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Anonymous Comments from SIU Investigators ... that they want Management to read and think about:


One of the issues we're dealing with is our claims staff just doesn't care. Claims Reps want to work a 36 to 40 hour week. If a file is supect for fraud, referring it is counterproductive to the CR. The emphasis isn't on Identification of fraud, the emphasis is on shuffling papers. It's simply easier to pay and close than it is to refer to SIU. Claims in. Claims paid. Claims closed.


We say that 25-30% of claims contain elements of fraud, yet only 1 to 2 percent get investigated. It's all too easy to say "Oops, I must have missed it" in case of an audit


Nobody is asking for numbers of referrals because claim managers don't care. What they DO care aobut is how many customers will be made happy today, how much will it cost them to have an open investigation vs a closed investigation, and how will the quarterly reports look to the supreme muckymuck$?



Dear Mr. Manager: You have turned my case management system into something to generate bullsh*t management reports that have absolutely nothing to do with those of us hired to work in the field.  We are now being ordered to spend more time doing data entry in order to build databases for these worthless managment reports than we spend actual time in the field working cases.  If I could use the "interested parties" database system you have designed, maybe my time spent would be worthwhile in the long run, but our system does not have a search function to do this. You FORGOT to put that feature in and this has been going on for five long years. I've entered thousands of doctor names, lawyer names and witness names but it does me no good at all.  feature in -- it's on the list of things to do and it's been there for about five years.   


Most of the decisions now being made now by management have absolutely nothing to do with making it easier for SIU to do its jobs. Most of those ill thought out decisions only makes it easier for management to report to claims on all of the wonderful things we are doing -- but we are not really doing those wonderful things because the majority of our time is spent shuffling paper. It's all about making lovely little managment reports and not at all about fighting fraud. The emphasis seems to be "What looks good on paper for people who actually have no idea what we do."  Here's what I think: We are not doing what we are supposed to do because we are instead doing what someone has NO IDEA what it's all about things we should be doing.


Our program designers have never touched a fraud claim. If only the programmers would ask the people doing the work what is needed instead of asking the managers (who also may have never worked a fraud file) what is needed. It would be so helpful if  we could have the data given to us the way we want it. Who lives at the address, what are the connections, that kind of stuff. There IS software. It could work!


Dear Mr.  Manager: Why don't you listen to your employees? You can train all you want -- you can even train our supervisors and managers -- but unless upper management tells them or even allows them to DO something, it does no good.  What top management DOES dictate is for Claims Handlers to clear out their queue every day by five o'clock . Is it any surprise that they don't bother to identify fraudulent files and leave them OPEN for the extra amount of time it takes to work them? Duh. The claims people are going to open-pay-close because that is what they are going to get rated on. bonus's are based on this principle. You're supposed to be smart guys. What is so difficult to understand about this sytem being wrong, wong, wrong?


Management pays only lip service to Fraud. They deal with it just enough to satisfy the regulators, but not enough to come anywhere near addressing the overwhelming problem. Fraud takes TIME and they won't deal with it because it does take time.


Claims is never going to honestly focus on rooting out fraud because that's not what they get graded on. They get graded on their managment reports, reports that include important things like (1) did all their mail, (2) wrote all their checks, (3) went home by 5 PM and (4) didnt have to be paid overtime.


What hurts SIU? It's the attitude of "Why make jobs harder if Management doesn't care?" The credo is that a good claim is a closed claim. The only time that I really feel that claims wants me involved is when they want help because they can't close something.


I was hired for my investigating skills, my powers of observation, my ability to think outside of the box and get at the truth of a situation. Please Mr. Manager, let me do the job that I was hired to do. I am a field investigator who has 50 pounds of scut work hung around my neck like an albatross. You could pay an entry level employee less than half of what you pay me to do that scut work. Essentially I have become an overpaid data entry clerk ... but I hope to God that you don't figure it out before it's time for me to retire!


Every time I attend a training function, I become better at my job. Every time I meet another company investigator and exchange business cards, it's another ace  in my investigative pocket. How can I make you understand this and, more importantly, support it? 


