Chapter 5 – Claims

The adjuster’s role

· Adjusters investigate, determine policy coverage, negotiate, adjust, and settle claims

· Adjuster – a person who on behalf of an insurer or an insured, for compensation, directly or indirectly solicits the right to negotiate the settlement of or investigate a loss or claim under a contract or a fidelity, surety or guaranty bond issued by an insurer or investigates, adjusts or settles any such loss or claim

· Independent adjusters are subject to provincial legislative requirements – they must be licensed to operate

· Generally staff adjusters, employees of insurance companies are not required to be licensed or certified

· Ongoing education and professional development improving personal skills and keeping current on business environment are important components to the growth process and awareness of fraud

Reporting of claims

· Claims are usually reported to a broker/agent or to the insurer directly

· Normally it is the insurer’s representative who decides whether a given claim requires an independent adjuster, investigative or other expertise and which individuals are best suited for the task

· Certain companies have Special Investigation Units to handle or to consult on questionable claims

Red flags common to all types of claims

· Questionable claims must be identified at the outset so that they can be more thoroughly investigated

· Red flags common to all claims; the insured or claimant:

o Presses too strongly for a quick settlement

o Seems too familiar w/ insurance terminology and the claims process

o Is experiencing financial problems in business or personally

o Is willing to accept a low settlement figure to avoid providing full documentation

o Called the broker just b4 the loss to confirm coverage

o Was separated or divorced shortly b4 the loss

o Submits a claim for very expensive items that do not correspond to the insured’s lifestyle or cash flow

· Fraudulent claims demonstrated certain patterns. They often occur:

o Just after policy inception

o After an increase in coverage

o Just b4 the policy expires

Claims investigation

· Exercising thoroughness by regularly verifying info provided reduces the possibility of fraud

· The more factual evidence gathered the more probably that a fraudulent claim will be identified

· Choosing the right adjuster and area of expertise is essential to optimizing claims handling

· Adjuster’s locale – established adjusters are well-known to professional in their community and this improves their chances of obtaining info and documentation efficiently

· Adjuster’s attitude – Adjusters must be objective. Some are better suited to deal w/ certain types of individuals

· The insurance act protect the insurer by permitting an investigation of a claim w/out prejudice to its rights to deny the claim

· When the possibility of a policy violation or exclusion arises, a non-waiver agreement permits the adjuster to maintain contact w/ the insured throughout the investigation w/out fear of creating an estoppel

· Should the insured refuse to sign the agreement, a reservation of rights letter should be sent instead

· Reservation of rights letter – a unilateral notice by the insurer asserting that it is preserving its options and waiving none of its rights. It does not bind the insured. It does not acknowledge coverage, making it difficult for the insured to allege waiver or invoke estoppel

· A blank proof of loss form must be provided to policyholders. It is not an admission that a policy is in force nor does it acknowledge that the loss falls w/in coverage

· All appropriate permission documents should be signed asap to release documents such as financial info, employment records, medical records, etc

Photographs

· Most adjusters carry cameras w/ them in order to photograph accident sites or damage areas

· Photos remind people of what the area looked like, show that no physical damage exists, demonstrate the general type and quality of contents, validate the existence of property and they tend to add weight to any physical evidence available

· Photos as evidence can also be used against an insurer – ie fraudulent photos (examples on page 6)

Interviewing techniques

· Interviews may be conducted in person or on the telephone

· Direct contact w/ the witness/claimant tends to produce more comprehensive information

· Adjusters conduct investigative interview – they do not interrogate

· Interrogations – an investigative interview where the known facts are matched to a particular suspect for the purpose of obtaining a confession

· A model interview system may include:

o Plan – prepare for any interview. Learn as much as possible b4 meeting. Prepare a checklist to cover all the areas that must be covered

o Listen – learn what happened from the person being interviewed. Allow the person to answer the question. Do not interrupt – listening is a skill. It is often the latter part of an interview that holds the most info as the person develops a comfort level

o Do not use threatening language or gestures

o Maintain composure – it is almost never appropriate to get upset. Sometimes a lie can be more useful than the truth when the credibility of a claimant/witness can be brought into question

o Ask one question at a time – Do not confuse the person by asking too many questions at once

o Evaluate body language – a person in distress shows it

o Ask for an explanation – if the answer is not clear

o Make notes – even if the interview is being taped. Show the person your notes after the interview. Permit the person to make any changes as long as the changes are initialed. This will make it difficult to them to change their story later

· To begin an interview ask simple, direct, non-threatening questions. At the outset the adjuster’s goal is to document the necessary background info and set the person at ease

· Open-ended questions should follow. The most important thing at this stage is to listen

· Remember a checklist is not a substitute for instinct and natural curiosity to dig for the facts. Be prepared to be flexible and think on your feet!

