Deborah Siehl
11-03-2003, 08:14 PM
I was invited to solve a case on Insurance Fraud to win a prize through a scholarship site. I have to research some info to help solve the case and thought I would share the results with all members.
This may be what some of you are looking to get into and you may find the information helpful.
I will post more as I find it.
PS. The case I am doing is considered a game to win, but all info reflects real life situations.
I hope you enjoy the information.
In focus | life 00000
Life 00000: old and new plotlines
Agents, insurers, clients and beneficiaries reach for the crass ring
By Henry Stimpson
In the1944 film Double Indemnity, Barbara Stanwyck seduces an insurance agent into murdering her husband for his life insurance money so she and the agent can live happily ever after. Nearly 60 years later, life 00000 remain a blend of such old-time classics plus perverse new plotlines involving phony viaticals, money laundering by drug rings, and Internet schemes.
"The more things change, the more they stay the same. There’s no limit to the permutations of life insurance fraud," says Victoria E. Fimea, senior counsel, with the American Council of Life Insurers.
Time Tested
Nobody knows exactly how much money fraud costs life insurers annually. But most experts agree, dishonest life agents, policyholders and beneficiaries have mined time-tested life schemes for years. The costliest ruses net hundreds of thousands of dollars at a time.
Stealing from clients or life companies is a common swindle by the small percentage of agents who are crooked. Typically they might divert money insurers pay out for the cash-surrender value of policies, or for payments on loans clients made against their policies. Agents might also file bogus life applications to pocket commissioners, or fail to forward refunds to policyholders who are owed premium refunds if they return new policies during the legal grace period. Some agents even open bank accounts in other people’s names so they can deposit diverted checks.
The stolen money usually finances the agent's vacations, luxury condos, drugs, gambling and other personal habits, or sometimes props up failing agencies. Two ruses are called "sliding" (secretly adding coverage the policyholder doesn't know about, usually involving less than $100 in premiums) and "twisting" (secretly replacing a policy with a more-expensive one.).
An agent was fired by his company but continued pocketing premiums. When 12 clients died, the shocked beneficiaries discovered the policies had been cancelled for nonpayment of premiums. A Pittsburgh agent took $194,000 of commissions on coverage his customers didn’t buy. He'd faked the applications. A Texas agent systematically stole $117,000 from two annuities owned by an elderly woman, officials charge. He allegedly made it appear he was helping the woman with estate planning by creating a living trust.
Fake and Real
On the flip side, faking deaths is a well-traveled way for policyholders and beneficiaries to bilk life agents and insurers. What swindlers need most is a death certificate. You simply fly to a Third World country, buy an inexpensive certificate from a counterfeiter or corrupt bureaucrat, and have your spouse tell your insurer you died in a fiery auto accident near a remote mountain village while on vacation or visiting relatives.
Some foreign traffickers even sell "death kits" containing a phony death certificate, fake newspaper obituary, video of a staged funeral, photo of a supposed gravesite, and other concocted "proof." Insurers often smell a rat when a policyholder suddenly die overseas, but often must bear the high cost of hiring private investigators who know that nation, its language, bureaucracy and criminal underworld well.
Crooks also stage elaborate phony deaths in the U.S. A Mississippi barge captain’s hat and wallet were found on deck recently. Clearly, he must've fallen off and drowned. But a tipster alerted the police, who found him alive and dry. His wife was part of the alleged plot to collect $1.1 million in benefits. It was the second recent arrest for phony death on a Mississippi barge. Some people simply murder the hapless policyholder – or hire thugs to do it. People kill their husbands, wives, business partners and best friends. One woman with serious gambling problems even suffocated her infant after taking out a $100,000 life policy on the child.
In a tragic wrinkle, two Alabama agents induced policyholders to kill themselves. Jimmie and Isom Turquitt bought about 100 life policies for alcoholics and drug addicts, naming themselves the beneficiaries. The Turquitts shipped the men to their farm for menial labor. The Turquitts fed the addicts little food, plying them with booze and drugs instead so they'd die quickly. Some did die, and the Turquitts collected $784,000 in death benefits before getting caught.
Internet insurance transactions are another potential hotbed of fraud. The medium's anonymity allows crooks to buy a policy using fake or stolen personal information, and make a bogus claim later.
Consumers also can be victimized by websites offering cut-rate "insurance" that doesn’t exist. "Deluxe policies at 70% off!" one website boasted.
Few Internet life 00000 have surfaced so far, however, but e-cons could spread quickly once crooks learn how to manipulate insurance transactions online.
New hotbed
Viaticals are one of the newer life 00000, often raking in tens of millions of dollars at a time, Fimea says. Though viaticals can be an honest and profitable investment, fully 40-50 percent of viaticated policies are fraudulently obtained, a Florida grand jury believes.
In a ruse called clean sheeting, terminally ill people fraudulently obtain policies by pretending they’re healthy (see July/August 2000 Fraud Focus).
