CALA Risk Management & Fraud Prevention in Claims Handling 4 — Questions and Answers
Question 1: A claimant presents a police report filed three days after the alleged accident. Why is the delay significant to a fraud investigation?
- Late reports are inadmissible as evidence in insurance proceedings
- It may suggest the claimant had time to stage evidence or recruit witnesses (Correct answer)
- It automatically triggers a reserved rights letter
- It voids the insured's cooperation clause obligations
Correct answer: It may suggest the claimant had time to stage evidence or recruit witnesses
A delayed police report may indicate the claimant used the time to set up a fraudulent narrative, recruit false witnesses, or stage supporting evidence.
Question 2: In risk management, what does 'loss trending' help an insurer accomplish?
- Identify individual claimant credibility
- Project future claim costs based on historical patterns (Correct answer)
- Determine at-fault party in multi-vehicle accidents
- Calculate depreciation on total-loss vehicles
Correct answer: Project future claim costs based on historical patterns
Loss trending uses historical claims data to project future loss costs, supporting accurate reserving and pricing decisions.
Question 3: Which type of fraud involves an attorney recruiting accident victims to treat with specific medical providers who over-bill for services?
- Swoop and squat
- Attorney runner/capper scheme (Correct answer)
- Insurer insolvency fraud
- Hard fraud ring operation
Correct answer: Attorney runner/capper scheme
Runner/capper schemes involve attorneys or their agents soliciting accident victims and directing them to cooperating medical providers who inflate treatment bills.
Question 4: An adjuster is reviewing an EUO transcript. The insured repeatedly contradicts details they gave in their recorded statement. This is BEST used as:
- Grounds for immediate policy cancellation
- Evidence of inconsistency supporting a fraud referral (Correct answer)
- Proof of coverage avoidance under misrepresentation
- Documentation to invoke the appraisal clause
Correct answer: Evidence of inconsistency supporting a fraud referral
Material inconsistencies between an EUO and a prior recorded statement are significant evidence supporting referral to the Special Investigations Unit.
Question 5: What is the key distinction between 'hard fraud' and 'soft fraud' in automotive claims?
- Hard fraud involves property damage; soft fraud involves bodily injury
- Hard fraud is premeditated; soft fraud involves exaggerating a legitimate claim (Correct answer)
- Hard fraud is committed by organized rings; soft fraud by individual policyholders only
- Hard fraud is a felony; soft fraud is always a civil matter
Correct answer: Hard fraud is premeditated; soft fraud involves exaggerating a legitimate claim
Hard fraud involves deliberately creating a false claim (e.g., staging an accident), while soft fraud involves exaggerating or embellishing an otherwise legitimate loss.
Question 6: A repair shop submits a supplement for 'corrosion removal' on a vehicle with a pre-loss rust condition. An adjuster should:
- Approve the supplement as part of a complete repair
- Deny the supplement as betterment is not covered
- Investigate whether the corrosion is pre-existing and not related to the covered loss (Correct answer)
- Refer the shop to the NICB immediately
Correct answer: Investigate whether the corrosion is pre-existing and not related to the covered loss
Pre-existing corrosion is not caused by the covered loss, so the adjuster must determine whether the supplement reflects loss-related damage or a pre-existing condition.
Question 7: Which analytical technique uses data mining to score individual claims by likelihood of fraud based on historical patterns?
- Predictive modeling / fraud scoring (Correct answer)
- Actuarial loss development
- Subrogation potential analysis
- Reserve adequacy testing
Correct answer: Predictive modeling / fraud scoring
Predictive modeling assigns fraud scores to incoming claims by comparing claim characteristics to known fraud patterns in historical data.
CALA Risk Management & Fraud Prevention in Claims Handling 4
A claimant presents a police report filed three days after the alleged accident.
Why is the delay significant to a fraud investigation?