Good faith reporting of suspected fraud sounds fine, but a couple concerns about this:
> In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an "unwritten policy" within the company to withhold evidence from customers that could help prove their innocence.
Besides the appearance of possible bad faith, that might also -- in the context of government relying on the insurance company to do some of the investigative work -- thwart government obligations to share evidence with a defendant.
honestly, these companies should be fined so heavily that it's just not worth it for them.
I understand that legitimate insurance fraud needs to be investigated and prosecuted, and I'm all for it. But you give them all the evidence, period, and let them decide. You do not manipulate them to save yourself from a payout. That crosses a line that has no grey in it.
It is a finable offense...in some states, like California.
Indeed, something like this could even get an insurance company's license to sell insurance in one of those states revoked.
In addition to the obvious case of bribery, deliberately misleading the police with intent to falsely imprison someone has got to be some kind of crime far worse than bad faith - defamation at the very least.
If I called the police and said "Several men entered the building, and then I heard gunshots, please hurry!", and didn't mention that I knew the building to be a firing range, I'd rightly go to jail for a long time.
In this case the accused person sued the insurer who reported them to police and apparently won a settlement (that curiously did not forbid him from disparaging the insurer post-litigation).
The hypothetical you gave would be more on point if instead of deliberately withholding key information, the 911-caller made a truthful allegation for an ulterior motive. So more like, 'there are suspicious cars idling outside the firing range and people walking around with guns. Someone swung the muzzle in my direction for a moment and made me feel unsafe.'
As for the insurer paying the salary of the officer who investigates-- yeah, poor optics there but the extension of the hypothetical scenario would be that the police deprioritized gun crimes without funding and won't show up and investigate otherwise.
So the real newsworthy issue here, which the article missed, is why police departments in Pennsylvania don't investigate insurance fraud felonies unless someone in the private sector is willing to cover their expenses.
There are many examples in the article of insurance using misleading or faulty evidence, and people ending up in prison or homeless as the result.
> So the real newsworthy issue here, which the article missed, is why police departments in Pennsylvania don't investigate insurance fraud felonies unless someone in the private sector is willing to cover their expenses.
It is mind-boggling why you would think the investigators would be impartial when paid by the insurance companies. The examples from the article certainly point to the direct opposite of that.
I have seen and heard plenty of examples from the criminal justice system where fully impartial prosecutors, under no appearance of conflict, press forward on weak evidence and weaker investigation. So no, it's not mind-boggling. The source of the officer's salary raises an eyebrow for sure. Not going to defend that, but I'm also not going to rely on a breathless and fundamentally one-sided article to explain it.
For those interested in how a serious and meritorious bad-faith claim still generates exposure for the reporting party, despite all the immunities and whatnot, see Maxwell v. AIG.[1]. The sources in the article I'm sure are aware of the potential for huge extracontractual awards, and I'm just not impressed that angle also is not discussed in the article.
If the insurance company withholds the evidence from the police and prosecutors they never “know” it exists and wouldn’t need to provide it.
What irks me is that they can destroy people’s lives with impunity: if they lose they just have to pay out the insured amount, they don’t need to compensate someone for making them homeless or for destroying their business.
All officers and prosecutors should be criminally liable as they are accepting bribes for prosecuting these victims.
The insurers should be liable for subverting the course of justice, and any deliberately withholding evidence that demonstrates the claim of fraud is false should make the insurance companies liable for all costs, and all “witnesses” should be separately liable for false testimony.
This has been going on for a long time. At least decades, if not centuries (remember that insurance is a very old business).
In the 1940's there were very popular radio dramas that aired every week following the adventures of insurance investigators, and their cozy alliances with law enforcement.
This article sounds like FBI and/or Internal Affairs should be involved into investigating State Farm and their paid prosecutors/policemen. Anybody knows anything or is too early? Or maybe nothing will happen due to too much money poured into right pockets?
