Saints Row 2 – Insurance Fraud Guide?

Violent video games have long been a topic of controversy, particularly so after major video game publishers such as Sony and Nintendo were named in lawsuits stemming from the Columbine shootings of 1999.  Allegations were that the perpetrators of that horrible crime were regular game players of violent video games and now a video game called Saints Row 2 allows players to commit virtual insurance fraud.

Violence and Video Games

This begs the question; do violent video games inspire people to act with violence in real life?  If so, could video games cause people to commit non-violent crimes as well?  The Saints Row 2 video game in particular has a component that encourages players to commit insurance fraud in order to advance in the game and obtain bonus points.

The National Institute on Media and the Family estimates that today’s young people play video games for about 8 hours per week.  When you consider the conditioning that may occur during these games, its easy to consider that a person may be inspired to attempt to act out these fantasies at some point.

Insurance Fraud - A Game?

Saints Row 2 contains a feature that allows players to commit insurance fraud in order to build up an accumulation of money throughout the game.  The player’s cash is built up by jumping in front of vehicles, and the goal is to do this without really getting injured, and to do it in such a way that the player’s character can stand up quickly and move on through the game quickly.

Will video gamers be able to discern fantasy from reality?  What effect do these games have on young people?  While games like Saints Row 2 are not illegal, games that encourage or mimic law-breaking activities should be carefully regulated to ensure that young people do not get the wrong idea when it comes to violent or non-violent crimes.

Insurance Fraud Glossary

• Application Fraud: When someone lies on an application about who they are, or what they do with their property, or who might be driving their car (ex. teenage son or daughter). This fraud is most often perpetrated to achieve a lower premium, or to obtain coverage from an insurance company that would not have provided the coverage if they applicant had been honest.
• Born Again Vehicle: The name given to an auto that has been stolen and given a new identification or Vehicle Identification Number by use of a fraudulent or counterfeit title. In some cases a genuine title is used for a Born Again Vehicle, and that title came from an auto that was illegally exported to another country.
• Counterfeiting: When vehicle insurance fraud is involved, counterfeiting is the forging, altering or copying of documents relating to the vehicle ownership in order to commit insurance fraud.

Fore! Hole In One Scam

Hole in one insurance – it’s a real thing and offered for many golf tournaments to pay a cash prize in the event that a participant is lucky enough to drain a hole in one.  One wonders how the perpetrator of insurance fraud might take advantage of this type of insurance.  Insurance Fraud Digest has found a story for you.

Kevin Walter Kolenda found a way to do just that.  He created a bogus insurance company called Golf Marketing Worldwide, LLC and convinced several tournaments to purchase Hole in one insurance for the event.  Then he pocketed the premiums and never made good on those events where someone actually did get a hole in one.

Kolenda refused to pay prizes to lucky golfers in Bremerton, WA, Vancouver, WA, and Snohomish, WA.

As of December 21, 2012 Kolenda is free on bond.

Top 10 Insurance Scams

 1. Auto Theft

Cars are stolen quite often and there are two main ways that the bad guys make a living with stolen cars.  The first involves “chop shops” where crooked mechanics disassemble cars and sell the parts off.  The second method involves the sale of the vehicle to overseas buyers with no paperwork.

2. Staged Auto Accidents

Quite often two or more people will conspire to stage an accident in order to collect on insurance claims for totaled vehicles.  If the value of the car is inflated, the perpetrators will scheme to collect and profit from the insurance payoff.  Claims for faked injuries from a staged accident are also common.

3. Pocketing Repair Costs

Often people will forego repair costs to their damaged car and pocket the cash, or spend it on something other than the actual repairs.  This can be done quite easily, especially in cases where a car is damaged but still drivable. 

4. Medical Insurance Claims

There are many reported cases of medical insurance fraud every year involving crooked health care providers.  In these cases, doctors and clinics bill insurance companies for procedures and/or medications that were never needed.  In the worst cases, procedures get billed to an insurance company that were never even completed.  In other cases, fake patient names are used to scam insurance companies.