· Asking the right questions is an important component to effective communication

Statements

· Statements can provide a map to direct an investigation according to the account that emerges

· They are valuable and permanent record of an individual’s recollection at a time when the incident is still fresh in the mind of the statement giver

· It may be necessary to take more than one statement from an insured to clarify any inconsistencies in the info uncovered

· Statements are used as reference documents to refresh the memory of the statement giver

· They can also be used to damage the credibility of the statement giver should inconsistencies arise in testimony

· A person may refuse to sign a statement. Even if the statement is not signed it will still be useful and credible record of the discussion

· The interviewer should not seek to control but rather should only be a collector of info

· Statements can be recorded through a court reporter who uses shorthand or a transcribing machine. This is considered to be the most accurate type of statement as statements taken by an adjuster is generally tailored and trimmed to include only the points that the adjuster perceives as important

Examination under oath

· Many policies provide insurers w/ the right to conduct an examination of the insured under oath

· A sworn statement is a useful tool to emphasize the solemnity of the occasion and it also creates supporting documentation of a claim

· Once the claim has been denied, it is too late to invoke this right provided by the policy

Polygraph testing

· Courts have not accepted test results of a polygraph examination as evidence of lying

· Even researchers who believe the polygraph can reveal deception agree there can be a ‘false positive’ finding

· Submitting to a polygraph test is entirely voluntary

· Stages of the test:

o Pre-test interview

o Collection data

o Analysis of the data

· The polygraph apparatus does not determine that someone is lying – it is the polygraph examiner who analyzes results and renders an opinion as to whether or not answer are truthful

Experts

· Using experts on questionable claims may improve chances of fraud detection

· When specialized services are required or an expert is needed, care should be taken to choose:

o Properly qualified persons

o Reputable firms or individuals

o Stable operations or individuals

o Those who conduct operations to avoid any liability or criticism to be brought upon the insurer

o Firms who demonstrate that they value training and development in their field

· Types of experts:

o Origin and cause specialists

o Appraisers

o Electrical, mechanical, or chemical engineers

o Accident reconstruction specialists

o Investigative specialists

o Surveillance specialists

o Photographers

o Doctors

o Accountants

o Lawyers

· Forensic expert – experts who specialize in investigation that are likely to be connected to a judicial process. They must be prepared to appear in court as witnesses

· Forensic – used w/ or connected to a court of law

· After an expert has been hired and a report has been submitted, the report must be objectively examined

· Neutrality is an important element of any expert’s report

· To ensure that a useful analysis has occurred, the following questions might be appropriate:

o Was proper testing carried out?

o How soon after the loss was the scene of the accident inspected? What evidence might be affect4ed by not being under continuous custody?

o What effort was made to determine whether there were any changes to the scene since the loss?

o Was evidence properly handled?

Claim denials

· Just b/c a claim is suspicious does not mean that it is fraudulent

· An insurer normally makes a decision to deny coverage on the grounds of fraud only after a proof of loss has been submitted

· Even though an insured is guilty of insurance fraud, a claim might still have to be paid. Mortgagees collect on the policies to the extent of their interest

· Should a claim be paid and later discovered to have been fraudulent, insurers can apply to have claimants reimburse insurance money paid

· Restitution can be awarded in criminal court matters in certain circumstances but the insurer must make a formal request

· Civil actions can be instituted against those who have defrauded insurers and policyholders

Court testimony

· Not very many cases actually make it to trial

· The adjuster who must appear in court to testify should consider the following:

o Detailed notes make a well-prepared witness. Notes can job memories – they do not necessarily need to be read into court. It may also help to review notes w/ anyone else who investigated the scene

o Spend the appropriate amount of time looking through your notes and preparing them for easy reference when you present your evidence

o Focus on the points you want to make

o B4 entering the witness box take a number of deep breaths

o Make a conscious effort to speak slower than you normally do. You are likely to be nervous. This makes you increase your rate of speech which makes it difficult for anyone to follow you.

o Listen carefully to each question. Take your time and formulate a response

o If you are not sure of what is being asked, then say so – do not sue it as a tactic to slow things down

o Answer the question being asked. Be concise. Do not volunteer any extra info.

· When testifying to not be concerned about classifying evidence

· Allow your team of lawyers to protect you during the cross examination process

· Being too quick to answer may thwart any attempt for a team approach

Sample Review Questions - Fraud Awareness and Prevention

1. The basic functions of an adjuster are to investigate, determine policy coverage, negotiate, adjust, and settle claims.

2. The provincial insurance act define adjuster as:

A person who,

on behalf of an insurer or an insured, for compensation, directly or indirectly solicits the right to negotiate the settlement of or investigate a loss or claim under a contract or a fidelity, surety or guaranty bond issued by an insurer, or investigates, adjusts or settles any such loss or claim…

3. Independent adjusters must be licensed in order to operate legally.

4. Seven red flags common to all types of claims are: the insured/claimant,

a. Presses too strongly for a quick settlement

b. Seems too familiar w/ insurance terminology and the claims process

c. Is experiencing financial problems in business or personally

d. Is willing to accept a low settlement figure to avoid providing full documentation

e. Called the broker just b4 the loss to confirm coverage

f. Was separated or divorced shortly b4 the loss

g. Submits a claim for very expensive items that do not correspond to the insured’s lifestyle

5. Policy timing pattern that have been associated w/ fraudulent claims often occur:

a. Just after policy inception

b. After an increase in coverage

c. Just b4 the policy expires

6. Qualities that must be considered when choosing an adjuster are:

a. The attitude – must be objective

b. Adjuster’s locales – well-known to professionals in their community improves their changes of obtaining info an documentation efficiently

c. The right expertise and the right contacts may improve fraud detection and control

7. A non-waiver agreement provides protection to the insurer to investigate a claim w/out prejudicing its rights.

8. A typical non-waiver agreement identifies the parties (insurer and insured), the date of loss, the location and the types of claim.

