical history or injury report.

·        History of claims. The claimant has a history of suspicious or litigated claims.

·        Treatment is refused. The claimant refuses a diagnostic procedure to confirm the nature or extent of an injury.

·        Late reporting. The employee delays reporting the claim without a reasonable explanation.

·        Claimant is hard to reach. The claimant does not respond promptly to messages or claimant is hard to reach.

·        Changes. The claimant has a history of frequently changing physicians, addresses or jobs.

Suspicions of potential fraud should be reported immediately to the workers’ compensation insurance carrier or the Insurance Fraud Unit of the Texas Department of Insurance for further investigation. Policyholders should gather as much information as they can to support the claim, including identifying witnesses and misstatements. Additionally, they should get in touch with their workers’ compensation carrier’s claims department and special investigations unit or fraud investigation department so the carrier can begin investigating.

If the claim results in a criminal conviction, the insurance agent can help their client get the fraudulent claim, or the fraudulent portion of the claim, removed from the policyholder’s experience rating.

Workers’ compensation claim-related fraud can be a costly crime. By taking the time this year to remind policyholders of the “red flags” of workers’ compensation fraud and how to prevent it, agents can build a relationship with their clients and demonstrate the value they bring to the table.



[1] Texas Department of Insurance, Division of Workers’ Compensation Fraud Unit. Retrieved from: https://www.tdi.texas.gov/wc/smo/wcfraud.html

[2] EMPLOYERS, More than 1 in 10 Small Businesses are Concerned Their Employees Would Commit Workers’ Compensation Insurance Fraud, Study Finds. Retrieved from: https://blog.employers.com/EMPLOYERSBLOG/tabid/165/ArticleID/219/Default.aspx

 

Tags:  advice  best practices  fraud  Insurance  litigation  strategy 

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Bitcoin, Cryptocurrency and Blockchain

Posted By Chris Prewit, Tuesday, January 2, 2018

Article written by Robert Crosby, Executive Director of Independent Insurance Agents of San Antonio

Since this is the start of a new year, I wanted to write about something that has taken the nation and the world by storm. As I delved into the subject of Bitcoin, Cryptocurrency and Blockchain transactions, it became apparent became to me that there is a generational gap of understanding this new currency between the Millennials (Bulls) and Baby Boomers (Bears).

Let’s start with a history lesson.  Bitcoin is a new form of money, a digital currency created in 2008 during the financial crisis.  Blockchain is the tracking mechanism that facilitates any incoming and outgoing bitcoin transfers to and from any internet address at any given time.  During the financial crisis of 2008, people from all over the world felt its debilitating economic effect. As late as the end of 2016 and into 2017, many are still feeling the effects of the dwindling value of their fiat currency or the currency approved by a country’s government.   Satoshi Nakamoto, an unknown person or persons, created the bitcoin concept sometime in 2008.  A key component of bitcoin is decentralization. Decentralization allows us to cross currency barriers making us all a part of the bitcoin ecosystem.  This allows anyone, anywhere, to take part in transactions and contribute to it in our own way.  Rather than relying on a government, bank or middleman, bitcoin belongs to everyone in this “peer to peer” system, making all of us part of the bitcoin network. Bitcoin is driven by individual users and without individual users, there is no bitcoin. The more people that embrace bitcoin, the better it works.  Bitcoin needs an ever-expanding community actively using bitcoin as a payment method either buying goods and services with bitcoins or offering goods and services in exchange for bitcoin. Bitcoin can be used as an investment and traded like a commodity.

As I did a more in-depth analysis, I learned about some of the features and characteristics of bitcoin.   Bitcoin lets you exchange money in a different way than you would with a bank.  Bitcoin makes it possible to transfer value anywhere in the world via the internet in a very easy and quick way.  It allows you to control your money but it does come with great security concerns.  Bitcoin claims that it can provide very high levels of security if used correctly. Because of this, it is important for anyone interested in investing or utilizing bitcoin to take the time to inform yourself before using bitcoin for any transaction.  Bitcoin should be treated with the same care as your wallet, or even more so in same cases. Always remember that it is your responsibility to adapt good practices in order to protect your money. 