Laws with inherent conflicts of interest are supposedly unconstitutional. Can any lawyer comment on this? Can we have the ACLU challenge these in court?
The use of privately gathered evidence intended to be handed over to law enforcement may violate the Fourth Amendment via the exclusionary rule.
That insurance customers are contractually obligated to assist the insurer with investigations may violate the Fifth if that contract is being abused in this way, as well.
Yes, when third parties start acting under the direction of the police, they become the police in the eyes of the constitution, with the same restrictions.
That has nothing to do with the GGP’s strange claim that there’s some general constitutional prohibition against laws with “an inherent conflict of interest”.
> It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated.
It doesn't have to be a company making false claims. Cross the wrong person anywhere in the world and you can have the police and courts come after you.
To be precise, the problem is deeper than any one branch.
In the US system of government, checks and balances are essential to counter overreaching and abuse from any single branch. If no such checks exist against unjust prosecutions by law enforcement (the executive branch), then by default, either the judiciary or legislative branch must be at fault, or both.
In this case, it's clearly BOTH the US legislature and US courts have been remiss. Both should step in and outlaw any private funding of public law enforcement, as well as require ALL public court prosecutions to abide by the same burden of proof and evidence required of any gov't/DA-led investigation.
To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing.
> To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing.
I’ve always wondered why plea deals don’t count as perjury? You’re saying you did something when you didn’t.
Man it has very little to do with government and everything to do with your worship of free market nonsense. In a capitalist society capitalists own the government. AKA private power. So the judiary being corrupted to benefit corporate interests is a no brainer since that is the way the system is designed. It is working as intended.
It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated.
You can fight back, and if you win you would be very well compensated in the form of actual and punitive damages (assuming the insurance company didn't settle before trial).
Of the ruling class - not capital. Those two are not synonymous historically at all - remember the literal aristocracy of the warrior elite which also shows up in dictatorships.
This isn't mere pendantry but pointing out it is a matter of power.
Not really, no. The American aristocracy tends to have a lot of capital, but has been pretty exclusionary toward those without that aristocratic background. Less than parts of Europe, but it's the same beast. America has historically had pretty high income mobility. In my area the majority of capital owners are not from the upper classes.
The real purpose of the justice system is to make people believe in it so they avoid settling their own disputes. Anything else is incidental. Actually punishing criminals and not punishing innocent people helps, but is by no means necessary.
It’s like democracy: the primary advantage is that people think they can effect change so they will refrain from violent revolution. Whether voters can actually effect change is largely irrelevant as long as people believe it.
Most businesses -- even large businesses -- run on very low margins. The average person drastically overestimates the margins of businesses in general.
It doesn't have anything to do with 'working class'. Such things are pretty meaningless outside of political bullshit-making.
There are two real economic classes of people in the USA.. productive class and the parasitical class.
The productive classes consists of people of all income levels. They could be poor, rich, or in between. These are people who generate more wealth and value for society then they consume. Could be janitors. Could be farmers. Could be CEOs of fortune 500 companies. Small business owners. The whole gamut.
Then you have the parasitical class made up of people who can control vast amounts of wealth on paper, or not, but really don't produce anything themselves. Again all income levels. Could be a guy running scams on section 8 subsidized housing so the state pays his mortgage. (having a low-income girlfriend rent his house under the program while he pretends not to live there is a common approach). Could be massive arms manufacturers like Lockheed Martin. And politicians and other state apparatus and cronies that make their money through mechanisms like regulatory capture and taxes.
So it's up to the productive classes of people to provide the material wealth and value that is then used by the entire population of the country. The provide all the food, all the clothing, all the transportation services, they build all the housing, pay all the taxes, etc etc.
The source of political power for the government then is based on it's ability to extract a percentage of that wealth and then redistribute it. It's not just through taxes that they achieve this, but also through regulations and other controls of the market. The mechanisms can be overt and they can be subtle, but the goal is always the same: Take a portion of somebody's work output and give it to somebody else to get them to go along with what you want. Calling it 'socialism' really misses the point.