The insurers themselves have no emphasis at local branch or the state level to ID or investigate suspicious claims. When I ask a Claims Rep, "How many suspected fraud files did you refer?," he is likely to answer either "None" or "one or two." Why is this? It's because his job is to pay, pay, pay and close, close, close. The insurance industry is iits own worst enemy when it comes to fighting fraud.


How exactly does management measure the claims that are not paid? It strikes me as so much Monopoly money. NICB writes reports on ROI and yet no two companies have the same definition of what fraud even is. If one company presents data on soft fraud and another company reports data on hard fraud, how accurate can any industry report be? When is industry going to decide that fraud is important enough to define? How can any agency quantify if it can't qualify? .



By Bill Lundy


There is no such thing as a Bad SIU. Now that’s quite a statement to be made in times when some SIU’s are being right sized, down sized, trimmed and (in some cases) deleted. This is time for insurance companies; time to trim expenses. It is a time when no one is free from being under the knife. Many companies are questioning if the Return on Investment, (ROI) makes their SIU worth their support. But before they are chopped and diced into smaller sections or depleted altogether, companies should really look at what they have and what the real problems might be. Let’s divide the issues into groups that can be scrutinized one at a time. Call the groups:





Fraud recognition

  What’s so special about Special Investigations
  What do you mean, “Savings?”



One of the biggest problems with Special Investigation Units throughout their tumultuous history has been an issue of communication. It seems the SIU’s speak SIU  and their leadership speak  CFO, two entirely different languages.  There is a basis for that communication problem. We need to take a look at the history of the Units and see where they come from and who they usually employ and we will see where the problem really lies.


SIU’s have been around since about the mid 1970’s. A few east coast carriers, in an early response to fraudulent automobile fire and theft claims, set them up to battle the newly recognized plague. (see  This History of SIU's as I remember it, Dan Fitzgerald, SIU Today, spring issue, 2007)  Those early units enjoyed such success that other insurers soon followed suit and came on line to battle insurance fraud in fire claims. Arson was in all the headlines in the early 1980’s and many of the new SIU’s employed former fire investigators like John Barracato, former chief deputy fire marshal for the City of New York and former head of Aetna’s SIU.


Early in the evolution of the Units, most of the investigators came from police agencies, and, to a degree, that has not changed. That is because police detectives have experience that most Claims Representatives don’t have and when an insurer wants an investigator, they want them NOW. They don’t ordinarily take the time to send bright interested claims people to schools to learn the trade of fraud investigation. And to make matters worse, most insurers don’t have the large personnel pool from which to draw those talents. They hire the best they can find away from police agencies and tell them basically what they want them to do. They point them to the street and, with some meager training in insurance law, they send them forth to battle evil in the form of fraud artists. Some large companies are able to hire from inside but they are among the few.


Now think about what has just happened. A detective from some police agency who has been fighting crime for at least a half dozen years, (you don’t usually get to be a detective in less than that on the PD)  is hired by an insurance company to go find fraud and basically take on the dragon. The investigator knows what is expected, or at least he (or she) thinks he does. He’s been directed to detect and deter fraud, just like he was previously asked to do --  go detect and deter drug dealers and arsonists or burglars or other nefarious bad guys. What he usually did not do in his  former employment was to measure how much time it would take to do that job. In his law enforcement life, he had targets in mind that had to be taken down one at a time. There were  crimes or incidents to solve and there was no such thing as Return on Investment. As close as a street cop came to ROI was to talk to his pension benefits manager to see if his 401K was doing well and if the ROI was going to support their retirement.


On the other side of the coin, speaking the language of CFO,  is the insurance company manager or accountant who is weaned on dollars and time and return on investment. They know what they want and they, in their heart of hearts, think that nearly everyone has a good idea of what that is. They want ROI. They want someone to come to work for them who thinks a lot like they do.


And therein lays the crux.


Communications between the Management of the company and their SIU is not on the same frequency. One mouth speaks SIU and one mouth speaks CFO. Neither has ears capable of understanding the other. The people of the Unit feel they have a stated mission and they are working diligently to do what they feel is expected of them. Management thinks they have given direction and the results are not always what they wish them to be. It is much like a native from Beijing talking to a native of Barcelona. They are both good people and both believe they are working toward the same end, but they don’t talk the same language. The communication issues between the SIU and management could fill a book, but any assessment of a Unit must take it into consideration. This is the umbrella that both covers and defines the problem.


