Future of SIU
by Gary Cline
What is the future of insurance companies special investigations units? That is a question that people working in the industry today are asking themselves and to be honest, I’m not sure SIU leadership knows what the future will look like. I have been in the industry for more than 20 years and to a large degree, business really hasn’t changed much. A claims associate gets a claim and if they think it is suspicious, a referral to SIU is made. What people think is suspicious and when they make referrals however does vary between insurance companies. So, my question is, if all companies must perform according to the various state insurance fraud laws, why is there such a difference in operations?
My experience is some SIU operations measure success simply by the numbers they put on a spreadsheet. Some operations feel the more referrals they receive, the more successful they look. Most businesses feel they must increase productivity on an annual basis in order to show they are being more profitable. An example would be, if I made 10,000 widgets and sold then in 2017, then I need to manufacture 12,000 widgets and sell them in 2018. This is what some SIU operations try to do each year, simply increase the number of referrals each year and we can say we are successful. The company is always setting the bar higher and measure their success at how closely they achieve or pass their goal. But is that really the best way to measure success in an SIU program? I don’t feel it is proper for an SIU program to constantly try to increase their numbers, (criminal investigations), just to satisfy a spreadsheet. Would it not be better to know the actual truth about how much fraud is being attempted, rather than pretending you are successful by simply increasing numbers any way you can? What I believe is the better method, is for companies to strive to identify the proper claims that need investigating and perform professional investigations that meet state statutes. This is certainly not easy to achieve, so many programs take the easy way out by just increasing numbers.
Nearly every state has an insurance fraud law that indicates insurance companies must identify suspicious claims and investigate them for potential fraud. After the investigation is completed, if there remains even a mere suspicion that fraud is possible, the claim must be referred to the proper state agency for further investigation. Simply put, our SIU operations are performing preliminary criminal investigations on potential insurance fraud. So, is it good customer service to recklessly require policyholders to endure a criminal investigation by SIU when there is no reasonable suspicion fraud exist in the claim? Furthermore, is it a good use of assets to require SIU investigators to spend time and resources investigating claims that do not rise to reasonable suspicion of potential fraud? At this point, most everyone will be in agreement that SIU should only investigate claims that have real fraud indicators, but what is a fraud indicator is where things vary widely throughout SIU programs.
I recall speaking with a senior Vice President of a smaller regional insurance company years ago and she indicated at her company every stolen vehicle claim went to SIU for investigation. At the time I lived in south Florida and I gave her a scenario of a real claim as an example of what I felt was a flaw in her thinking. In my example a young mother went to the grocery store in south Florida where the temperature was hot and humid, taking along her two small children. She purchased hundreds of dollars worth of groceries, much of which was frozen goods, and then found her car missing from the parking lot after she checked out of the grocery. As I tried to explain, it would be unusual for a young mother to fight with two small kids at the grocery store, spend hundreds of dollars on food that could go to waste while the mother waits on a police report and then try to find a ride home, all to submit a fraudulent stolen vehicle claim. Simply put, there were no fraud indicators in the claim. I felt the claims associate could easily identify potential fraud indicators, or show there are none, by obtaining the police report and taking a statement from the insured. However, the truth came out that this carrier was really more interested in having someone handle the claim than actually perform a fraud investigation. I’m not sure this type of program actually meets the state insurance fraud laws as they are written.
What I feel is even a worse example of failing to meet the fraud laws of investigating suspicious claims, is when a company chooses money over complying with the fraud laws. Is it proper for an insurance carrier to pay what they describe as nuisance payments to individuals who file claims that contain fraud indicators, but no fraud investigation has been performed? Some companies feel it is more profitable to make small payments, (I have seen several hundred dollars to more than $5,000), to someone so they will just go away. Many of these claims have fraud indicators, but a business decision is made where they feel it is more profitable to pay the people than to risk an investigation where it may cost the company more in a settlement. I’ll use the example here that I always gave my investigators when they thought they knew the answer without asking the question. If you can predict what will be said or what will happen that accurately, please tell me this week’s lottery numbers. Carriers that choose to operate under this method are not real partners to fighting fraud and I doubt they are complying with the state statutes concerning investigating insurance fraud.
One of the biggest problems I have seen with SIU programs is the lack of knowledge or training on what is the real purpose of the program as seen by claims leadership. If a program wants to maximize its effectiveness and profitability, everyone in the organization should be on the same page as to how the SIU program should work. Over the years I have seen claims leaders who want SIU to perform an investigation, knowing no fraud exists, but because the claim was confusing. We have even been asked to investigate just because of the high dollar value of a claim or because a crime was committed, but no fraud against the company. Some leaders think SIU is the insurance companies police department and have the same authorities as a police officer, which we don’t. Claims leaders often don’t understand why SIU should not be used to simply take photos, obtain police reports, or perform an interview on claims that have no indication of fraud. They view the investigator as a simple employee who is at their beck and call, not someone who is trying to perform criminal investigations as required by law. I also question in these instances if it is more profitable to use an investigator when other cheaper resources are available?
States have these fraud laws on the books for a reason and I suspect in the future insurance companies will be subject to following the laws more closely. State laws typically don’t care whether a company is profitable, but more interested in seeing that their voters are not taken advantage of through higher premiums or unfair trade practices. SIU leaders, and more importantly, senior leaders within each insurance carrier have a responsibility and an opportunity to better educate their employees on how to meet the insurance fraud laws, while at the same time working to be more profitable as an organization and keeping premium costs as low as possible. I believe most of these issues on how to use the SIU program can best be addressed by senior claims leaders understanding they don’t have all the answers concerning how fraud investigations should be performed. They should engage successful SIU leaders who have considerable knowledge of the fraud laws and who can assist in developing training programs that will be given to every employee within the company, regardless of rank, title or position, on a continual basis as to how the SIU program will be used. The goal of this training is to eliminate confusion on what duties SIU should be responsible for, ensure that each states fraud laws are being met, that the company as a whole is committed to preventing fraud and that every employee knows the importance of a good partnership with SIU.