Do you have the tools to identify which of your customers are trying to defraud you?
Fraud was not evident when the loss was first reported to our insurance group. It appeared to be just another RLP (renter's liability protection) rear-end accident and claim involving a rental car. There was even a police report but something seemed amiss. The renter and driver lived very close to one of the occupants of the vehicle that was rear ended. A closer look revealed that the accident involved two rental cars, which were rented from different companies but within the same ZIP code.
The police report was quite thorough and listed five individuals in the car that was rear-ended and four individuals, not including the driver, in the insured rental. That made five potential claimants and 25/50 limits that were quickly disappearing in a morass of bodily injury claims. Liability was clear and somehow everyone had the same lawyer.
Upon further investigation, all nine potential claimants were guests of the state penitentiary system and had served prison sentences that overlapped. An educated guess was that they thought of this scheme in their spare time and executed their plan once they had finished paying their debt to society.
Thankfully, the "red flags" were identified and this claim was referred to our special investigation unit. The property damage was paid, but none of the nine potential injury claims were ever paid. If my staff had not been properly trained in fraud awareness and detection, $50,000 could have been paid out.
Insurance company claims departments are continually trained in fraud awareness and detection process. In California, every newly hired employee, regardless of function, has a one-hour mandatory fraud awareness and detection training.
Rental car agencies do not usually ask many detailed questions prior to renting a vehicle. Additionally, counter agents are always eager to sell extra liability insurance and any collision waiver coverage. Staged-accident rings like to use rental cars because they don't create paper trails tying particular vehicles to the claimants in the accident. Additionally, only some of the rental car insurers utilize the ISO ClaimSearch system - a master database of all property and casualty claims utilized by the majority of insurers - to track all accidents and claimants.
Hard vs. Soft Fraud
Insurance fraud can be classified as either hard fraud or soft fraud.
Hard fraud occurs when someone deliberately plans or invents a loss, such as a collision, auto theft, or fire, which is covered by his or her insurance policy in order to receive payment for damages. Criminal rings are sometimes involved in hard fraud schemes that can steal millions of dollars.
Soft fraud, which is far more common than hard fraud, is sometimes also referred to as opportunistic fraud. This type of fraud consists of policyholders exaggerating otherwise legitimate claims. For example, when involved in a collision an insured person might claim more damage than was really done to his or her car. Soft fraud can also occur when, while obtaining a new insurance policy, an individual misreports previous or existing conditions in order to obtain a lower premium on his or her insurance policy.
The main concern for rental car agencies is hard fraud. This usually takes the form of staged accidents or fake bodily injury claims. This also includes personal injury protection fraud, which not only includes the renter, passengers and claimants, but the treating doctors and lawyers representing these individuals.
The question then becomes, "How can the fraud be avoided?"