Monthly Archives: April 2009

Fraud Opportunities Rise

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“Does a bad economy increase crime?  Analysts have debated that question for years, according to Mike McKee, senior special agent for the National Insurance Crime Bureau.  While it’s too soon for statistics to confirm whether recent events like the mortgage meltdown and an increase in unemployment truly lead consumers to commit more crimes, McKee said at least anecdotally the economic recession is affecting insurance fraud.”

 

Different types of fraud and the opportunity to commit fraud has taken a toll on all lines of the insurance business according to fraud bureaus. 

 

Commercial insurance is being hit with the rise in theft of cargo as electronics and other equipment are taken right off the trucks.  Circuit breakers are being ripped out and copper wiring is increasingly stolen from commercial buildings.  

 

An increase in vehicle giveups has been reported when owners dispose of a vehicle and then claim that their vehicle has been stolen.  Then the owner collects the insurance money and often makes a profit.  Employees of car dealerships are sometimes involved in the theft and/or burning of the vehicle.  And in turn, the owner may purchase a new vehicle as payoff for the help of the dealership employee. 

 

Workers’ Compensation and health insurance carriers have noticed that people are staying out of work longer and claiming more injuries.  Instead of a hurt arm, now it is an arm and a leg, or back and a shoulder.  The most attention-grabbing trend is employees extending their claim.   In one case, for example, an employee injured his toe, which led to not being able to sleep, then led to sexual dysfunction.   As a result, he had to have sleep and sex therapy along with treatment for the injured toe. 

 

The loss or disappearance of classic cars and jewelry has risen.  Arson of both homes and vehicles has also increased.  Consumers are burning their homes hoping for an insurance bailout.  Others are claiming smoke and ash cleanup from wildfires to get insurance payoffs. 

 

Another major inclination is in medical identity theft and provider fraud.  In this situation, a person’s identity along with their medical and insurance information is stolen and fraudulent bills are sent to the insurance company.  Then the insurance company pays the bills to a fraudulent company, while the true insured and his insurance company are unaware that they are victims of a scam.

 

And unfortunately, there is a rise in insurance agents who are committing premium theft and diversion.  They divert premium checks that are intended for the insurance companies and embezzle them to use for personal use while assuring the insured they are covered. 

 

Source:    Insurance Journal, April 2009, Patricia-Anne Tom http://www.insurancejournal.com/news/national/2009/04/14/99585.htm

McDonalds Workers’ Compensation Claim Denial Justified

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According to a Workers’ Compensation expert, the recent denial of a claim by McDonald’s insurance carrier is justified upon analysis of the law despite public outcry.

 

A McDonald’s employee was shot in Little Rock, AR in 2008 after expelling a man from the store who was battering a customer. The man who was expelled returned with a gun and shot the employee who attempted to prevent his re entry into the store.

 

The “Course And Scope” rule requires the following three elements before a claim can be compensable:

 

1) The injury must “arise out of” employment.

 

2) The injury must be in “the course of employment”.

 

3) The injury must arise out of the “scope of employment”.

 

In the case at hand, 3) was not met according to the insurance carrier and the claim was denied. This case will likely go to trial.

 

Upon first glance, the outcome does not seem fair. However, an insurance policy such as Worker’ Compensation is a contract and the contract dictates the terms of coverage based on the language and case law.

 

See Full Story: Chris Boggs, Market Scout, http://www.mynewmarkets.com/article_view.php?id=99219

Health Care Reform To Impact Profitability Of Small Business

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According to a recent NFIB article, likely health care reform will take one of five different directions and the impact to small business employers will be impacted differently by each.

 

The five most common ways discussed to structure health care reform are as follows:

 

1) Employer Mandate – Requires employers to a) provide a fixed percentage of employee health care costs, b) a fixed percentage of payroll to go towards the purchase of health insurance, or c) “pay or play” option where employers who don’t contribute must pay a special tax.

 

2) Single Payer System – A single payer such as the federal government would tax both employers and individuals in return for providing health care. This is the type of system in Canada.

 

3) Exchange / Connector – A public / private partnership where subsidies are offered for low income individuals to purchase discounted benefits through a forced consolidation of individual and small group markets.

 

4) Individual Mandate – An individual requirement to obtain health insurance either through their employer or on their own through government run plans.

 

5) Tax Equality – Inequalities would be ironed out of the tax system which currently favors employer provided insurance where the employer gets to deduct 100% of costs and the employees pay their portion with before tax dollars. However, individuals currently purchasing insurance on their own gain no tax advantages. In addition, the self employed are penalized by paying for their insurance with after tax dollars as they can’t deduct and pay a 15.3% payroll tax on their premiums.

 

The debate on this crucial issue will need to be watched closely as the consequences would be severe in terms of tax burdens and loss of jobs due to many small businesses becoming uncompetitive.

 

Source: NFIB, My Business, April/May 2009,

http://www.mybusinessmag.com/fullstory.php3?sid=1964