9. Reservation of rights letter – a unilateral notice by the insurer asserting that it is preserving its options and waiving none of its rights. It does not bind the insured. It does not acknowledge coverage, making it difficult for the insured to allege waiver or invoke estoppel.

10. When the insurer provides a policyholder w/ a proof of loss form it is not admission that a policy is in force. Nor does it acknowledge that the loss falls w/in the policy coverage. A proof of loss form must be provided to policyholders as set out in the insurance act.

11. Financial records, employment records, or medical records all require the insured’s permission to authorize their release.

12. Photographs are important to investigations b/c they remind people of what the area looked like and they tend to add weight to any physical evidence available. They can provide a useful record that no physical damage existed in an area and also demonstrate the general type and quality of contents. They also validate the existence of property stolen or destroyed.

13. Interrogation – an investigative interview where the known facts are matched to a particular suspect for the purpose of obtaining a confession.

14. Eight useful points to remember about the interview process are:

a. Plan – prepare for any interview. Learn as much as possible b4 the meeting. Prepare a checklist to cover all the areas that must be covered.

b. Listen – lean about what happened from the person being interviewed. Allow the person to answer the question. It is often the latter part of an interview that holds the most info, as the person develops a comfort level.

c. Do not use threatening language or gestures

d. Maintain composure – it is almost never appropriate to get upset. Sometimes a lie can be more useful than the truth when the credibility of a claimant/witness can be brought into question.

e. Ask one question at a time – do not confuse the person being interviewed by asking too many questions.

f. Evaluate body language – a person in distress shows it.

g. Ask for an explanation – if the answer to a question is not clear.

h. Make notes – even if the interview is being taped. Permit the person to make any changes as long as the changes are initialed. This will make it difficult for them to change the story later.

15. When formulating questions in an interview the adjuster should consider the type of questions being asked. To being an interview the adjuster should ask simple, direct, non-threatening questions. Open-ended questions should follow. The adjuster must be prepared to be flexible and think on their feet. Asking the right questions is an important component of effective communication.

16. Statements are useful b/c they can provide a map to direct an investigation according to the account that emerges. They are a valuable and permanent record of an individual’s recollection of the incident. They are also used as reference documents to refresh the memory of the statement give much later. They can also be used to damage the credibility of the statement giver should inconsistencies arise in testimony.

17. If a claim is not paid w/in the mandated time period after submission of a proof of loss, the policyholder has the option to launch a lawsuit against the insurer.

18. The three stages of a polygraph test process are:

a. Pre-test interview

b. Collection of data

c. Analysis of the data

19. Polygraph testing is controversial b/c it can produce ‘false positive’ findings which means that a truthful person may be judged to be lying. Also some psychologists maintain that there is no specific ‘lie response’.

20. Factors to consider about the choice of an expert:

a. Properly qualified

b. Reputable firms or individuals

c. Stable operations or individuals

d. Those who conduct operations to avoid any liability or criticism to be brought upon the insurer

e. Firms who demonstrate that they value training and development in their field

21. Eight types of experts are:

a. Origin and cause specialists

b. Appraisers

c. Electrical, mechanical, or chemical engineers

d. Accident reconstruction specialists

e. Investigative specialists

f. Surveillance specialists

g. Photographers

h. Doctors

i. Accountants

j. Lawyers

22. Forensic – used w/ or connected to a court of law

23. Analyzing an expert’s report may include the following questions:

a. Was proper testing carried out?

b. How soon after the loss was the scene of the accident inspected? What evidence might be affected by not being there under continuous custody?

c. What effort was made to determine whether there were any changes to the scene since the loss?

d. Was evidence properly handled?

24. Eight points adjusters should consider when they appear in court as witnesses:

a. Detailed notes make a well-prepared witness. Notes can job memories. It may also help to review notes w/ anyone else who investigated the scene.

b. Spend the appropriate amount of time looking through your notes and preparing them for easy reference when you present your evidence.

c. Focus on the points you want to make

d. B4 entering the witness box take a number of deep breaths

e. Make a conscious effort to speak slower than you normally do. You are likely to be nervous. This makes you increase your rate of speech which makes it difficult for anyone to follow you.

f. Listen carefully to each question. Take your time and formulate a response

g. If you are not sure of what is being asked then say so – do not use it as a tactic to slow things down

h. Answer the question being asked. Be concise. Do not volunteer any extra info.

CIP Study Guide

Fraud Awareness and Prevention C39