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Combating insurance fraud with forensic science.

TODAY'S CLAIMS PROFESSIONAL IS FACED with an incredible number of challenges. The world is highly dependent on science and technology, and the exponential growth of these disciplines makes life on this planet infinitely more complex. With every new gadget, product, piece of machinery and chemical substance, the probability of failure and abuse is sharply increased - and so is the probability of new claims, both real and fictitious.

It is no longer necessary to make a case that fraud is the most critical issue facing the insurance industry today. Yet, despite the staggering costs of fraud to both insurers and self-insureds, the discussion of insurance fraud has remained centered mostly on defining the problem rather than on finding solutions. What is needed is the articulation of viable approaches for uncovering and discrediting fraudulent claims.

One approach is the application of science and technology as a method of dealing with fraudulent claims. From DNA fingerprinting to computer analysis and simulation, modern technology provides the technical expert with an entire arsenal of sophisticated tools that can be used against insurance fraud. It is up to the risk managers and other claims professionals to recognize that these resources are available and to begin to utilize them.

The traditional professional training of adjusters, risk managers and attorneys does not include the information that is needed to understand the numerous technical issues surrounding the modern claims scene. Attempting to keep up with this ever-changing technology is like trying to drink water out of a fire hydrant. It is virtually impossible in this age of specialization for the nonscientist to develop the necessary familiarity with modern technology to discredit a fraudulent claim. In the areas of personal injury and products liability alone, there are hundreds of technical issues from toxic chemicals to ergonomics that require specialized knowledge in order to distinguish a valid claim from a fraudulent one.

In the midst of a recession, layoffs and budget cutbacks, the nsk manager is caught between the cry for cost-effectiveness on the one hand and the need to protect the organization against fraudulent claims on the other. Recent regulatory trends demanding faster disposition of claims further compound the problem.

Another challenge facing the modern claims professional is that the insurance industry has an image problem. Most consumers think of insurers as greedy monsters that cOmpile obscene profits at the expense of the public good. Because of this negative image, the deck is stacked in favor of those who are trying to defraud the insurance company. In addition, a cumbersome system of justice makes it more expensive to fight a claim than to settle it. Finally, insurance fraud is aided and abetted by unscrupulous attorneys and medical practitioners.


In a climate such as this, obtaining a defense verdict requires meticulous preparation and documentation. This often involves the use of sophisticated scientific methods and modern instrumentation. It should be obvious from the above that this is no job for amateurs. The claims professional will be well advised to seek the help of a forensic specialist. One would be hard-pressed to think of a case involving insurance fraud that did not require the intervention of a technical expert. The forensic application of modern science may offer the only hope of obtaining convincing evidence of fraud.

Having reviewed all pertinent documents, a forensic expert can help formulate a plan of attack that will ultimately expose a fraudulent claim. The implementation of the plan calls for the forensic expert to suggest additional technical experts, run a complete background check on the claimant, and uncover and expose inconsistencies in the various statements and documents.

A forensic expert should also help the claims professional with the discovery process by identifying critical data and documents that should be requested from the claimant or his or her attorney. The ability to decipher technical, medical or scientific reports or records, as well as verify the relevance and the accuracy of those documents, is another benefit.

A forensic expert can prove invaluable for selecting appropriate lab tests or other scientific procedures and instrumentation that can yield proof of fraud. Furthermore, forensic experts can aid in formulating an appropriate list of questions for deposing or cross-examining the opposition. Finally, the findings or testimony of the opposition's "experts" can be discredited by the forensic specialist who can point out errors, omissions or questionable conclusions and attack the validity or reliability of the methods used.

Taking this forensic science approach can also serve the purposes of establishing grounds for subrogation and/or comparative negligence and of alerting the carrier of potential problems with certain types of coverage that involve unacceptable risks. The latter will allow the insurance carrier to request that certain corrections be made before any future underwriting is considered and will alert the self-insured about potential problems.


Does this approach work? The answer is a resounding yes. There are numerous case histories that demonstrate the ability of technical experts to apply scientific principles and prove conclusively that a given case was fraudulent. For example, in the area of fraudulent claims for fictitious injuries from low-velocity vehicle collisions, accident reconstructionists have been able to determine, through a combination of seat belt analysis, occupant kinematics and computer-aided animation, that the claimed injuries were not consistent within the parameters of the accident. Sophisticated spectroscopic analysis of paint transfers has frequently been used to link or disprove alleged contact between two vehicles. The same techniques can be used to distinguish car paint from house paint, or even to pinpoint the year and make of a vehicle.

