The Future of P&C SIU
The year is 2017. The teleportation machine is still glowing as we walk into the building that houses "The Futuristic Insurance Company." Looking around we notice that data-mining technology has made rapid advancement in the past ten years. Looking at adjuster Tamara Tomorrow's desk we see that when a claim is presented to a company, it is instantly linked cross industry. The issued report not only points out probable connections, but inter-company links are utilized, records are automatically merged and files are tagged for immediate report to overseeing agencies. Gone are the times of multiple claims for a single incident. Tamara is relaxed and smiling.
Product marking devices have made great strides and are now incorporated in most fields of manufacturing. New automobiles are equipped with transponder devices and advanced computer chips that alert if the car is used in an unusual pattern. All of this simplifies Tamara's job. She continues smiling.
The file contains no hard copy MVRs. Underwriters no longer manually review Motor Vehicle Reports as they are outdated. Now all drivers are rated by instantaneous review of incoming real-time driving information. If the insured is prone to speeding, the carrier knows it. If he frequents less than desirable locations, the carrier knows it. If another driver has ongoing access to the insured vehicle, the carrier knows it. Real time. Computers do all of the work. Tamara has time to grab a 10 AM manicure and pedicure. No wonder she is smiling..
We are living in Orwellian times.
(If it were a perfect world that had evolved, prosecutors would actually prosecute. Judges would actually send insurance fraud perpetrators to jail. And the vast majority of the public would actually turn in fraud perpetrators. Sadly, it is anything but perfect.)
2017: Insurance fraud has not lessened' it has increased. It is at record highs. Government entities have been continually restrictive, mandating claims handling activities. Systems criminals are utilizing predictive analysis to identify systemic weaknesses. Gone are the days of individual insurance fraud scams; industry routinely catches every instance due to advancing computer analytics. Instead we are now fighting a technology driven war in 2017, and theirs is more defined than ours.
Individuals have traded both liberty and privacy for convenience. Nanochips have been installed in most human being, a collection of medical data instantly accessed by a scanner. When a doctor sees a patient, the doctor's nanochip is recorded upon the patient's nanochip -- and vice versa. There are no more front office billing clerks because all billing is done electronically -- straight from the nanochip. Normal aspects of privacy are preserved, but law enforcement has chipped away at privacy when dealing with a police matter. The nanochip scanner black market is booming; reprogramming and overwriting carry a large price tag, but the more lucrative criminal enterprises rely upon it and are willing to pay the price.
The newest gadget on the insurer side is a voice stress analyzer that keys directly into the nanochip and instantly reveals when an insured is being less than truthful. The newest gadget on the insured side is a second nanochip that defeats the voice stress analyzer. Individuals can't afford them, but organized cartels can. And so it goes. We get a tool, they get a tool. And theirs is stronger and more advanced that ours.
It is September 2017 a small group of investigators are meeting at the Scottsdale Princess. Venues for this annual sojourn continue to be chosen according to a carefully crafted formula of meeting space, location and adjacent golf courses. It is Sunday evening and 8 people, each wearing a green badge, are sitting at a round table during the opening reception. Talking about what is ... and what could have been.
Person #1: So what if there are only 7 of us here at this annual meeting. I shot a 76 today.
Person #2: I hear ya, D-Boy, and I got a suite.
Person #3: Anybody want another glass of this Cristal? Or another ounce of caviar?
Person #4: We don't need no stinkin' speakers. We're the smartest SIU folks on the planet.
Person #5: Hey, has anybody seen the masseuse?
Person #6: We sure are brilliant.
Person #7: How come nobody is here with a purple badge? Doesn't any member of the insurance fraud press want to hear and report on spin anymore? It was fun to beat those purple badgers with a stick if they got too close to the door of the annual meeting. We gonna even have one of those this year?
Flash frame to another location, far away and without a signature golf course. Fourteen hundred of the nation's finest investigators mill around snacking on volunteer assembled tuna fish and chicken salad sandwiches. Coca cola and Mr. Pibb flow freely. Those who choose to can grab a glass of Strawberry Hill. Blue badges all around, yellow badges for venders and press.
Here, too, there is a table of seven set up.
