Mobilizing Against Fraud

The Ontario Auto Insurance Anti-Fraud Task Force has taken preliminary steps to establish the scope and appropriate response to fraud.

by Willie Handler

March 2012 issue of Canadian Underwriter

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Recognizing the importance of preventing auto insurance fraud, the Government of Ontario appointed the Auto Insurance Anti-Fraud Task Force on July 29, 2011. Directed by a five-person steering committee, the Task Force is independent of the government. Its mandate is to:
• assess the extent and nature of fraud in the Ontario auto insurance system; and
• recommend actions to reduce the incidence of fraud for the benefit of policyholders.
 
The Task Force submitted an interim report to the government on Nov. 21, 2011. The interim report describes what the Task Force has learned during the four months since its appointment; outlines actions with short-term benefits that might be taken; and establishes an agenda for the balance of its mandate.
 
The final report of the Task Force is due by Fall 2012.
 
Early Observations
 
For some time, a figure of $1.3 billion has been used to describe the cost of fraud in Ontario, but the Task Force believes this figure is not reliable. The Task Force indicates in its report that a comprehensive research and analysis on the scope of auto insurance fraud in Ontario will be undertaken over the remainder of its mandate.
 
The Task Force has categorized fraud into “organized,” “premeditated” and “opportunistic.” These defined categories will create some controversy among auto insurance stakeholders, since some groups do not agree they all constitute fraud.
 
Organized fraud
 
The Task Force defines “organized” fraud as an organized scheme designed to generate cash flow through either staged accidents or fabricated accidents. Individual claimants are not the organizers of these schemes: they generally rely on white-collar professionals to support the schemes. Stakeholders in the system completely agree that these activities constitute fraud.
 
Premeditated fraud
 
Premeditated fraud is defined as continual pattern of charging insurers for goods and services that are not provided or that are unnecessary. A claimant may or may not be complicit in the fraud. As well, in this type of fraud, the participant is not dependent upon a larger organization. Some stakeholders do not consider that claiming for some of these goods and services to be fraud. Rather, they believe these are simply disagreements over what constitutes reasonable and necessary expenses.
 
Opportunistic fraud
 
Opportunistic fraud involves an individual claimant who pads the value of his or her auto insurance claim by claiming for goods and services that are unnecessary or unrelated to the accident. Again, some people will see this as a disagreement about what constitutes a reasonable or necessary expense rather than a deliberate, fraudulent “padding” of claims.
 
Cost Trends
 
A significant portion of the Task Force’s interim report is dedicated to analyzing the costs structure and trends in the Ontario auto insurance system. Although the Task Force did not make a quantitative estimate of the extent of fraud in the system, it did make a number of interesting observations.
The Task Force identified a large — and as yet unexplained — gap between changes in accident benefits claims costs and changes in factors that are expected to influence those costs. The report notes that theses costs are concentrated in the GTA.
 
According to Exhibit 3 in the interim report, accident benefits claims costs increased by $2.4 billion or $370 per vehicle between 2006 and 2010. Exhibit 6 shows that $2 billion in accident benefits claims costs or $300 per vehicle is unexplained.
 
This gap was calculated by comparing actual accident benefits claims costs with projected accident benefits claims costs over that same period had they grown at the same rate as private health expenditures in Ontario.
 
Another concern for the Task Force was the increased frequency of accident benefits claims. Between 2006 and 2009, 6,400 fewer people were injured in auto accidents, based on Ministry of Transportation statistical reports. And yet, accident benefits claims increased by 14% over the same period.
 
The Task Force concluded that the fastest-growing categories of auto insurance fraud are premeditated and organized fraud. This is based on the belief that opportunistic fraud through the padding of claims could not have grown so quickly in such a short period of time.
 
Task Force Analysis
 
The Task Force spent a considerable amount of time collecting and analyzing available historical data. This gives us a very good perspective of how the Ontario system has gone off the rails over the past few years. However, the historical analysis is based on a system that no longer exists. Ontario’s auto insurance reforms, implemented in September 2010, dramatically changed the landscape of the province’s auto insurance system.
 
Prior to the reforms, the largest increases in accident benefits costs from 2006 to 2010 were assessments and examinations (228%), caregiver benefits (186%), housekeeping expenses (178%) and medical benefits (105%), according to Exhibit 16 of the interim report. All these benefits were affected by the reforms. Caregiver benefits and housekeeping expenses are now only paid to catastrophic claimants (about 1% of claims) and policyholders who purchased the optional coverage (also about 1% of claims).
 
Anecdotal feedback from health care professionals conducting medical assessments and examinations indicates business is down 50% since the reforms were introduced. Meanwhile, a number of insurers report that 50% to 70% of their claimants are being treated under the Minor Injury Guideline and are consequently subject to the $3,500 medical and rehabilitation cap.
 
And so, assuming most claimants no longer claim caregiver benefits and housekeeping expenses, if health professionals are conducting half the number of assessments as they did pre-reforms, and if at least half of insurers’ claimants are subject to the $3,500 cap, one would expect significant claims cost reductions since September 2010. I estimate this should work out to a reduction in costs of roughly $1.3 billion. This leaves about $700 million in current unexplained costs in the system. This is still a significant figure, and it speaks to the need to gain a good understanding of the extent and source of fraud in Ontario, particularly during the post-reform period.
 
