Last year alone, insurance companies paid out more than 50 billion rubles to fraudsters in Russia alone. This amount represents 10% of all insurance payouts for 2016.
The favorite area of insurance fraudsters is auto insurance. Auto insurance payouts account for one-fifth of the total amount. This includes disputed situations where the insured tries to improperly increase the amount of compensation and there is no direct evidence.
Fraudulent payments for life, health, and property insurance account for one-tenth of the total amount.
But to prove in court the fact of insurance fraud can be proven only in 1% of cases. The insurers managed to get back only five billion rubles out of the paid fifty.
The insurance companies are sure that the number of fraudsters will grow. This is explained by the declining living standards of the population.
An analysis of insurance fraud in recent years shows that during the crisis the number of financial frauds increases.
The record number of fraud cases occurred in 1998 and 2008.
The increase in the number of insurance frauds forces insurers to include in the rate for the client the expected damage from fraud.
Causes of insurance fraud
Today’s situation, when insurance companies are forced to pay in dubious situations, and it is incredibly difficult to prove fraud in court, has its reasons:
The involvement of law enforcement officials in insurance fraud. In most cases, such fraud is associated with the falsification of documents.
The loyal attitude of most people is to receive an improper benefit. Some citizens simply do not trust insurance companies, while others do not see in such fraud anything wrong.
The Russian Union of Motor Insurers (RUA) conducted a survey which revealed that 30% of citizens believe that all insurance companies deceive their clients and therefore do not consider it a crime to overestimate the number of losses if they get it.
Auto liability insurance companies observe a picture of fraud in this area:
- A fourth of the incidents are related to the issuance of a CMTPL insurance policy after an insured event;
- A third of the frauds are related to staging an insured event (an accident);
- About 15% of fraudsters deliberately falsify facts related to the insured event (for example, that the driver was drunk or took drugs).
Fraudulent employees of insurance companies
More than half of all facts of insurance fraud in the Russian Federation are carried out with the help of employees of insurance organizations.
Even criminal communities can be formed, the basis of which is an unscrupulous employee of the insurance company, who decided to take advantage of his position to obtain illegal profits.
The security departments of insurance companies record such facts of fraud:
- Drawing up an insurance contract retroactively (after the insured situation);
- Intentional exaggeration of real damage to increase the number of insurance payments. In this case, the employee of the insurance company is entitled to a percentage of the compensation received;
- The collusion of an employee of an insurance company, workshop staff, and a client. In this case, the cost of repair work and spare parts requiring replacement is overestimated. The difference between the actual costs and the insurance compensation paid is divided between the three parties concerned;
- Misrepresentation of the facts of an insurance situation to obtain compensation;
- Distribution of forged insurance policies or blank contract forms.
Clients try to cheat their insurance organization with the help of:
- Arrangements with an expert who assesses the incurred damage and its causal relationship to the insured event. Usually, the expert is offered a financial reward for intentionally overstating the amount of damage and, therefore, compensation under the insurance contract;
- Forged insurance documents. For instance, a fake MTPL policy allows a car owner to avoid penalties from the traffic police during a document check. You will not be able to get insurance compensation by such policy, but you can save a lot on third party liability insurance;
- You can insure your life, health, or car with different insurers to receive compensation for a single incident several times;
- Staging a car theft. In this case, it is very difficult to prove insurance fraud.
Fraud involving third parties
Insurance fraud is often carried out by seemingly uninterested parties. Collaborators will be needed for such insurance scams:
- Staging an accident or other insurance incident. This type of fraud will require the assistance of police officers, medics, or firefighters. They will prepare false reports, medical certificates, extracts from non-existent medical history, expert evaluations to obtain insurance compensation.
- Concealment of circumstances about the insured event. Such fraud schemes can involve experts, police officers, doctors, ambulance workers, and false witnesses.
It should be noted that in real life, various insurance fraud schemes turn out to be interrelated.
Unraveling insurance scams it is possible to find out that customers of insurance companies, its employees, law enforcement officers, experts, and medical workers took part in it for profit.
Such organized crime in the insurance sector makes it very difficult to uncover the facts of fraud and is the reason for the growth of losses in the insurance business.
Examples of fraud in insurance
In the field of insurance, there are simply blatant cases of fraud. Five of the most sensational scams of recent years.
Kill for insurance
A group of swindlers from Volgograd tried to claim sixteen and a half million rubles in compensation from insurance companies.
The client had signed life insurance contracts for two and a half million rubles with six insurers, including such companies as “Renaissance Insurance”, “Alliance” and “RESO-Guarantee”.
Compensation payments under the insurance contract were due to his friends.
Two months later a man’s body was found near the river in the center of the city. His hands and feet had been cut off and his face was disfigured.
Friends of the insured confirmed that it was their companion, additionally informing police officers that the deceased liked to swim in the river.
By contacting their insurers, the friends were able to obtain compensation under an insurance contract from several companies.
The security departments of other insurance companies investigated the incident, and law enforcement officers were involved.
As a result of the investigation, a “dead” client was found; he, of course, turned out to be not only alive but also healthy. At the end of 2014, there was a trial, which sentenced the insured to three years in prison and his accomplices to two and a half years in prison.
A car that died twice
A car owner from Armavir signed a hull insurance contract with MAKS through an agent, and six months later he filed a theft report with the insurance company.
According to the client, his car was stolen from a restaurant in Armavir.
The amount of compensation under the car insurance contract was two million rubles.
The security service of the insurance company carried out an investigation, which revealed that more than a year ago (before the conclusion of an insurance contract with MAKS) the “stolen” car was badly damaged and could not be repaired.
It was also found out that the car body, keys, and documentation had been purchased by the insured from the previous owner.