Bitcoin is treated as a commodity in the world market with the price of a single bitcoin unpredictably increasing or decreasing over a short period of time due to its young economy, novel nature and sometimes liquid markets. Consequently, keeping your savings with bitcoin is not recommended at this point.  Bitcoin should be seen like a high risk asset and you should never store money that you cannot afford to lose with bitcoin. If you do receive payment with bitcoin, many service providers can convert them to your local currency.

Here is a list of companies that accept Bitcoin. (Last updated on December 6, 2017)

Any transaction issued with bitcoin cannot be reversed.  A bitcoin transaction can only be refunded by the person receiving the funds. That means you should take care to do business with people and organizations that you trust, or that have an established reputation.

All bitcoin transactions are stored publicly and permanently on the network most commonly called a “blockchain."  Anyone can see the balance and transaction of any bitcoin address, however, the identity of the user behind an address remains unknown until information is revealed during a purchase or under some other circumstances.   For this reason, bitcoin transaction addresses should only be used once.  As mentioned before, always remember that it is your responsibility to adopt good practices in order to protect your privacy.

Bitcoin is an experimental new currency that is in active development. Each improvement makes bitcoin more appealing, but also reveals new challenges as the adoption of bitcoin grows.  During these growing pains you might encounter increased fees, slower confirmations, or other service issues. Be prepared for problems and consult a technical expert before making any major investments.   Keep in mind that nobody can predict the bitcoin future.

Bitcoin is not an official currency, but that having been said, most jurisdictions still require you to pay income, sales, payroll and capital gains taxes on anything of value including bitcoin. It is your responsibility to ensure that you adhere to tax and other legal or regulatory mandates issued by the U.S. government and local municipalities.

Next month we will be discussing a more in-depth analysis about “blockchain” and how it is used in the insurance industry.

A final commentary, investing or using bitcoin in commerce is a high risk adventure.   As with any investment, your appetite for risk will determine your willingness to jump into this new form of currency.  I have found that the millennials are willing to take the risk and have already been trading in bitcoin and blockchain.  The Baby Boomers are more conservative and are really struggling with the concept. Consequently, many have have no idea how it works. Whether you are a Millennial or a Boomer, just be careful what you wish for and research, research, research.

In just the last few days, the San Antonio Express News and MSN News have been writing warning articles about bitcoin. The Express-News reported that the Texas State Securities Board issued a cease and desist order this week against an overseas company selling investment contracts to mine bitcoin. For more information please review the December 29th issue of the Express-News. The article appeared in the Business Section, under the heading of “Texans warned about firm with ties to bitcoin”. MSN news reported on December 29, 2017, that we need to heed Warren Buffett’s warning: Bitcoin is pure FOMO” - the fear of missing out. Both of these articles are great reading regarding bitcoin.

This article references bitcoin.org multiple times.

Tags:  best practices  business  cryptocurrency  industry  Insurance  InsurTech  Technology 

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Business Risk Management in the Age of Increasing Workplace Violence

Posted By Chris Prewit, Monday, December 4, 2017

Article written by Robert Crosby, Executive Director of Independent Insurance Agents of San Antonio

It seems that every week we hear of another incident of violence in our society. Most recently, the shooting at the First Baptist Church in Sutherland Springs, Texas, reminded us that no place is safe from acts of violence. The frequency of these incidents seems to be increasing and the statistics are frightening and sobering.  

According to the Bureau of Labor Statistics, workplace violence is the second leading cause of death in the workplace. This can be one of the most frightening exposures for a company and just one incident can threaten the very survival of the company. The FBI reports that from 2000 and 2015 the number of annual active shooter incidents increased by 2000 percent. With these types of statistics, business owners must consider the ramifications of an incident in their place of business.  

According to CHUBB Insurance, there are several factors to consider when you are deciding whether or not to add workplace violence expense insurance coverage to your insurance portfolio. Expenses incurred in the aftermath of a workplace violence incident are often staggering and unforeseen. These expenses can include crisis management, independent security, employee counseling, public relations, and salaries for victim employees and for replacement employees, medical care, and rest & rehabilitation for employees.  