Leslie K., slower than she was in 2007 but still reporting on the fraud industry, squeezes in to the table of seasoned investigators and makes it eight. "Thank you for agreeing to this Ten Year Reunion. I know that we talked about getting together again when we last met in 2007, back at an association meeting at Caesar's Palace in Las Vegas." She wears a yellow badge, unlike the blue badges worn by the others. Security has been schooled to treat yellow-badge holders nicely, realizing that venders and press representatives are a good thing, not a bad thing. Nobody here has to know the secret handshake, although she still remembers it well. "Do you all remember the quotes that you provided in 2007?" she asks. Handing out printed copies of the www.johncooke.com article composed shortly after that meeting, those at the table are easily able to look at what they had said.
She continues. "I realize that we were behind closed doors when you said those things, but remember that it was a time of impending change and paranoia was rampant. Silly now that we look back, wasn't it?"
B: "Hah. Here's what I said. 'Things will start going uphill when the insurance industry bean counters see the value in hiring, training and maintaining a competent and complete staff of professional insurance adjusters. That has been the answer all along, but industry can't seem to see the forest through the trees.' ".
J: " I remember that. I added that we owed a duty of education to the prosecutors, the judges, and everyone else who has an impact on the actual process inherent in how we fight fraud. Maybe your prediction would have been correct, but I seem to recall that they did damn near the opposite. Companies cut back on SIU presence. They placed more responsibility to identify fraud on the adjusters, but offered them no support. Open 100 news lines and close 104 old lines. Push and churn. Churn and push. It's a wonder we were able to get any prosecutions at all.
S: That was when all the initiatives were floating around. Not a one of us had a real understanding of the theory behind CCOR. In '06 they were threatening to shut down IASIU if it didn't behave, but then in '07 they assumed a seemingly different stance.
C: "Spin. Spin. Spin. Reminded me of when NATB turned into NICB, and then again when ISO became the favored child. Promises, promises. We're going to beat this problem. We're going to do better, be better, get better and more measurable results. Most of those calling the shots never touched a fraud file except to offer an opinion on how they could have busted the case. Yeah, right. Never saw a minute in the trenches, and they're going to tell me how to do my work."
LV and KS walked by the table, each holding a drink, and both looking for a dance partner. "C'mon, guys, get with it. what could you possibly be talking about that's more fun that shaking booty?"
"Remember when we were all at Caesar's palace ten years ago," said Leslie, "and everyone was buzzing about the forcing of a merger of NICB, CAIF and IASIU?"
"Ah, the days of mixed messages," recalled KS. :"When ten stories were circulating at the same time, not a one of them the entire story. A lot of folks scratching to stay alive back then ..."
D: I was one of them. Looking to stay alive until I found another job in what was definitely a shrinking job market. If I'd been seen talking to half of you folks, it would have meant my head. We were only comfortable talking behind closed doors, as I recall. As it was, it didn't make much difference."
F: "Unless you wanted to move to Bombay. Wasn't it 2008 or so when the first company claims unit outsourced their reporting to India? I remember predicting that back at Caesar's, Lookit here," he said pointing, "insurers will soon be taking claims reports and adjusting small losses from Bombay and Beijing." The writing was on the wall even back then. The old times were gone. the blind were leading the blind. It was all about pushing paper and paying claims. Even then it wasn't about investigation. It was already gone. The skill behind investigation had disappeared from the face of the earth. Everything was becoming about paying."
M: Look around you. Except for a few little Mutual companies and struggling Mom and Pop operations, every major company is doing the biggest share of it's claims handling straight out of India. When they started turning it over, they were paying $1 an hour flat. No medical benefits. First the big three started it and took some customer hits, but when everybody else started following suit, it was just business as usual.
B: Financially it made all the sense in the world One person will stuff envelopes and all the real work gets shuffled overseas. I remember the arguments: We can have somebody in India do it for a whole lot less money. We can print an electronic check anywhere in the world. We can mail that check from Bloomington or DC or Los Angeles, and who's the wiser? No buildings here, no benefits, no 401k's, no mandatory worker's compensation, no company cars. Just pay a buck an hour, hand out scripts, and reap in the profits.
D: It started with sending IT work overseas. Remember when the Farm first did that? Not even any long distance phone calls. You dialed a computer number and it connected you to India.