5. Unnecessary Medical Treatments

You may already have been involved in a medical insurance scam without even realizing it.  If your doctor is prescribing treatments that are unnecessary and billing your health insurance company, this is a form of medical insurance fraud.  Beware of doctors who continually change the types of procedures, and be especially cautious if you are asked to undergo various unsuccessful treatments.

6. Arson Fires

Burning down a house to profit from an insurance policy is all too common.  Those who are deep in debt or who may be behind on their mortgage routinely seek to collect from an insurance policy, and the most lucrative way to do this is often from a total loss resulting from a fire.  Forensics in this area has become quite advanced, and most of these criminals are caught.  While the bad guys in these cases may go to jail, and won’t get any insurance money, most policies contain a section that requires the insurance company to pay off any mortgage, even if the policyholder intentionally set the fire.  This is a huge cost to the insurance industry.

7. Storm Damage Claims

A common type of insurance fraud involving homeowners insurance involves making new claims every year for the same damage.  The scam works like this; an insured may have a roof that leaked one year causing some water stains in the house.  They make a claim with the insurance company, and get paid for the roof damage and for the interior damage. They fix the roof so it does not leak any more, but never fix any interior damage, pocketing that cash.  The next year they switch insurance companies and make a claim for interior water damage, which is not new damage at all, but which is the same damage from the prior year. 

8. Theft Claims

One of the most common forms of homeowner’s insurance fraud involves theft of personal items.  People will submit a claim for a break-in and theft, and tell the insurance company lies about what was stolen.  In some cases, there may have been a few things taken, but the actual list of items submitted to the insurance company is a fake inventory created by the insured to inflate their claim.

9.  Life Insurance Fraud

While this is quite an elaborate scheme, it is not uncommon.  This involves a person who takes out a life insurance policy naming their cohort as a beneficiary.  The perpetrator then fakes his own death and hides for several months.  Once the beneficiary is able to collect the payout, they both disappear pocketing the cash.

10. Fake Injury Claims

People who intend to collect money for injuries can easily fake a fall down or auto accident.  While injuries often do occur, sometimes there is no physiological damage apparent.  While a doctor can diagnose physical trauma, they cannot diagnose pain.  If a patient tells them it hurts, the doctor must put that in a medical report even if they believe it to be untrue.  

A&O Entities $100 Million Life Insurance Fraud Scam

Russell Mackert, a 51 year old attorney from Spring Texas admitted in U.S. District Court in Richmond, VA that he helped to facilitate a huge life insurance fraud scheme that stole over $100 million from innocent insurance policyholders and investors.

Mackert plead guilty to conspiracy charges stemming from his work as an attorney for A&O Entities, which is a group that collectively dealt in over $100 million of fake investments marketed to over 800 investors in the U.S. and Canada.  Many of those victims were elderly retirees.

The plea involved the admission by Mackert to making material misrepresentations and omissions to investors about the money they were investing.  He also failed to inform investors that the vast majority of the money invested was being used for purposes wholly unrelated to the purchase and maintenance of fund portfolios as had been promised to investors.

Mackert faces 25 years in prison on combined charges, as well as $500,000 in fines.

10 Million Ipods

Every year, the insurance industry as a whole spends $30 billion on fraud according to a study in May 2009 conducted by the Insurance Information Institute.  That is about 10 percent of their losses and loss adjustment expenses.  The cost of 10 million Ipods?  Just over 2 billion.

What does this mean for you?  That means that if you have had a claim recently, some crook took your insurance company for at least 10 percent of whatever your settlement was.  It also means that the insurance company has to recoup those losses somehow, and to do this they need to increase their premium or cut valuable services. 

Let’s examine what $30 billion actually means:

A = The amount of fraud in the U.S. every year

B = The cost of 100,000 Cadillac STS's

C = The total NY Lottery prize payout in 2009

D = The cost of 10 million Ipods

There are different types of fraud, sometimes referred to as "hard" or "soft" fraud.  Hard fraud occurs when someone deliberately plans to commit a fraud and sets out a plan to do just that.   Examples are staged collisions, arson, faking injuries for benefits, or doctors who charge fees for treatments or medications that were never given. Soft fraud is sometimes referred to as "opportunistic fraud" and this occurs when someone who has a legitimate claim exaggerates the damages to profit from the loss.