Typically, the patients apply for a small policy (usually under $100,000) that doesn’t require a medical exam and lie about their health on the application. They sell the policy to a viatical firm, which securitizes the policies and offers them to unsuspecting investors – often trusting seniors.
One small insurer discovered it had issued 52 clean-sheeted policies worth $100,000 each.
Dishonest viatical firms are active partners in many of the largest schemes. Many times the viatical firm is a shell that offers investments in policies that don't exist.
In another clean-sheeting case, 11 men concealed their HIV infection, bought policies worth $9 million total, and each landed a $44,000-$55,000 profit.
The newest trend in viatical fraud is syndication. Here, a policy is sold to multiple investors – sometimes as many as 100 people. Often they investors are from foreign nations like Columbia and Thailand. The structure can be complex, including offshore trusts and escrows to throw off investigators.
Insurers also want state regulators to loosen the two-year contestability clause all states require for life policies. The clause says insurers can't rescind a policy after two years, even if the insurer finds the policy was purchased fraudulently.
Many illegally obtained policies are viaticated as soon as the two-year period ends, and insurers want regulators to let insurers rescind policies after two years if they discover a 0000. But regulators have proven unsympathetic so far, Fimea says.
Sidebar
Money laundering: Dirty in, clean out
Life insurance is an increasingly popular tool for laundering dirty drug cash and supporting terrorism.
"Insurance is vulnerable because there’s no central registry of transactions," ACLI’s Victoria Fimea says. "It’s attractive to money launderers."
Launderers take elaborate steps to cover their trail. Money laundering involves placement of the cash, layering (using layers of transactions to hide the origins) and integration (providing a legitimate explanation for the proceeds).
Investigators suspect drug money is being washed, for instance, when a viatical that’s bought by dozens of investors in drug havens such as Thailand and the Philippines.
But most laundering involves single-premium life policies and annuities, and occasionally lump-sum contributions to pension plans.
Typically, a customer comes into the agent’s office and pays cash for a single-premium policy. Annuities are perfect because there’s no underwriting. Cash payment may seem suspicious, but few agents turn down a paying customer.
During the "free look" period, the new policyholders tell the insurer they don't want the policy, and the insurer sends them a refund check. The money-launderer then deposits this squeaky-clean check, and no bank will question its legitimacy.
Agents sometimes are in cahoots. For instance, a British agent helped launder $1.5 million through single-premium policies, and in the process became the agency’s top producer.
Under the federal anti-terrorism Patriot Act passed in November, insurers and other financial firms must report suspicious transactions to the feds. The firms get full criminal immunity and can’t be sued. The Treasury Department hasn’t completed regulations for insurers but action is coming soon, Fimea believes.
This may be what some of you are looking to get into and you may find the information helpful.
I will post more as I find it.
PS. The case I am doing is considered a game to win, but all info reflects real life situations.
I hope you enjoy the information.
In focus | life 00000
Life 00000: old and new plotlines
Agents, insurers, clients and beneficiaries reach for the crass ring
By Henry Stimpson
In the1944 film Double Indemnity, Barbara Stanwyck seduces an insurance agent into murdering her husband for his life insurance money so she and the agent can live happily ever after. Nearly 60 years later, life 00000 remain a blend of such old-time classics plus perverse new plotlines involving phony viaticals, money laundering by drug rings, and Internet schemes.
"The more things change, the more they stay the same. There’s no limit to the permutations of life insurance fraud," says Victoria E. Fimea, senior counsel, with the American Council of Life Insurers.
Time Tested
Nobody knows exactly how much money fraud costs life insurers annually. But most experts agree, dishonest life agents, policyholders and beneficiaries have mined time-tested life schemes for years. The costliest ruses net hundreds of thousands of dollars at a time.
Stealing from clients or life companies is a common swindle by the small percentage of agents who are crooked. Typically they might divert money insurers pay out for the cash-surrender value of policies, or for payments on loans clients made against their policies. Agents might also file bogus life applications to pocket commissioners, or fail to forward refunds to policyholders who are owed premium refunds if they return new policies during the legal grace period. Some agents even open bank accounts in other people’s names so they can deposit diverted checks.
The stolen money usually finances the agent's vacations, luxury condos, drugs, gambling and other personal habits, or sometimes props up failing agencies. Two ruses are called "sliding" (secretly adding coverage the policyholder doesn't know about, usually involving less than $100 in premiums) and "twisting" (secretly replacing a policy with a more-expensive one.).
An agent was fired by his company but continued pocketing premiums. When 12 clients died, the shocked beneficiaries discovered the policies had been cancelled for nonpayment of premiums. A Pittsburgh agent took $194,000 of commissions on coverage his customers didn’t buy. He'd faked the applications. A Texas agent systematically stole $117,000 from two annuities owned by an elderly woman, officials charge. He allegedly made it appear he was helping the woman with estate planning by creating a living trust.