J: Hey, they eliminated estimates to start. Body shops wrote 'em out instead of having field adjusters do it. The shop would repair the car and send in the bill. Sure some body shop owners got rich off the deal, but the bean counters liked the numbers. There's plenty of money in the pot when you slice of a big piece of the employee pie. Then they kept slicing and slicing and slicing ....
M: Well, it made sense to them. After all, only plumbers, electricians and house builders were really needed in the flesh. The rationale was why should they pay a white collar worker to sit behind a desk when they can pay an Indian one tenth the money and zero bennies?
S: Remember that we were in a world of hurt back then. It was all about impact ratio, but that was soft numbers anyway. Think back for a minute, way back, ten years back. How many times would SIU find something that could be used to mitigate a claim, but it was NOT used by the adjuster? Maybe the adjuster wanted to use it but the supervisor told him no. RLA's were so scared of getting a bad faith suit that they paid claims they shouldn't have paid just to avoid a lawsuit. We all knew it, but there was nothing we could do.
J: We really tried, too. Remember? Intelligence meeting behind closed doors. We'd be chasing the same crooks, so we'd cooperate company to company. We took the task force approach, delegating expenses, covering all the bases, working the case and turning it over. You watch these goons for five days, we'll watch 'em for the next five days -- then we'll have the goods to shut another sleaze bag medical mill down. We had some damn great attorney firms slamming doors on those medical mill crooks, didn't we?
C: The whole insurance industry was turning into a Ponzi scheme. Too many of the decisions made by claims people were made by the magic eight ball method, without logic or thought. By 2012 we had one SIU investigator covering five states, responsible only for paying lip service to the biggest economic problem in this country. SIU was the necessary evil in states that mandated our presence, and most people in claims had no idea what we did nor did they want to know what we did. They'd duck around a corner to avoid eye contact, remember that?.
F: Think about it, guys. In the banking system, you got the marketing department. It's their job to let people easily get their money. Then you have the security folks and it's their job to keep the bank's money from walking out the door. It's a constant fight between marketing and security over ease of use and/or hemorrhaging by fraud. That's where insurance was in 2007. Claims were graded on how much money they spent and how quickly they spent it. SIU's were graded by fraud payment avoidance, which is funny money anyway. Two wholly opposing systems; no wonder it all blew up.
J: My guys used to pray for them to sue. We could get all kinds of information out of discovery. The legal mills made their money on quick settlements. They didn't want to go anywhere near a courtroom. The industry needed to grow a pair and fight the bad claims and pay the good claims.
D: In all fairness, they did react a little bit. The industry was aware in 2007 that they had a duty to educate the insurance buying public about matters of fraud. They knew that they had to educate their own company personnel, from the top down to the bottom. To show them what to look for and show them that there was a system in place that would work. Everybody needed education and the time was ripe to step up to the plate. That was probably the beginning of the end because they crawled up to the plate and tried to hop to first base on one foot. Remember what the plan was? You folks have five years to develop a plan. FIVE YEARS! Five years to do a job that we critically needed done in five minutes. Nobody could see that if we as an industry didn't take away the carrot, the horse would continue chasing it.
C: That's because Claims Management wanted to control a process that they never fully understood themselves. They considered SIU to be loose cannons, probably because they had no idea what it was that we were doing. It was getting the education out into the public arena, far ahead of the five year mandate, that changed the face of the insurance industry. The buying public began to get angry about the sloppy handling of its money and started voting with its feet and its dollars. The little companies became the big companies and the big companies became the little companies. When money is flying out the doors quicker than it is coming in, secrets are no longer secret.
M: Ah, the Jack companies. That was the first giant to topple. Public perception can eat a company alive. And it did. What a tsunami effect we saw. It made Enron look small by comparison.
J: Hey, lunch hour is over folks, and I have a seminar to attend. We were able to see a new vision arise from the ashes of mismanagement and shortsightedness, and we've got a responsibility to learn as much as we can and pass it on to everyone who deals with fraud in any form. Otherwise we'll become just like them and history will surely repeat itself.
The seven seasoned-investigators-turned-management looked at one another and smiled. They'd seen a vital industry that was making great forward advances suddenly cut to its knees by bad decisions. They weathered the storm until rational thought caught up with profit gouging and held on through the market adjustment that surely followed. Everyone stood to leave, but not before promising to meet again in 2027.
Stay tuned for another update in ten years..
© Copyright 2007 The John Cooke Fraud Report