As if getting into auto accident weren’t stressful enough, victims need to be on the alert for elaborate auto insurance fraud schemes, such as staged crashes complete with fake passengers and fake injuries.
But there’s been a new wrinkle in how fraudsters are working the system to get insurance money: Scam artists are recruiting real passengers from real accidents to file fake claims. The biggest perpetrators of this type of insurance fraud are phony medical clinics in no-fault states, insurance fraud experts say. No-fault auto insurance, which covers everyone in a car accident regardless of who's at fault, is the law in 12 states.
Phoniness over the phone
The scheme works like this:
An insured motorist involved in a real car crash is solicited over the phone or at home by someone posing as a representative of the person’s auto insurance company. Even if the passenger wasn’t hurt, the “representative,” who actually works for a phony clinic, insists the person visit the clinic to be evaluated.
Scare tactics often are used; for instance, the victim is warned that he might be suffering from a hidden injury that will only get worse later, when it may be too late for coverage or treatment.
Even bribes are made to get the policyholder to cooperate. The solicitations can get intimidating or even aggressive, says Howard Goldblatt, director of government affairs for the nonprofit Coalition Against Insurance Fraud.
Once the person goes into the “clinic” and fills out paperwork, including his or her auto insurance information, the scam begins without the person’s knowledge. A doctor or health practitioner at the clinic may never even examine the patient, but an auto insurance claim gets filed anyway.
The scam operates in countless ways and often is carried out by real doctors or health care providers who may or may not know about the crime ring. The insurance fraud ring may be made up of criminals from various walks of life — from clerks to attorneys and doctors, says Linda Webb, president of Contego Services Group, which conducts investigations for insurance companies.
“Organized fraud rings will plant people in medical billing companies, hospitals, even police departments,” Webb says. “These jobs are an open field day to get data. Data, for fraudsters, is king.” Police reports are a major source of this data, such as names and addresses.
Crash reports: Gateway to crime
Crash reports are public records that easily can be obtained through local or state police departments. Some jurisdictions even sell these reports to generate revenue, a perfectly legal enterprise. Legitimate buyers of these reports include attorneys who represent accident victims, media outlets, insurance companies and victims' services organizations. Fraudsters access these reports by posing as a member of any of these organizations – or by simply buying the reports.
Names and addresses of car accident victims also can be harvested through the cooperation and involvement of unethical tow truck drivers, ambulance drivers or even investigating police officers, says Steven Weisman, a law professor at Bentley University in Massachusetts who authored "The Truth About Avoiding Scams."
Getting away with fraud
“It is often easy to get away with these frauds because of the lack of sufficient investigation into each accident, particularly if the payouts are kept ‘within reason,’” Weisman says. Additionally, insurance companies are under pressure to make payments quickly and may not have the time or resources needed to investigate every claim thoroughly.
Still, some auto insurance fraud rings are stopped. In May 2011, health practitioners at the Bethel Health and Rehab Center Inc. in Orlando, Fla., were arrested for not only recruiting participants for staged accidents, but also for coercing real accident victims into signing and faking treatment forms, and for faking treatment records of unsuspecting patients. Those involved in the fraud ring face up to 30 years in prison if convicted. In September 2011, a dozen people were charged in New York City as part of a scam that involved coaching legitimate auto accident victims into exaggerating their injuries.
States are becoming savvy to this type of fraud; in Texas, state legislators passed a law mandating that “runners” for clinics and attorneys cannot solicit a crash victim by phone or in person within 30 days of a crash. “We’re seeing interest by other jurisdictions to restrict that kind of access,” says Goldblatt, the Coalition Against Insurance Fraud official. Connecticut and Kentucky, for instance, have passed similar laws.
A victimless crime?
While accident victims are not robbed outright by this type of fraud, insurance companies are bilked. And you can be sure those costs are being passed onto auto insurance policyholders in the form of increased premiums, Goldblatt says. “Fraud costs insurance companies. It raises rates on consumers; it drains money from the economy, because it is a criminal act,” he says.
Florida, a no-fault state that is rife with this type of insurance fraud, is seeing insurance companies pay out more in claims than they receive in premiums, Goldblatt says, "and a good chunk of that is because of fraudulent claims.” According to the Insurance Information Institute, auto insurance fraud is estimated to cost the U.S. insurance industry $30 billion a year.
How to avoid being a scam victim
The easiest way to avoid being lured into one of these solicitation fraud schemes is to just say “no” when you get a phone call or someone rings your doorbell.
“If you didn’t request it, reject it,” says Frank Scafidi, a spokesman for the nonprofit National Insurance Crime Bureau.
“After you’ve had a car accident and someone drops out of the sky, knocks at your door or calls you on the phone to visit a medical clinic, or suggests you visit a mobile diagnostic testing service, send them away or hang up," Scafidi adds. "Don’t talk to them, because you’re being set up.”
Report the unwanted visit or phone call to your insurance company, Goldblatt says. And if you need to see a doctor for treatment after a car accident, visit your own family practitioner, not an unfamiliar medical clinic.