It's what always have existed. It's what kings used to gain and keep power. And it's what modern governments use to gain and keep power. Same thing, different lies. Ordained by God to rule, or 'will of the people'.. it's still all made up nonsense.
For example the Pentagon, in the USA, has hundreds of billions of dollars it spent that are simply unaccounted for. They know they spent the money. But they really don't know who it went to. Or why it was spent. Or really what it was spent on.
Most American's call that waste. But when it comes to the parasitical classes.. it's not waste. It's profit. And they have zero desire to ever see these sorts of 'problem' fixed.
So they don't get fixed. The real point has nothing to do with what they are buying. The important thing is who gets the money.
And thus it's the most critical job of the government to keep it's population working as hard as possible and generating as much economic activity as possible. So they generate sets of incentives and punishments... like working with banks to protect their debts. Also corporate culture plays a huge portion, propaganda from a variety of sources is all completely critical to making sure all this stuff keeps working.
People with massive student loans, massive car payments, massive mortgage payments, are kept that way because at that point they are working their asses off for virtually nothing. All their money ends up going to the banks one way or another. They are living pay check to paycheck and are terrified at the prospect of losing any sort of wealth generating capability because even a small dip in productivity will spend them into a even deeper debt spiral.
Sane people would just walk away from something like that. Once they got tired of the car they would just walk away from it. Got tired of the house, just walk away. So it's up to the government in schools working with banks and other groups to propagandize the population and convince them that it's in their best interest to spend all their lives generating the income for other people to use.
When George Bush said that if you stop buying stuff the terrorists win... to him that is not hyperbole or odd thing to say. It's actually a accidental moment of complete honesty. The goal of the terrorists is to undermine the economy that the government stands on top of.
And it doesn't need to be 100% one way or the other.
In this particular case the insurance companies are subsidizing their profits through the use of law enforcement to carry out investigations.
> Erie Insurance, one of the nation’s largest auto insurers, had not only provided the cops with evidence against its own loyal customer — it had actively worked with them to try to convict him of insurance fraud.
OK, but there is no "loyal customer". There is only the prospect of a payout. And the incentive to avoid it.
Ah, loyal customer is a commonly used term for a customer who has conducted business with a company for a long time. Not sure why you put it in quotes or why it confused you, but you can google it.
Yeah, OK. It's just that the outrage of TFA relies on the assumption that customers' loyalty implies companies' loyalty to them. It's arguably a foolish assumption. Especially about insurance companies, whose profitability relies on denying claims.
Not the assumption, the expectation. That's how capitalism is supposed to work, hence the outrage. "Caveat Emptor" shouldn't be a general business model.
It's quite simple. I gather that he'd been a customer for many years. So "loyal customer". And I gather that he owned an expensively customized vehicle.
So something bad happened, and he filed a claim. And the insurance company's systems presumably flagged the claim. Probably because it was much larger than expected, based on the type and age of vehicle. So they paid police to investigate for fraud. And I gather that they eventually did file a crime report. And at trial, their expert presumably testified that the vehicle wasn't worth as much as claimed.
If getting insurance increases the cost of a bad thing happening, instead of decreasing it (because your claim will be refused, and you'll also be charged with fraud for even trying to make a claim) then what is the point of taking out insurance on anything?
No worries for the insurers -- you're legally required to get insurance for all sorts of things in the US. Vehicles, mortgages...even some landlords require that renters hold a renters' insurance policy.
You're not legally required to get insurance for a mortgage. But you won't have much luck finding a lender who will lend to you if you don't. I'd be surprised if this wasn't equally the case in most other countries.
That's only true if you're putting down less than 20%. Once you're over 20% lenders don't care. I recently put 50% down on a house and did not have to get insurance. The lender said it was one of the cleanest loans they've ever done.