Think about these numbers next time you are someone you know has an insurance claim.

Fraud Signals

How can you tell if someone is being dishonest?  Perhaps you could test them by asking the right questions to "catch" them or perhaps you could look for visual cues that the person is experiencing some anxiety about lying.  As an investigator the first step in determining if someone is being dishonest is to find out how that dishonesty may benefit them.  In the case of insurance fraud, that is usually pretty simple as there is some monetary gain to be had.  Creative perpetrators however will create something that I like to refer to as a "dishonesty sandwich".  This is the creation of a story that has layers and layers of truth and lies mixed together.  Sometimes a collection of small lies is stuffed in between some large and undeniable truths.  This method of "stacking" issues together can work to pad claims or to embellish injuries, adding value to the final claim payment. 

Very often we see injury claims that have volumes of medical reports attached, making the injury appear to be severe.  Often however, we find that the legitimate injury that really did get medical attention (the large undeniable truth) was resolved very early on and the lion's share of all the paperwork in the file is follow up and re-hashing old reports.  Are these reports lies?  Not really.  This dishonesty occurs when those reports are collected and submitted as evidence of a "severe" injury.

When the clamp starts to close and the dishonesty becomes evident, perpetrators will often attempt to change the focus to the back to the undeniable true components of their story to garnish sympathy from those unfamiliar with the full facts of the case.

Recession Inspires Fraud

As suspected, the current economy seems to be inspiring more fraud across the country. A recent news report from California indicates that automobile insurance fraud is on the rise, to include auto arson and auto theft fraud.

Cases of suspected arson increased by 25 percent in 2008 as compared to 2007.

Read article here. 

Who Commits Insurance Fraud

Many see insurance fraud as a white-collar crime, but that is not always the case. There are many motivating factors to insurance fraud, with the underlying motivation being unfair gain. The Polk-Lepson Research Group is a Market Research & Analysis firm in York, PA and they conducted a study in 2002 and identified people most likely to commit insurance fraud:

-People that saw fraudulent actions as done for "monetary necessity."

-People who consider themselves as "social victims."

-Individuals who feel personally victimized and who are motivated by "anger."

-Groups characterized as “economic sophisticates,” people who seek to obtain and maintain wealth and who view fraudulent behavior as a calculated risk.

The Pennsylvania Insurance Fraud Prevention Authority (IFPA) commissioned this study and they found that about 58 percent of Pennsylvanians feel that insurance fraud was acceptable under some circumstances. It should also be noted however that more than half of Pennsylvanians did also agree that insurance fraud should be discouraged.

Although their study did show that people could rationalize a need for insurance fraud, 72.4 percent of those questioned did agree that the perpetrators of insurance fraud should be prosecuted for lying and falsifying information. Additionally, 90.6 percent of those questioned did also indicate that if insurance companies were to actively pursue fraud cases, then fraud incidents would likely go down.

Rationalizing crimes is one way that criminals motivate themselves to break the law. Insurance companies are easy targets in this arena due to negative publicity received in the event of major catastrophes such as Katrina. However, the victims of insurance fraud are not just the insurance companies, but also their customers. An insurance company has to make up every dollar they lose to fraud, or spend in fighting fraud by charging their customer a higher premium.

Planes, Trains and Automobiles

People are now faking claims while abroad. Claims during travel are up 80% according the Times Online.

Many customers are faking the theft of expensive electronics and other personal property. Items that are easily taken aboard airplanes, buses and taxis.

Some of the fraud involved in these "travel cases" includes people faking illness to get out of paying for reserved seats on airplanes.

Insurers have dealt with these types of claims for years however. They have methods of identifying fraud - that's how we know it is up by 80%!

Check out the story here: Travel insurance fraud rises