Fraud Recognition

Underneath that umbrella lives the claims operation. Keep in mind that nearly all SIU’s work for Claims. The Claims division has hundreds of people who have been asked to adjust claims, handle claims, pay claims and even some to investigate claims. But when a fraudulent claim rolls in, they often just don’t see it and even if they do, if they send it to the Unit, it will just take that much longer to get it paid and getting claims handled is in the job description of the claims representatives. It is what they are paid to do!!!

  1. The Claims Representatives need to know what a fraudulent claim looks like. They need to be trained in fraud recognition and that, in itself, is a Herculean task considering the turnover in claims staff each year. Technology helps to some degree, but technology without training will never work. Companies need not train all their claims personnel to HANDLE fraud, merely to recognize it and then turn it over to the next level of handlers; Claims Specialists, the SIU, or even Underwriting    

  2. Companies must open the lines of  communication between the SIU and Management. They are part of the same team. They have the same goals and therefore need to speak the same language. Somehow, some way, we need to find an ASCII language program that enables SIU and CFO to talk to and with one another.

  3. The Claims Representatives need to know and understand the mission of the Special Investigations Unit. And each company is somewhat different in designing the “mission.” Some want the SIU to go after only potential bogus claims. Some want the SIU to roll on unusual claims like large fire losses. Some want the SIU in on even large B/I claims. No matter the claims sort, communication is crucial.

What’s so Special…


Numbers one, two and three above bring us to the question “What is so special about SIU?” If they are part of a team, why are they so special? It has rankled claims representatives since the birth of the notion.


 “Special Investigations” has been the name of the investigation groups since the earliest years of their existence; however the name was not designed to elevate the Unit above the level of the Claims Representatives -- no matter if it is sometimes parlayed that way. There is really nothing so special about the Unit itself; the name was designed to imply the kind of claims they were likely to investigate. The group is called Special Investigations. They investigate Special Claims. They investigate unusual claims, larger than normal claims, irregular claims, fraudulent claims, really odd claims. You could hang any one of those descriptive words on them. Call them the Unusual Investigations Unit. Call them the Irregular Investigations Unit or the Really Odd Investigations Unit (probably not). You would not wish to call them the Fraud Claim Investigation Unit because that might open the company to legal troubles. Plaintiff’s counsel would have a field day trying to say that the company had assigned the claim to its fraud unit and that meant it had already made up its mind it is a fraud.


The bottom line is that the Unit itself is not special. It is the claims themselves that are special and they need not be fraudulent to earn the attention of the Unit. Any very irregular claim -- like a large fire loss that deserves special attention lest it fall through a crack in the floor-- might earn the attention of the Unit. Auto thefts involving cars equipped with advanced security systems that make them less vulnerable to theft may earn the attention of the Unit. Certainly the claims that wear the hallmarks of Organized Ring activity should earn the attention of the Unit.


Keeping these factors in mind is really not on the radar of the Claims Executive level. So when crunch time comes and the executives look for ways to trim budgets and get costs under control, where do they look? They look for groups that have questionable ways of showing their worth to the company. One way to find groups to question and possibly trim is to look at the Return On Investment numbers. 


Return on Investment

For years, Special Investigation Units have been nervous about touting their worth based on the shadowy concept of “savings.” (Author’s note: In fact, “savings” is really a four letter word. It really should not be used.) Historically, plaintiffs’ counsels have had fun bandying about the idea that SIU’s are not in the business of finding the truth about a claim, they are in the business of generating “savings” by denying their plaintiff’s very legitimate claim. The fact is that in years gone by, companies used to compare their “savings” and get bragging rights about how much their Units were saving the company in denials and withdrawn claims. A claim VP once told this writer that his company never paid a fraudulent claim. He had a Unit that was generating 15 to 1 “savings” as a Return On Investment. (His measurement methodologies were to say the least a bit odd) In more recent years, the Units have been well advised to quit thinking in terms of “Savings.” So now how do they measure their ROI?