Is that true for homeowner's insurance? As far as I know, the 20% rule is for private mortgage insurance (PMI), which pays to the lender if you fail to make your payments. Basically an added payment because with a low down-payment, you're seen as an extra risk of default that must be insured separately.
Sorry, I meant PMI, not homeowner's insurance. The GP said "mortgage insurance" and that's what I was referring to. I absolutely have and was required to obtain homeowner's insurance to get a loan.
Don't know if that's true all the way around, put down more than 20% and had to have multiple very specific types of coverage, and they needed proof every year that the policies were renewed. Every year I held the mortgage, I got a nastygram because their system didn't do the auto-checks at the right time. Could be specific to type of home/location, though.
You don't have to have health insurance. You have to pay a fine for not having health insurance. Many people decide that the fine is the cheaper option, so health insurance companies at least have to compete with that.
You don't "have to" do anything under the law. Nobody comes and holds you by the wrist and makes you do it. You just have to pay fines, or go to jail for not doing it.
To drive on the public roads you have to prove "Financial Responsibility" for most people the cheapest and most effective way to do that is Auto Insurance, however every state i am aware of has alternatives, aka "Self Insure" that can be a Bond, or some other guarantee that you are able to cover the minimum liability of state
Remind me never to do business with State Farm, they seem to over the top at least in this story, I would hate to have Hail Damage to my home then be put in prison if I expect to have that damage fixed....
Does anyone have any carriers that they would recommend? I’m currently with State Farm, but this is really concerning. Anyone know of any more ethical insurance providers? Thanks.
USAA is great if it you meet the membership qualifications - I've been with them since my Army days (They keep loosening up the requirements, at this point if your father's brother's nephew's cousin's former roommate was ever in the military you might qualify)
I’m also with USAA (banking and insurance) for the last 30 years. Very happy (though no longer using them for investments as they’ve just not kept up).
Banking products have been available for a long time. Insurance used to be closed to just the military officer corps, then they offered insurance to some “affiliated” groups, but it was under different terms I think.
I had one auto claim and they were excellent. Parents had a homeowners claim and they were likewise excellent.
I have 2 insurance companies, State Farm being one. I decided okay, I'm going to switch immediately as I read the article, only to realize the other one was also named in the article! I think the issue is to push a law prohibiting such cozy relationship between cops and insurance companies. There's a strong conflict of interest when cops are getting paid by insurance companies.
While everyone involved surely deserves either life in jail or the death penalty, there's something we can do without going through the corrupt 'justice' system:
Inform all the clients of these companies of what they're doing. Let them know they bribed the police to put clients in jail after filing a claim.
And don't forget to name names - don't let them hide behind the corporate facade.
Debatable. To me life imprisonment sounds like a perfect match for perverting the legal system to jail and ruin innocent people for profit. This corruption is not just a crime against the victims, but against society itself for its erosion of the public trust in the institution of law.
So, I've seen the flip side of this. I have a friend who does building inspections for insurance companies. He sees what's basically outright fraud all the time, but companies rarely press it. Think about it: their main incentive is to avoid paying out claims where they shouldn't have to. They're more than happy to deny a claim, stop offering your services to that person and let the next insurance company get defrauded by the person. The companies have minimal incentive to rat out their own clients (especially when they're merely 95% sure it's fraud), and so lawlessness can easily continue.
So, I can see both sides of this. The government might WANT to prosecute insurance fraud, but they're rarely aware of it, because how would they find out?
I assume he's seeing construction fraud? Then the builder would be liable rather than the policyholder, and IANAL but probably the insurance company wouldn't have standing to do anything even if they wanted to since they don't own the building.
Or is he correcting details of the properties used in some actuarial model? I suppose that would be more interesting but I can't imagine that a 4x premium adjustment or whatever would be worth suing for.
Just today, Dutch newspapers reported that courts in the Netherlands are running trial processes against suspected insurance fraudsters without any involvement from the police or the DA's office [0].
