Six ways to keep insurance snoops at bay

A popular 1994 song with the lyric “I always feel like somebody’s watching me” could apply to insurance consumers. In determining your rates and investigating claims, insurers regularly snoop into your background, your activities on Facebook and even your actions in public.

In most cases, the spying and prying are perfectly legal. But insurers sometimes go too far.

Some information about you – obtained through applications and questionnaires – enables insurers to build a profile that tells them which policies to sell and how much to charge. That can range from your occupation to your credit score to your education.

If an insurer suspects something fishy with your claim, it may enlist spies to dig deeper, perhaps even videotaping you doing yardwork or playing at a park with your kids.

Insurance investigators use a variety of methods to snoop into your background and activities.

For consumers who have legitimate insurance claims or simply don’t want their privacy invaded, here are six simple rules to follow:

1. Use caution when you’re out in public, even in your own backyard. Climbing a ladder when “injured” could cost you. Cell phone cameras are everywhere.

2. Think about what you post on the Internet. Patrick Tighe, an attorney in West Palm Beach, Fla., recommends “privatizing” your Facebook page to block unwanted visitors. “Once you put something up, Facebook owns your picture and your thoughts,” Tighe says.

3. Be wary of anyone you don’t know who befriends you – online or off-line. They may be seeking information that could harm your position in dealing with your insurance company.

4. Don’t provide any more information to insurers, opposing lawyers or investigators than absolutely necessary.

5. Don’t be left dangling. If an insurer doesn’t pay on a legitimate claim because it’s “still investigating” after several months, don’t be intimidated, says Robert Hunter, director of insurance at the Consumer Federation of America. If the insurer had the goods on you, it already would have turned over its evidence to authorities.

6. Watch what you say. Anything you utter about your case to a doctor, a co-worker or even a relative can be used against you.

An example of the “watch what you say” philosophy is heating contractor Joe Hannawacker of Ewing, N.J. Hannawacker had injured his back in the summer of 2008 and filed a workers’ compensation claim later that year.

But between the time of the work-related injury and the time he filed the claim, Hannawacker had been in the emergency room for a separate injury he suffered when he picked up his daughter and she accidentally kicked him. Hannawacker told the hospital emergency room staff what had happened.

When Hannawacker underwent his insurer’s medical exam, the insurance company’s sharp-eyed doctor had the emergency room report. “You can’t be that bad off,” Hannawacker says the physician told him. “It says here that you were ‘picking up your daughter!’”

When Hannawacker protested, the insurer’s doctor wrote in the insurance file that the heating contractor was “bitterly complaining.” Hannawacker says he ultimately won a settlement in the workers’ compensation case – two years after he was injured – but it didn’t cover his loss of income.

‘Bailout of last resort’

Virtually every major insurer of cars, homes and people maintains a special investigative unit that ferrets out information it can use to reduce or deny claims. Personal injury attorneys say many insurers hire former FBI agents who lean on their law enforcement contacts to dig up damaging information.

Investigators also have access to “claims indexing” services like Insurance Service Office in Jersey City, N.J. Insurance Service Office provides lists of claims that have been filed by the same person. For example, it will flag a chiropractor who has operated solely from a post office box and has handled 20 similar car accident cases. Credit checks allow investigators to determine whether someone had financial problems before filing a claim.

To back up the insurers, many states have adopted laws that make insurance fraud a special category of crime and, as such, have created their own insurance fraud divisions in the criminal justice system.

Still, the number of fraud cases increased during 2009 in all 15 categories tracked by fraud fighters, according to James Quiggle, a spokesman for the Coalition Against Insurance Fraud. “People’s pocketbooks have been hit hard by the recession,” he says, “and insurance is the bailout of last resort.”

Invasion of privacy OK in some cases

Insurance consumers should be careful about what they post on Facebook and elsewhere online, as that information can come back to haunt them.

As a result of fraud, insurers’ pocketbooks are being hit hard. Legal defense costs for the industry now exceed $255 billion, according to the latest statistics from the Insurance Information Institute. Therefore, companies that insure your car or home are given a fair amount of latitude in how they conduct investigations.

“Insurers have both the right and responsibility to combat fraud,” says Andrew Mais, a former spokesman for the New York State Department of Insurance, “and they often use surveillance to check on” the validity of insurance claims.

Even consumer advocates like Hunter, the Consumer Federation of America official, don’t deny insurers the right to poke around in your business.

“Invasion of privacy is OK under certain circumstances,” Hunter says, “but (cases of) outright fraud should be turned over to law enforcement.”

Still, that “invasion of privacy” sometimes goes too far.

Church snooping

In 2007, the Atlanta Journal-Constitution found out that one of the country’s largest auto insurance companies, Progressive, had hired private detectives to spy on people in church. Two of these people had sued Progressive and were part of a support group dealing with sensitive issues like abortion, sexual orientation and drug addiction. Progressive’s detectives taped the meetings to discredit the couple.

Progressive owned up to the snooping and issued an apology.

Such cases are not uncommon. However, insurance investigators can’t tap your phone, peer through your keyhole or go anywhere, like your bedroom, where you have an expectation of privacy, Quiggle says. But virtually anything you do in public is subject to snooping.

–Ed Leefeldt