In the area of products liability, scientists have been able to discredit a number of fraudulent claims, including one for severe burns allegedly caused by the explosion and fire of a product that laboratory tests showed was not even flammable. Several fraudulent claims for alleged food poisoning have been put to rest, as well, with meticulous microbiological and chemical tests that conclusively proved these products contained no harmful substances.

Advanced metallurgical techniques have, in a number of cases, proved that the claimant's allegations about defective products were false. And an ultraviolet examination of stained carpets showed that the stains were the result of the claimant's attempt to remove spills with harsh detergents and not a manufacturing defect. Neither the claimant nor his attorney knew that these cleansers contain optical brighteners that fluoresce when exposed to ultraviolet light.

In another case where a substantial claim for broken teeth was made against a candy manufacturer because of alleged pieces of metal imbedded in the candy, scientists were able to conclusively demonstrate, by a combination of chemical analysis and microscopic examination, that the metallic substance that caused the broken teeth was a dislodged filling from the claimant's own mouth.

In the area of slips and falls claims, safety engineers have on numerous occasions discredited the claims by proving that the scene of the alleged fall was, in fact, safe and that the walking surface was slip resistant, as evidenced by measurements that showed a high coefficient of friction. False property damage claims are routinely discredited by structural and civil engineers. The findings of these experts also frequently uncover solid grounds for subrogation.

Also within the domain of forensic science, document experts have developed sophisticated techniques to unequivocally demonstrate forgeries and falsification of documents. Expert examination of molds has been used to discredit a number of fraudulent cases of dry rot, or damage due to flooding. Finally, a number of fraudulent health injury claims due to alleged toxic exposure have been discredited by a combination of advanced sampling and instrumental analysis techniques and a meticulous search of the toxicology literature.



It should be clear that anyone who attempts to prove fraud without the use of technical experts is fighting tigers with a slingshot. The work is too technical and sophisticated for a seat-of-the pants approach. Modern technology, however, can offer risk managers the resources they need to contain the enormous cost of fraud.

Combating fraud is a part of risk management goals and objectives that must be articulated as part of an overall strategic plan. Formulating such a strategic plan is primarily the responsibility of the risk manager, but it requires the participation and involvement of the organization's entire management team, including the legal department. It then becomes incumbent on senior management to review and approve the plan and provide the necessary funding and resources.

Once the plan is approved, the risk manager then assumes the role of the coach who directs the effort and acts as the liaison between the attorneys, the organization and the technical experts. In this respect, the risk manager's role is very much like that of a physician who orders a number of sophisticated tests, X-rays, cat scans, MRIs, etc., but relies on other technically competent people to actually perform these tests.

The risk manager should use attorneys and technical experts as resources but remain in charge so that the interests of the organization are protected and there is prudent and efficient use of funds. Furthermore, depending on the size of the organization, it may be advisable to consider allocating funds to the risk manager for the hiring of independent claims adjusters. This frees the hands of the risk manager to concentrate on his or her main charter - loss and injury prevention.


* Contact a reputable firm of forensic experts, preferably one that does not charge for initial consultation, and discuss the case. This discussion will enable one to decide whether or not a case is fraudulent and what type of an approach should be used. It will also allow the risk manager to determine the type of technical expert required to investigate the case as well as the appropriate technology that will be used to validate suspicions.

* Be sure the expert is technically competent and understands courtroom decorum and procedures, how to give depositions and how to communicate with individuals who are not technically literate.

* To expose fraud and win a defense verdict, avoid, at all costs, the "hired gun" syndrome. The expert must come across as an objective scientist who is interested only in the truth - not as a fan who is roofing for the home team. Watch out for experts who are willing to lie.

* For maximum effectiveness, retain the expert early on. Most technical experts are underutilized because someone waited until the last possible moment before retaining them.

* Be sure that the expert understands the totality of the case, and not just a portion of it. Make available as much information as possible to the expert.
COPYRIGHT 1992 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Kakis, Frederic J.
Publication:Risk Management
Date:Dec 1, 1992
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