Additionally, loss of business income is a very real concern. Many business owners may believe that they have adequate insurance coverage with their General Liability insurance policy. However, Commercial General Liability may only respond if the business is considered legally liable for the incident. Business Interruption coverage will only respond if there is damage to your building. If you have to close your doors for a period of time while your staff recovers emotionally or physically, you may not be able to rely on Business Interruption coverage as a source of income replacement while your doors are shut. Workmen’s Compensation coverage very possibly will not cover a non-job-related injury in the workplace. The expenses to add temporary or new permanent employees is another non-covered expense.

Terrorism Coverage only covers events that generate at least $5 million in Property and Casualty losses and a terrorist attack certified by the U.S. Secretary of the Treasury, the Attorney General and the U.S. Secretary of Homeland Security. The September 11 attacks are the only incidents to date that meet those parameters. Most policies do not provide coverage event crisis response teams, victim counseling or funeral costs for employees, customers, visitors, and others.

Every business should consider assessing the risks that their specific type of business may have but there are certain businesses that have an increased risk of violence. Any company that deals with the public, exchanges money, delivers goods and services, works with unstable or violent persons, operates at night, or plans to reduce their workforce with layoffs or outsourcing of operations have an increased chance of a violent incident.  

There are policies in place through various carriers that provide for coverage in areas of third-party liability, crisis mental health specialists, independent forensic analysis's, funeral expenses, public relations, victim employees’ salaries and replacement employees’ salaries, informant rewards, risk assessment and response training and business interruption just to name a few.

A comprehensive risk assessment of your specific business is critical as coverages can vary widely.  Some policies have limitations depending on employee size, types of weapons and other incident specific particulars.

So where do you start? – take time to review your current coverages with your independent insurance agent and have your agent do a complete assessment of your company’s hiring and training practices, and workplace protection policies.

Recovery from any workplace violence incident is very difficult.  The better prepared a company is the more quickly the recovery process becomes and a return to normal operations is more successfully accomplished.

Tags:  advice  articles  best practices  business  Insurance  World Issues 

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TDI Issues Draft of Hail Litigation Report

Posted By Chris Prewit, Wednesday, November 2, 2016

An interesting article by Bill Kidd appeared in the latest issue of The Insurance Record


There is growing involvement from attorneys and public adjusters in the litigation of Texas hail damage claims. The Texas Department of Insurance (TDI) staff revealed their initial findings to the Senate Business and Commerce Committee on October 5, 2016.  Lt. Governor Dan Patrick has directed the committee to monitor “the number of lawsuits related to property claims filed as a result of multiple hailstorms and weather-related events across Texas”.  The committee was directed to examine “negative consumer trends that may result in market disruption such as higher premiums and deductibles, less coverage, non-renewals, and inability to insure coverage due to insurance carrier withdrawal from the state”.  The committee was to then make recommendations on legislative action that is needed. TDI issued a data call on May 20, 2016 to collect information on hailstorm residential property claims litigation with response due August 19, 2016.  Approximately 140 separate insurance companies submitted responses. The data highlighted the following information. Before 2012, known attorney or public adjuster representation “was about 0.4% (one in 250 claims)”. “After 2011, known attorney or PA representation was about 4 to 4.5 % (one in 22 to 25 claims), or an increase of about 10 times or 900%. The data also revealed that the rate of lawsuits increased.  Before 2012, the lawsuit rate was about 1.5 to 2% but after 2011, the lawsuit rate increased by 1,400%. The TDI warned that “the results should be considered preliminary.” The TDI’s results are based on 40,000 randomly sampled windstorm and hail claims.

 

The data also indicated a majority of claims with attorney or PA involvement are in South Texas. “South Texas accounts for 4% of all sampled windstorm and hail claims and about 53% of claims with known attorney or PA involvement” TDI reported.  Seven insurers stated that they “intentionally reduced, limited, or stopped writing policies in Texas as a direct result of increased claims litigation from weather related perils.”  Two of those companies also opted not to renew policies.  Counties affected include Hidalgo, Maverick, Potter, Randall and Webb. One company increased its minimum wind deductible for new business policies statewide. “Twelve companies stated that they have increased rates for residential lines of insurance as a direct result of claims litigation” TDI Reported. TDI plans to finalize its analysis before the 2017 legislative session.

Tags:  articles  blog  business  hail  industry  Insurance  litigation 

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What will Autonomous Cars mean for Insurance Companies?