One way is similar to “Savings” but it is less bitter. One could call it a “correction”. Every company in the industry measures reserves and according to the company’s accountants, those reserves are right near the actual cost of the claim, plus or minus a small margin.. Fair accuracy is demanded by government regulators. The rank of various Claims Representatives is directly proportional to the dollar value of the claims for which they are responsible. A lower level claims person may only have responsibility for claims up to $50,000, for example, with any larger claim going to the next higher authority. A claims center may be responsible for $50 million in claims per year and if it goes over that, more people may be needed. Every company maintains track of reserves and subsequent payments. The difference between the payment and the reserve can be called anything you want, such as variance, difference, correction or revision. It takes into account the difference between what is reserved and what is paid -- or in the event of a subrogation, the amount recovered. But it can never be the measure used to determine whether or not a Unit or members of the Unit will be employed or paid. The day that figure is linked to Unit employment is the day the plaintiffs’ counsels will point out to you in a very high court that you pay your people only if they generate dollars through investigations and subsequent denials. It may not be true, but that will be little solace when the counsels dance in court. Do not measure a Special investigation Unit based on “Savings.”


The measure of a Special Investigations Unit should be based on customer satisfaction and in their line of work,  the “customer” is the Claims Division. It is their partner. The claims division is never measured based on how much money they “save” in denials. They are measured in how they satisfy customers and how they satisfy their superiors in the number of claims satisfactorily handled. The Unit will be periodically audited, of course, as will the entire Claims Division,  by  either a company’s own internal Claims Quality Control division or by the regulators or by both. The way claims are handled by the Unit and by Claims is the measure of satisfaction and ROI to the company.


Companies will forever ask if their SIU, or other sub-units of the Claims division, are worth the money it takes to support them. Claims is a cyclical business. Companies enlarge their operations every few years and then they find ways to trim them with technology and/or training. SIU’s are really no different. But before a company goes over the edge and starts to trim, slice, dice or delete their SIU, an analysis of the Unit and its work should be carried out. The company needs to answer key questions before it makes any large decisions affecting the SIU. Some of those questions include:


Communications: If expectations are not being met, are they being communicated?

Recognition:      Is the Claims division sending files to the SIU that contain fraud indicators or is it sending claims to get them off the desk?

Does the Claims division know how to handle a fraud if they see it?

What kind of technology is used to identify fraudulent claims?

Proper claim handling: Once the file gets to SIU, is it properly handled?

Are proper vendors choices being made?

Is action on the file timely?

Are reports accurate and timely?

Are results communicated quickly?

Relationship with Claims: Is the SIU a small police department in the company?

Does it see itself  as elite? Does Claims see it as elite?

Does the SIU relate to the workload of the Claims division?

Staffing: How does the Executive level see the Unit?

What do they want changed?

Do they know?

Does the SIU have sufficient staff to handle the load?

                        Are they properly located? Travel is expensive. Are there alternatives?

Future look: What does the Executive level want the SIU to look like in a decade?

What kind of  technology is available now and what is in the pipeline that will affect the SIU in a

                       few years?


As a company conducts their analysis of the SIU, like any good detective story, more leads will pop up. As the analysis evolves, an image of the Unit and its place in the company develops. Only after the Executives get a good look at the way things really are (and the way things can possibly be) should they make any major decisions. SIU’s are relatively new to the industry. They have only been around for 30 years, and most of them for a much shorter time than that. Most of them have changed during that time period, some several times. Flying blind, making important decisions in the dark only costs more money. Stop and study it first and make the decisions based on knowledge, not guesses. If the executives can’t do it themselves, then find another way, but decisions about such an important function as fraud deterrence should never be made in the dark.



Midstates Consulting a subsidiary of

Midstates Investigations and

Technical Services, Inc


www.safestonline.com (behaviors based fraud detection software)


The author has worked in, with, and for Special Investigations Units for 28 years and is widely regarded as one of the founders of the International Association of SIU’s. He has been an international speaker on SIU formation and function and has authored several books on insurance fraud. He now operated Midstates Investigations and Technical Services, Inc, a private investigation and consulting firm and works with insurers in fire investigation,  SIU consulting and fire file evaluation.  He is proud to be a life member of IASIU.


© Copyright 2008 The John Cooke Fraud Report