Insurance Insurance Fraud Detection & Prevention 2 ā Questions and Answers
Question 1: What is 'hard fraud' in insurance?
- Fraud that is especially difficult to detect due to complex documentation
- Deliberately planning and executing a false claim or loss event to collect insurance proceeds (Correct answer)
- Fraud committed by licensed insurance professionals rather than policyholders
- Overcharging premiums based on inaccurate risk classifications
Correct answer: Deliberately planning and executing a false claim or loss event to collect insurance proceeds
Hard fraud involves deliberately planning and committing a fraudulent act, such as intentionally burning a home or staging a theft, specifically to collect insurance money.
Question 2: What is the 'swoop and squat' technique in auto insurance fraud?
- A staged rear-end collision caused by one vehicle cutting in front of another and braking suddenly (Correct answer)
- A scheme where a fraudster impersonates an insurer and collects premiums
- A method of inflating repair costs by substituting cheaper parts
- A technique where claimants exaggerate soft-tissue injuries after minor fender-benders
Correct answer: A staged rear-end collision caused by one vehicle cutting in front of another and braking suddenly
In a swoop and squat scheme, one vehicle pulls in front of another and brakes suddenly, then occupants file fraudulent injury claims against the innocent rear driver's insurer.
Question 3: What is 'claim padding' in insurance fraud?
- Adding non-existent claimants to a legitimate insurance policy
- Inflating the value or extent of a genuine loss beyond what actually occurred (Correct answer)
- Filing duplicate claims with multiple insurers for the same loss
- Forging signatures on insurance claim documents
Correct answer: Inflating the value or extent of a genuine loss beyond what actually occurred
Claim padding involves inflating a real lossāsuch as listing additional stolen items that were not takenāto receive a larger settlement than actual damages warrant.
Question 4: What is the primary role of a Special Investigative Unit (SIU) within an insurance company?
- A team that sets premium rates based on actuarial data
- A department dedicated to identifying and investigating potentially fraudulent claims (Correct answer)
- A unit that handles regulatory compliance and agent licensing
- A group responsible for underwriting high-risk policies
Correct answer: A department dedicated to identifying and investigating potentially fraudulent claims
Special Investigative Units are dedicated teams within insurance companies tasked with identifying, investigating, and referring potentially fraudulent claims to law enforcement.
Question 5: Which of the following is NOT typically considered a red flag for workers' compensation fraud?
- An injury reported on a Monday morning with no witnesses
- A claimant observed performing physical activities inconsistent with the claimed injury
- An employee filing a claim within the first week of employment
- The treating physician is selected from the insurer's approved provider network (Correct answer)
Correct answer: The treating physician is selected from the insurer's approved provider network
Using a physician from the insurer's approved network is standard compliant practice, not a fraud indicator; the other options all suggest potential fabrication or exaggeration of a claim.
Question 6: What is 'premium fraud' in the context of insurance?
- Charging policyholders more than the filed rate for their coverage
- Providing false information on an application to obtain lower premiums or undeserved coverage (Correct answer)
- Failing to pay premiums on time while maintaining active coverage
- Switching policies frequently to avoid rate increases after claims
Correct answer: Providing false information on an application to obtain lower premiums or undeserved coverage
Premium fraud occurs when an applicant misrepresents informationāsuch as understating mileage or hiding prior accidentsāto obtain a lower premium or coverage they would not otherwise qualify for.
Question 7: Which database do multiple US insurers use to share claims history and detect patterns of fraudulent activity across companies?
- CLUE (Comprehensive Loss Underwriting Exchange) (Correct answer)
- NCCI (National Council on Compensation Insurance) database
- ISO (Insurance Services Office) risk registry
- FEMA flood zone mapping database
Correct answer: CLUE (Comprehensive Loss Underwriting Exchange)
CLUE is a claims history database maintained by LexisNexis that insurers use to share auto and property claim records, helping identify claimants with suspicious patterns across multiple companies.
Insurance Insurance Fraud Detection & Prevention 2
What is 'hard fraud' in insurance?