After drawing up an insurance contract, the client sold the car body for scrap metal, receiving eight thousand rubles for it.
After the sale of the body, the client turned to the insurance company with a statement about the theft of the car.
Law enforcers terminated the investigation into the theft case and opened a new criminal proceeding charging the client under the articles providing for liability for insurance fraud and deliberately false notification of law enforcement officers of the offense committed.
Hiding the disease
A woman living in Krasnodar decided to cheat the VSK insurance company and receive compensation for twenty million rubles under the life and health insurance contract.
The resident of Krasnodar was diagnosed with a musculoskeletal system disorder.
This disease is chronic and is a direct indication of disability.
Instead of going to the VKK, the woman went to the bank, where she received a loan of twenty million rubles on falsified salary certificates.
After receiving the loan, the woman signed a life and health insurance contract with VSK, under which disability of the first or second group is an insured event, for which she is entitled to compensation payments.
The client did not notify the insurance company about the diagnosis of the disease that is the basis for the disability group.
After waiting four months, the client applied to the Medical and Social Expert Examination Office and had her disability formalized.
With the documents in hand, the client turned to the insurance company with a claim for compensation under the insurance contract.
VSK security service managed to establish that the client had been diagnosed before receiving the loan and signing the insurance contract.
During the trial, the woman was found guilty of attempted fraud and sentenced to three years of a suspended sentence.
Forging a house
And the residents of Volgograd invented a new method of fraud. They took out a home insurance contract with VSK for sixty-eight million rubles. Except that instead of real houses they insured dummies.
The fraudulent counterfeit homes were represented as residential buildings under construction with a total area of two thousand square meters. The non-existent houses were located in the countryside.
As evidence of construction costs, the swindlers submitted a package of fraudulent documentation to the insurance company, including invoices, construction contracts, and other financial documents.
A few months after the insurance contract was executed, the non-existent houses burned down, and the swindlers applied for insurance compensation. Such a fact aroused suspicion, and VSK security officers began an investigation.
They found out that the elite new buildings turned out to be dummies. It was not the mansion that was burnt, but the outbuildings without a foundation, roof, windows, and communications.
In conclusion of the insurance agreement the clients deliberately deceived the VSK employee, who had executed it.
Overstatement of the actual value of the insured property was necessary to increase compensation for its damage in case of an insured accident.
Revealing the fact of insurance fraud was a valid reason for the refusal of the insurance company to pay compensation to swindlers.
However, the swindlers did not want to settle the case amicably.
They filed a lawsuit demanding to collect from the insurance company the compensation due in the amount of sixty-eight million rubles.
The insurance company representatives managed to prove their case in court.
The police opened a criminal case for fraud on a, particularly large scale. A different criminal court already handed down a suspended sentence with probation for two years.
I took out travel insurance
An employee of a travel agency received compensation from the insurance company RESO-Guarantee for seven million rubles by falsifying an insured event. The woman took out a “no-departure” insurance contract.
It provides for compensation in the amount of the costs incurred to purchase the trip if it is impossible to leave for reasons beyond the client’s control.
The fraud scheme was simple: using her official position, the woman wrote insurance contracts for clients, information on whom was in the travel agency’s database.
Most people did not even suspect that they were the participants of insurance fraud.
The tour operator developed a whole fraud scheme: she falsified refusals of consulates to issue visas, financial documents for payment of vouchers.
Over several years the swindler contrived to receive insurance compensation on behalf of one hundred and fifty unsuspecting clients.
And her income from the fraud was seven million rubles.
After the opening of criminal proceedings and the presentation of charges, the former travel agent is on recognizance not to leave. The court decision on the case is not yet available.
And the fraudster “faces” up to ten years in prison.
Methods to combat insurance scams
All types of fraud can be divided into two categories: professional and amateur or domestic.
Methods of combating professional fraud are the prerogative of law enforcement and fall within the scope of operational activities.
Due to the standard “independent” methods, it is unlikely to disclose the scheme of professional fraud.
Such criminals act in groups with precise organization, having corrupt relations both among lawmen and judges. And the insurance company alone cannot resist such fraud.
But there will be no need for any special methods to fight domestic fraud.
The fight against amateur swindlers is the main task of the security service of the insurance company. And this fight is the prevention of illegal insurance payments and bringing to responsibility, including criminal responsibility, of guilty persons. The number of persons attempting to fraudulently obtain payments under insurance is very high.
This is due to the Russian mentality: most citizens do not consider it a crime to cheat the insurance, and some of them even brag about it on social networks.
Insurance companies, despite the competition for customers, combine their efforts and share methods of combating fraud.
For example, the participants of car insurance rallied under the leadership of RAMI (Russian Union of Auto Insurers).
Three years ago it launched the project “Bureau of Insurance Histories”, in which insurers cooperate on anti-fraud issues.
Another method of combating fraud is the initiative of the Union of Insurance Companies, according to which the Russian Ministry of Finance has prepared a draft amendment to the Russian Criminal Code.
It suggests adding an article stipulating criminal responsibility for committing fraud in the sphere of insurance services. Punishment for fraud is provided both for dishonest clients, and for employees of insurance companies.
We should also note the strengthening of anti-fraud methods and prevention of fraud by law enforcement.
If five years ago the police did not want to investigate knowingly losing the case in court, today the attitude of the court to the insurance swindlers is more stringent.
There is a solid court practice of punishing persons guilty of insurance fraud.
The method of combating internet fraud is simple. It consists blocking of Internet resources that offer to buy fake insurance policies.
During the last two months of this year alone the law enforcers managed to block three hundred such sites.
Despite the active counteraction to fraud and the introduction of new methods of struggle against it, many people want to get rich at the expense of insurance. Only the improvement of citizens’ legal culture and living standards can minimize the criminal activity of swindlers.