The idea is that the police force is too understaffed to do research against smalltime insurance fraud, but the insurance companies are more than happy to build the case independently. And the judge is still impartial, so everything is fine, right?
This worries me because the insurance isn't exactly impartial, right? I assume that once they suspect fraud, they really really want you to have indeed committed fraud, because there's hardly any downside for them if they wrongly accused you. They'll build up a very one-sided case.
Apparently in the US, the same problem is solved with an undereducated instead of an understaffed police force, plus semilegal bribes. To be honest I don't really see the fundamental difference between that and the new Dutch idea.
I wonder what HN thinks should be the solution. Staff more cops? What if recruiting good ones is prohibitively hard? What if the good ones would really prefer to be put on other cases than "we think Joe Smith stole $2000 from an enormous cash-loaded faceless financial corporation"? It's a hard problem.
When lightning struck my house, insurance company just flat out refused to help, one employee of their just flat out told us on the phone that unless we could prove lightning hit our property specifically, they wouldn't even bother sending someone over to check our claims, because or the claim was false, or the lightning hit the power lines, and in this case we should bother the power company...
(by the way, we know the lightning hit our property, the damage got bigger and bigger in specific direction, and following it the place with highest amount of damage was the tall metallic post where the motor for the gate was attached...)
Wow. I had the same thing happen in back in '08, but our insurance company pulled record of lightning strikes in the area to determine if lightning could actually have been the cause. Luckily, they determined that it was the likely cause - all in all, I had almost $20,000 in damages.
Adversarial systems are where two advocates represent each side and attempt to convince an impartial third party (a jury, a judge) of their case. The court is an impartial referee between the two sides. This is the legal system in most common law countries (e.g. the United Kingdom, areas of the Commonwealth, etc.). In this system, the court isn't involved in investigating the facts of the case: that's up to the advocates.
This is in contrast to the inquisitorial system used in civil law countries (e.g. France, Italy) where the court is actively involved in establishing the facts of the case - so they're not an impartial referee like they are in the adversial system.
The investigative wing for life insurance is really interesting. They can sniff out fraud from a mile away. They still have to do a lot of insurance apps manually because people lie so often. How can people say they don't smoke but it shows up all over their medical records?
After a very long time, this is a fine piece of investigative journalism to make the top 30 on HN. I wish the main BuzzFeed site did more of this than the clicbait.
> But Schoofs acknowledges that BuzzFeed’s investigations may never rocket into the social media stratosphere with the same velocity as the company’s lighter fare. Major investigations seldom get fewer than 200,000 pageviews, but that’s a dribble of traffic compared to the 73 million pageviews garnered by The Dress.
Insurance companies obviously end up being the front line of insurance fraud and should definitely turn over those cases to the proper authorities. But this shit? "Erie had even paid part of the salary of the lead detective who knocked on Schmidt’s door that day, as well as that of the prosecutor who went on to charge him with felony insurance fraud. And it would also secretly cover the costs of an expert witness to testify against Schmidt in court." Why on gods green earth is it legal for any person or company to directly pay police departments like this? How is this not a bribe?
The really crazy thing is a small time blogger I know got fined thousands of dollars for not disclosing a product endorsement on her small time blog.
The FTC is up and active and enforcing the rules... on the smallest companies in the US.
Somehow in this country if I get a free meal at a restaurant, post about it and don't disclose the free meal, I'm a target. But bribing police is legal without disclosure to courts? I can pay 'experts' to testify in court without revealing I'm paying? Just when I though the corruption couldn't get any more entrenched, I keep finding new areas of deep rot.
> I can pay 'experts' to testify in court without revealing I'm paying?
I feel like it's generally understood that when expert witnesses get called to the stand, they're being compensated for their time by whoever is calling them.
> I feel like it's generally understood that when mommy blogger talks about a product on their blog, they're being compensated for their time by whoever is calling them.
