Insurance Fraud Manual

1 Insurance Fraud . HANDBOOK. 2018 by the Association of Certified Fraud Examiners, Inc. Association of Certified Fraud Examiners, Certified Fraud Examiner, CFE, ACFE, CFE. Exam Prep Course, Fraud Magazine, Report to the Nations, the ACFE Seal, the ACFE Logo and related trademarks, names and logos are the property of the Association of Certified Fraud Examiners, Inc., and are registered and/or used in the and countries around the world. COURSE REVISION DATE: 12/22/18. No portion of this book may be reproduced or transmitted in any form or by any means electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system without the written permission of the Association of Certified Fraud Examiners, Inc.

2 The Gregor Building 716 West Avenue Austin, Texas 78701 USA. (800) 245-3321. + 1 (512) 478-9000. DISCLAIMERS: Every effort has been made to ensure that the contents of this publication are accurate and free from error. However, it is possible that errors exist, both typographical and in content. Therefore, the information provided herein should be used only as a guide and not as the only source of reference. The author, advisors, and publishers caution that this publication is not meant to provide legal advice.

3 The user should always consult with an attorney regarding the specific rules and regulations for your state or locality. Printed in the United States of America. Insurance Fraud HANDBOOK. TABLE OF CONTENTS. I. Insurance Fraud OVERVIEW. Introduction to Insurance Fraud .. 1. Insurance Fraud Schemes .. 2. Red Flags of Insurance Fraud .. 8. 11. II. ESTABLISHING AND MEASURING A NEW SPECIAL INVESTIGATION UNIT. Introduction .. 13. Measurement Systems in Place .. 15. Who Measures? .. 15. How Often Are Measurements Taken?

4 16. Calculating Savings .. 16. Factors in Measuring Performance .. 18. Additional Rating Factors .. 18. Expensing SIU Costs .. 19. Areas of SIU Responsibility .. 19. SIU Personnel 20. Technology Requirements .. 22. Data Mining and Link 24. Integrated Business Processes .. 25. Anti- Fraud Personnel .. 26. 26. III. THE POLICY: THE CONTRACT. Knowing the Policy and Its Language .. 31. The Policy as a Contract .. 32. First- and Third-Party Policies .. 34. Innocent Coinsured .. 35. Mortgages and Loss Payees .. 37.

5 IV. CONDUCTING THE EXAMINATION UNDER OATH. Effective Use of the Examination Under Oath .. 44. The Uses of an Examination Under Oath .. 46. Insurance Fraud Handbook i Insurance Fraud HANDBOOK. IV. CONDUCTING THE EXAMINATION UNDER OATH (CONT.). The Interplay of the Arson and Fraud Defenses in a Fire Claim .. 51. 54. V. THE Insurance INTERVIEW PROCESS. The Preliminary Statement of the Insured or Claimant .. 57. Statement Methods .. 59. Witness Statements .. 66. VI. INFORMATION GATHERING AND LEGAL ISSUES OF SHARING.

6 Immunity Reporting Acts .. 71. Public Records Laws .. 76. Reciprocal Information Exchange .. 78. Disclosure .. 78. Ethics and Insurance Fraud .. 82. Information Gathering .. 82. Domain Name 86. Historical Website Information .. 86. Secretary of State Records .. 86. City and County Business Licensing .. 87. Newspaper Searches .. 87. Professional Licensing .. 87. UCC Filings .. 87. Treat All Information Obtained as a Lead .. 87. 88. VII. CONDUCTING SURVEILLANCE. Methods of 90. Preparation .. 90. Techniques of Foot Surveillance.

7 91. Techniques of Vehicle 92. Fixed Surveillance .. 93. Satellite 94. Night Surveillance Equipment .. 94. Vendor Management .. 95. 100. ii Insurance Fraud Handbook Insurance Fraud HANDBOOK. VIII. EXPERT SELECTION PROCESS. Selection Process Steps .. 101. Fire and Explosions .. 104. From Theory to the Courtroom .. 106. Spoliation NFPA 921 Daubert Systematic Approach .. 108. Validation of Expert Opinions .. 112. Scientific Testing: What Can a Laboratory Contribute to the Case?.. 114. 115. Insurance Fraud Handbook iii Insurance Fraud HANDBOOK.

8 ABOUT THE AUTHOR. JAMES E. WHITAKER, CFE, CPP, PCI, CIFI. President The Whitaker Group, LLC. James E. Whitaker is president and founder of the Whitaker Group, LLC, an investigative services and risk management consultant group headquartered in Ohio. As a retired police detective division commander; FBI National Academy graduate; Special Investigations Unit (SIU) director and later a claims executive for a property and casualty Insurance carrier; and executive director for the International Association of Arson Investigators, he has dealt extensively with Insurance Fraud in its many forms since 1971.

9 He has a bachelor's degree in criminal justice administration and a master's degree in management (with an emphasis on organizational design), both attained from Myers University in Cleveland, Ohio. Mr. Whitaker has been a CFE since 1993 and is a Regent Emeritus as well as an adjunct faculty member for the ACFE. He has been a guest lecturer at ACFE Annual Conferences as well as ACFE Chapters in Cincinnati, Columbus, Cleveland, Pittsburgh, Philadelphia, Baltimore, and New Orleans. Mr. Whitaker is a Certified Insurance Fraud Investigator and serves on both the Investigation and Insurance Fraud Councils (co-chair) for ASIS International.

10 He also serves as an adjunct faculty member for ASIS on the PCI (Professional Certified Investigator) review course faculty. Mr. Whitaker is a frequent lecturer on the topic of Insurance Fraud across the United States and serves as a consultant to various Insurance companies on Fraud related issues, employee training, and ethics program development. Insurance Fraud Handbook v Insurance Fraud Overview I. Insurance Fraud OVERVIEW. Introduction to Insurance Fraud Aside from tax Fraud , Insurance Fraud is the most practiced Fraud in the world.