Fake and Real
On the flip side, faking deaths is a well-traveled way for policyholders and beneficiaries to bilk life agents and insurers. What swindlers need most is a death certificate. You simply fly to a Third World country, buy an inexpensive certificate from a counterfeiter or corrupt bureaucrat, and have your spouse tell your insurer you died in a fiery auto accident near a remote mountain village while on vacation or visiting relatives.
Some foreign traffickers even sell "death kits" containing a phony death certificate, fake newspaper obituary, video of a staged funeral, photo of a supposed gravesite, and other concocted "proof." Insurers often smell a rat when a policyholder suddenly die overseas, but often must bear the high cost of hiring private investigators who know that nation, its language, bureaucracy and criminal underworld well.
Crooks also stage elaborate phony deaths in the U.S. A Mississippi barge captain’s hat and wallet were found on deck recently. Clearly, he must've fallen off and drowned. But a tipster alerted the police, who found him alive and dry. His wife was part of the alleged plot to collect $1.1 million in benefits. It was the second recent arrest for phony death on a Mississippi barge. Some people simply murder the hapless policyholder – or hire thugs to do it. People kill their husbands, wives, business partners and best friends. One woman with serious gambling problems even suffocated her infant after taking out a $100,000 life policy on the child.
In a tragic wrinkle, two Alabama agents induced policyholders to kill themselves. Jimmie and Isom Turquitt bought about 100 life policies for alcoholics and drug addicts, naming themselves the beneficiaries. The Turquitts shipped the men to their farm for menial labor. The Turquitts fed the addicts little food, plying them with booze and drugs instead so they'd die quickly. Some did die, and the Turquitts collected $784,000 in death benefits before getting caught.
Internet insurance transactions are another potential hotbed of fraud. The medium's anonymity allows crooks to buy a policy using fake or stolen personal information, and make a bogus claim later.
Consumers also can be victimized by websites offering cut-rate "insurance" that doesn’t exist. "Deluxe policies at 70% off!" one website boasted.
Few Internet life 00000 have surfaced so far, however, but e-cons could spread quickly once crooks learn how to manipulate insurance transactions online.
New hotbed
Viaticals are one of the newer life 00000, often raking in tens of millions of dollars at a time, Fimea says. Though viaticals can be an honest and profitable investment, fully 40-50 percent of viaticated policies are fraudulently obtained, a Florida grand jury believes.
In a ruse called clean sheeting, terminally ill people fraudulently obtain policies by pretending they’re healthy (see July/August 2000 Fraud Focus).
Typically, the patients apply for a small policy (usually under $100,000) that doesn’t require a medical exam and lie about their health on the application. They sell the policy to a viatical firm, which securitizes the policies and offers them to unsuspecting investors – often trusting seniors.
One small insurer discovered it had issued 52 clean-sheeted policies worth $100,000 each.
Dishonest viatical firms are active partners in many of the largest schemes. Many times the viatical firm is a shell that offers investments in policies that don't exist.
In another clean-sheeting case, 11 men concealed their HIV infection, bought policies worth $9 million total, and each landed a $44,000-$55,000 profit.
The newest trend in viatical fraud is syndication. Here, a policy is sold to multiple investors – sometimes as many as 100 people. Often they investors are from foreign nations like Columbia and Thailand. The structure can be complex, including offshore trusts and escrows to throw off investigators.
Insurers also want state regulators to loosen the two-year contestability clause all states require for life policies. The clause says insurers can't rescind a policy after two years, even if the insurer finds the policy was purchased fraudulently.
Many illegally obtained policies are viaticated as soon as the two-year period ends, and insurers want regulators to let insurers rescind policies after two years if they discover a 0000. But regulators have proven unsympathetic so far, Fimea says.
Sidebar
Money laundering: Dirty in, clean out
Life insurance is an increasingly popular tool for laundering dirty drug cash and supporting terrorism.
"Insurance is vulnerable because there’s no central registry of transactions," ACLI’s Victoria Fimea says. "It’s attractive to money launderers."
Launderers take elaborate steps to cover their trail. Money laundering involves placement of the cash, layering (using layers of transactions to hide the origins) and integration (providing a legitimate explanation for the proceeds).
Investigators suspect drug money is being washed, for instance, when a viatical that’s bought by dozens of investors in drug havens such as Thailand and the Philippines.
But most laundering involves single-premium life policies and annuities, and occasionally lump-sum contributions to pension plans.
Typically, a customer comes into the agent’s office and pays cash for a single-premium policy. Annuities are perfect because there’s no underwriting. Cash payment may seem suspicious, but few agents turn down a paying customer.
During the "free look" period, the new policyholders tell the insurer they don't want the policy, and the insurer sends them a refund check. The money-launderer then deposits this squeaky-clean check, and no bank will question its legitimacy.
Agents sometimes are in cahoots. For instance, a British agent helped launder $1.5 million through single-premium policies, and in the process became the agency’s top producer.
Under the federal anti-terrorism Patriot Act passed in November, insurers and other financial firms must report suspicious transactions to the feds. The firms get full criminal immunity and can’t be sued. The Treasury Department hasn’t completed regulations for insurers but action is coming soon, Fimea believes.