I edited it for you to see if you agree that what's good for the geese should be good for the gander. If that logic won't fly for Mommy blogger with the FTC, why should it fly with expert witness? The stakes are WAY lower in one than in the other.
To be clear, I'm not supporting the idea of the FTC giving fines to anybody. But the idea of rule of law is that laws should apply to everyone, which is clearly not the case.
Your argument BTW, feels weird. Why would you bring up the idea of 'generally understood' when that can equally apply to the other side? To me it feels like one of those subtle defenses for the current system that don't actually spell out a defense, but tries to remove criticism with offhanded comments.
Blogging is a hobby for many people; being an expert witness is not. Does every expert witness donate their time out of the goodness of their heart? They're experts; they have a career doing something. They're taking time out of that career to consult for the case and appear on the stand; why would you not think that time is compensated for?
Edit: I could see an argument that normal witnesses are not compensated for their time, and so a layperson might assume that an expert witness is not? But normal witnesses are appearing in their capacity as a witness; expert witnesses are appearing in their capacity as an expert. They're consultants; consultants get paid for consulting.
> They're consultants; consultants get paid for consulting.
Bloggers... get paid for blogging. The issue, just like the expert witness, is by who. That is literally the whole point of disclosure for mommy bloggers, disclosing conflict of interests. Why not for witnesses?
Again, you keep putting out arguments that seem to be defending the current system without actually stating as much. If you feel the FTC should be as it is, then say so. These off handed contrarian comments with subtle defense of terrible things... is a kinda dishonest way to communicate.
I will say, you did spell out the rationalization of this. But a rationalization is just that: "the action of attempting to explain or justify behavior or an attitude with logical reasons, even if these are not appropriate.". Your logic can also be restated in a way that really highlights the issue I have:
People are not to assume someone in a commercial setting is getting compensated for endorsement. So therefore a disclosure is needed and strong enforcement.
People who are volunteering (jury) are to assume that things that happen in a non-commercial setting happen for money. Therefore, no disclosure is needed and no enforcement.
Also, the commercial setting has low stakes. The court setting has high stakes.
Which again, brings us back to: what's your point with these off handed comments?
Edit: Reading your other comments on this page, I think you didn't even read the article, which is why your comments are coming off so strange.
> People who are volunteering (jury) are to assume that things that happen in a non-commercial setting happen for money.
What? Jurors aren't volunteers. Jury duty is mandatory; if you get called, you have to show up or provide justification for why you can't be a juror. If you get selected, you can't just say "no sorry, this case actually sounds boring and I'd rather not". Also, jurors get paid. They are volunteers in no sense of the word.
Court is generally considered to be a professional setting; I agree that it's non-commercial but I disagree that there are only two options where one is "commercial" and the other is "if you're getting paid you have to disclose it". Who would you think is paying an expert witness for their time, if not the person who wanted them to testify?
I legitimately do not understand why you feel like this is a conflict of interest.
In my experience as a juror at a criminal trial in California, it was not left to general understanding that the anti-DNA expert called by the defense was paid by the defense. The prosecution got it in right at the beginning of their cross exam. of the expert.
In the opening 'graphs of TFA the People should be paying experts, police officers and prosecutors, and the police and DAs should be deciding on the viability and priority of the case as they do for convenience store robberies etc.
Imagine if "Rich man" had a wife who was killed and a "Poor man" who he wanted to see convicted of the murder. Now you have police and DAs who are clearly on the take and the conviction can be funded by "Rich man". And "Rich man" can supply the "evidence" and the "experts" who explain it.
I don't know what 'TFA' is, but you say that it says experts should be paid, so I don't understand what your argument is here.
The second scenario you describe is clearly corrupt, but I don't see how paying a consultant for their time is the objectionable part; when you stack that against a DA on the take, a police force on the take, and a rich man fabricating evidence, that all seems like a larger problem to me than "the rich man can pay an expert to testify about their expertise", especially given that the testimony of the expert witness can be challenged.