Posted By Chris Prewit, Tuesday, August 30, 2016

Article originally written by James Bryant

 

What happens when driverless cars catch on? As much as $160 billion per year in insurance premium could vanish amid improved vehicle safety and reduced vehicle ownership.

While autonomous car technology is years away, driver-assist technology is here today and has already made an impact on the reduction of accidents and premiums.

There would be a shift from individual liability insurance premiums to the auto manufacturer and their suppliers who develop the software that drives these cars.

The car manufacturers would then accept the liability for accidents involving their driverless cars, which would mean the individual is only responsible for comprehensive and collision.  A 2015 report by KPMG estimated that the personal-auto insurance industry would contract 40% within 25 years.

Part of the erosion comes from direct completion from the automotive industry. Instead of competing with each other they should join forces to share data and other valuable information. For example, Toyota formed a joint venture with Aioi Nissay Dowa Insurance. The two companies are working together to develop insurance products based on driver behavior data.

In the driverless car future, there will have to be different actuary models that eliminate the human factor of driving a car.

There is time to figure all of this out according to KPMG. They expect a fully self-driving car to be widely available by 2025, however the Wall Street Journal quoted that we are still operating in an era of millions of recalls for the simplest of technology, such as ignition switches failure, floor mats and air bags. This paints a picture that is not so optimistic for the autonomous car.

Tags:  autonomous cars  autonomous driving  best practices  insurance  insurance articles 

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How Brexit will affect the insurance industry

Posted By Chris Prewit, Wednesday, June 29, 2016

An article written by Sara Tatelman, Associate Editor, Benefits Canada at Rogers Communications

This article is from The Canadian Insurance Broker

 

The numbers are in and the UK is out. A very small majority (51.2%) of Britons voted to leave the European Union in last Thursday’s Brexit vote, a decision certain to affect the insurance industry.

“There are likely to be a number of medium-term changes,” Steven Mendel, CEO of peer-to-peer insurer brought by many in London, told Top Broker. Also Lloyd’s chairman says Brexit will be “no regulatory nirvana.”

To begin with, premiums are likely to shoot up because “the last thing that any financial services company wants is uncertainty and there’s lots of that right now” Mendel says. After news of the Leave victory, for example, the pound plunged to a 30-year low. So to make up for the lack of currency certainty, premiums will climb.

“...The vote brings with it some short-term uncertainty, and for this reason investors are assuming higher risk premiums and hence lower prices,” Andreas Gruber, chief investment officer at Allianz, said in a release. Nevertheless, “we believe market disruption are short-term”

Mendel also points out some of the lower-cost insurers who do business in the UK are not domiciled there. After the UK leaves the EU, they will have to be, and the move may cause their pricing to permanently increase.

In total, Brexit puts 34,000 insurance jobs at risk. As for UK insurers-such as Bought by Many- that work in other parts of the EU, Mendel anticipates they will have to get regulatory permission from every other country in which they do business, which can be both lengthy and expensive process.

“The Lloyd’s & London Market and General Insurance Market make extensive use of passporting,”   Jonathan Howe, UK insurance at PwC in London, said in a release. “The loss of these rights could see insurers being forced to restructure and facing large operational, regulatory and tax costs as they adapt to such a change.”

Mendel doesn’t expect European insurers to withdraw from the UK just because of Brexit. The UK is, after all, Europe’s second largest insurance market, but it is highly competitive, especially for home and auto coverage. “But I think if the business is already looking a bit uncertain, this may be a good justification for it.”

German Insurer Allianz, for their part, remains “committed to the UK market.”

Brexit has awakened dangerous forces in the world economy. Furthermore, London may lose its prominence as a global financial hub. “Many non UK insurance companies from areas such as the USA and Asia currently use the UK as their European headquarters and as a gateway into Europe thought EU/EEA passporting, “Howe said “There is a real risk that these rights could be eliminated and insurers will be thinking about the best location for their bases in the future”

Michael Menhart, chief economist at Munich Re, agreed. While Brexit will affect insurance less than other industries, “London will lose influence as a financial center to hubs such as Singapore or New York, “he said in a statement, “and this will also affect insurers.”

 

Original Article: http://www.citopbroker.com/news/how-brexit-will-affect-the-insurance-industry-10641

Tags:  Brexit  Impact  Insurance  World Issues 

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