It's derived from RTFA - "read the fucking article," something said when someone makes a comment that is addressed in the article. However "TFA" doesn't have the same rudeness that "RTFA" has and doesn't imply anyone didn't read the article.
I think the original expansion was as you say, but some people think of it as "Fine article", which I personally do. I have read comments which said "OP" and meant the fine article, and other comments where "OP" meant some top-level comment. So it's nice to have a shorthand that hasn't been degraded in specificity.
The second scenario is what you are commenting on. Literally. It's in the article.
For those of us that like to read and think and then comment, it can be frustrating talking with people who are just gratifying their ego by putting out words with no idea of what the topic even is.
And you'll note that I said the second scenario is awful!
But paying a consultant to consult for you doesn't become a bad thing to do, even if you are a bad person.
Like, consider the opposite question: Why should expert witnesses, people who have absolutely no connection to a case beyond a level of expertise in some component of it, _not_ be compensated for the time it takes them to prepare their testimony? This isn't an employee of the city; imagine you're a construction foreman and you're asked to appear as a witness to describe your experiences on a typical job site.
Why should you not get paid for preparing and giving your testimony?
Oh yes. Just the other week, the largest workplace immigration raid in history took place.
Seven factories owned by the same company. 680 individuals arrested for being undocumented - a misdemeanor, leaving aside all the other polarization of opinions on that.
It's a felony to (knowingly) employ someone without work authorization.
Not one supervisor, manager, or executive has been charged with anything in relation to these raids. And ICE has announced no plans to do so.
The author gets this topic utterly backward. Large insurance companies each have essentially no business incentive to do anything except pay claims. Maybe they try to get insureds back to baseline on the cheap, but deny an insured loss entirely? No. Not even investigate them.
And so fraudulent claims and the shadow industry that surrounds them grow in size until something bad happens, like a grandma dies in a commercially-staged motor vehicle accident.[1] And then everyone gets all introspective and tries to figure out how we got to that regrettable point and what we can do to walk things back to a sane place where fraudulent activity is not acceptable.
Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims. What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced and are generating erroneous or weakly-supported evidence of fraud, which the companies then hand off to public authorities who apparently have no better resources. That leads to two observations:
1. If the problem is irrational, counterproductive prosecutions due to poor training and resources, writing a hit-piece about supposed conflicts of interests over supplemental funding being used to patch the resource problems isn't really part of the solution.
2. The insurance companies are paying for the consequences of poor-quality investigations communicated to authorities by their investigators. The article talks about some of the claimants suing the insurers for bad faith practices (and defamation?), which I'd call a "cottage" industry in the U.S., except that the industry is quite large and active. The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions-- maybe not to refer prosecutions at all-- and so we'll repeat the cycle mentioned above until at a future time a grandmother, aunt or child is killed again in a staged fraudulent insurance claim, and then everyone will get introspective again and muse that at one point we had laws that incentivized insurers to identify and prosecute scam artists but bad press like this article led to changes that made them stop.
>>Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims
Incorrect, the entire point of an insurance company is to collect as much in premiums as possible while paying out as little in claims as possible
the Clear basic incentive is to DENY as many claims as possible
>> What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced
I don't see that at all. I see the companies incentivizing "investigators" to find away to deny claims even if it means fabricating a good story wholesale.
The Contractor that had is business ruined by State Farm because he was talking to the press is a clear example of that
>> The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions
Where on earth do you get any of these companies have "Learned their lesson"
Let me guess you are an insurance sales man, or in some way make your living connected to the Insurance scam?
The insurance business is about paying claims with minimal friction, expense, and dispute, and making sure premiums are set at an appropriate level . Triggering bad faith discovery and expensive extracontractual settlements is not the point, and it is exactly what the companies identified in the article have done. The ability of claimants to bring those claims more than levels the playing field.
I'm just floored to see a post on HN criticizing someone else personally on HN and then calling insurance a "scam"? It's a regulated industry, it's definitely not a scam, and I'm really saddened at the level of misunderstanding brought about by a poorly written one-sided article that doubtless was inspired by some kind of sharp-elbowed personal injury litigation strategy by sources in the story.
That does not in anyway "prove" it is not a scam, it is a legal scam backed by the government which there are many of those
The Insurance Industry for decades now have succeeded in regulatory capture where the "regulators" are made up of industry insiders that ensure the regulations favor the companies not the citizens
That is one of the biggest points of the story, is how the "regulations" mainly shield the insurance companies from liability and prohibit them from being sued
>I'm really saddened at the level of misunderstanding brought about by a poorly written one-sided article
It is not the article, the article just confirms what many of us has already experienced in Real Life when it comes to insurance.
Submit a claim, only to have it denied because you insurance only covers you if the event happens on the 5th tue during a full moon, if you are standing on one leg while praise the xenu god... That clause was on page 900 of the 4 point font contract you "agreed" to when you took out the policy
Or if the do approve your claim, You are Dropped from the insurance the second they legally can, or they jack your rates up Sky High to ensure they recover the costs, never mind that you paid in premiums for years well in excess of the claim....
Ok, point taken on underwriting and excluded risks, both of which are closely regulated and create legal commitments which insurers scrupulously honor by paying claims.
I think in any organization when management constantly is trying to squeeze costs there will be instances of incompetent conduct (which folks on HN will quickly note is often indistinguishable from malice). That said, if an insurer denies claims where liability and damages are reasonably clear, or abuse legal processes-- both of those are torts, legal fees are often available for the successful party, and if you feel you've been wronged by an insurer in any of those ways by all means go speak with a bad faith insurance attorney and good luck.
Are you saying that the incidents in this article didn't happen and that State Farm isn't paying LEO to investigate customers it believes are fraudsters?
The insurers paid their own investigators to investigate the insurance claims. When those investigations generated evidence that in retrospect was defective or weak, the companies handed the file to the police. I don't know who pays whose salary in Pennsylvania, but the article goes after all kinds of public/private coordination in the SIU space, from NICB on down for alleged collusion, and from that perspective simply has it wrong.
The biggest and (maybe) the only problem are the incentives for LEO to manipulate proof to jail /convict innocent people. Even an arrest can ruin your life, let alone trial, regardless of outcome.
Other than that, insurance companies have a right to cut down on fraud and jail fraudsters.
LEOs have access to tools that the public and corporations don't have access to, and the law prevents them having access to. By paying a LEO to access those tools the insurers are circumventing the will of the people.
Also, by paying LEOs to investigate a particular crime that means the insurer is effectively getting to pick who is investigated and who isn't. They should be able to deny a claim, and report what they believe is fraud, but the insurer shouldn't be telling law enforcement who to look in to. That's law enforcements decision alone, and payments muddy the water.
Paying for law enforcement is a bad idea. It changes the incentives too much.
They paid salaries of police, the judiciary, and the guy who testified against him in a CRIMINAL trial. That's more than enough conflict of interest to have any such criminal trial thrown out.
It's a necessary part of the business, and it keeps rates down for every insurance holder.
I just wish they were more public about punishing the bad ones they catch. It would help people understand the necessity of investigations, and probably discourage some would-be fraudsters.
> In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an “unwritten policy” within the company to withhold evidence from customers that could help prove their innocence.
If withholding evidence that might prove your customer's innocence is a necessary part of the business, I submit that your business is bad and should not continue in its current form.
> In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an "unwritten policy" within the company to withhold evidence from customers that could help prove their innocence.
Besides the appearance of possible bad faith, that might also -- in the context of government relying on the insurance company to do some of the investigative work -- thwart government obligations to share evidence with a defendant.