Expected Changes
 
The Task Force is already working on changes that should have a positive effect on the auto insurance system. These include working on optional e-learning for police officers; changes in Health Claims for Auto Insurance (HCAI), the electronic system health professionals use for transmitting auto insurance claims forms to insurers, that allow health professionals to check for unauthorized use of their identity, FSCO guidelines on health care billing practices; and new anti-fraud brochures and Internet material.
 
More substantive recommendations are still to come. The interim report highlights some of the possible recommendations including:
• licensing and/or regulation of rehabilitation clinics;
• enhancing regulation of the towing industry;
• establishing a dedicated fraud investigation unit; and
• developing a consumer engagement and education strategy.
 
Licensing/regulating rehab clinics
 
The Task Force indicated interest in the licensing requirements introduced by Hillsborough County, Florida in September 2011. Some of those requirements include:
• A physician must be responsible for operating a clinic.
• All persons associated with operating a clinic must submit 1) a copy of their state license; 2) a list of criminal convictions, if any; and 3) a set of fingerprints.
• A clinic must agree to inspections by county code or law enforcement officers.
 
These changes are new, so there is little experience to date regarding their effectiveness as an anti-fraud measure.
 
It is also difficult to determine what body in Ontario would take on this regulatory responsibility, which would include licensing, inspection and enforcement activities. Ontario is reportedly facing a $16-billion deficit and has appointed former bank economist Don Drummond to conduct a public service review. Under the current fiscal environment, don’t expect new money and resources from the Ontario government to regulate rehabilitation clinics.
 
Is there an alternative model? Well, there are the health regulatory colleges. But moving in this direction would require a substantial change in mandate to cover multidisciplinary facilities. In addition, the colleges have their own fiscal and resource restraints.
 
Regulation of the towing industry
 
Towing operators and drivers are currently licensed and regulated by a patchwork of municipal bylaws. Some are effective but many are not.
 
Regulation of the towing industry was proposed in a private members bill (Bill 147) introduced in the Ontario Legislature in April 2011. Bill 147 did not proceed past second reading before the fall Ontario election; therefore, it died on the Order Paper. Had the bill passed, it would have introduced a self-regulatory body, the Towing Industry Council of Ontario.
 
Don’t expect to see the bill revived under the current session, because the towing industry does not yet have the infrastructure in place for self-regulation. Government expenditure constraints will challenge the Task Force to develop a framework that will require minimal public resources.
 
Dedicated fraud investigation unit
 
The Task Force has shown interest in the U.S. National Insurance Crime Bureau (NICB). The NICB partners with insurers and law enforcement to identify, detect and prosecute insurance criminals. Data analytics is a critical tool of the NICB. The mandatory reporting of data by insurers facilitates the data collection. Introducing a similar model in Ontario would likely require legislation and engage some discussions about existing privacy legislation.
 
Where in Ontario would such a potential fraud investigation body be housed? Again, government financing constraints would likely be a factor. Building in some way on the experience of the IBC’s Investigative Services makes sense and more closely follows the American model.
 
Consumer education strategy
 
 The Task Force concluded there is little public awareness of Ontario’s auto insurance system and existing types of fraud. Fraud organizers use this lack of public knowledge to their advantage. Some consumers participate in fraud schemes without their knowledge and without understanding the risks.
The Task Force believes fraud prevention includes a better-informed public. The extent of any potential public education campaign is unknown at this time. But if it happens, it will require funding. FSCO and the Ministry of Finance have no history of funding consumer education campaigns dealing with auto insurance, so expect the financial burden to fall on the insurance industry.
 
The Task Force’s interim report received almost no media coverage, but expect more interest when the final report is completed and released later this year. None of these issues are simple, so the Task Force has its work cut out for itself.

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MBA Debate Ignited

Walla said some points which brought another reader, whom I respect and is an avid reader of the blog, to bring forth his views. His views are in blue, pretty solid points. My previous reply to Walla in yellow.

:33 PM

 

 walla said...

It's the old academic-practical question. But there is a difference. The MBA can with observation and mentoring become more street-smart but the street-smart without proper training cannot do the academic things the MBA can.

Kuok was a savvy commodity trader during his days. But if he is to present at an analyst conference today, he won't be able to answer with industry-wide terms the questions they will throw at him.

The last part of what the blogger wrote to say the street-smart can do this and that ..actually how many nonMBA street-smarts think enough like that to be able to know what to do next to get quantitative answers to acceptable levels of confidence?

Unless what is being pushed here is some zen-like qualitative personal insight seared out of big-time losses rehashed as street-smart wisdom.

But street-smart wisdom is about three chapters; MBA is at least three-hundred. And that's how investors have been looking at proposals since they have to answer on what basis they would plough in billions.

A lot of the success stories is by reverse engineering. Karma, luck, and dogged persistence lead to one big killing out of fifty, and it's success to be reverse engineered into some nice homilies.

In the end, arc knowledge-practice with culture. Then imponderable forces will be the only variable left.

No links, this one.

5:50 PM

 

It's the old academic-practical question. But there is a difference. The MBA can with observation and mentoring become more street-smart but the street-smart without proper training cannot do the academic things the MBA can. Where is the basis for this comment, where is the data to support the supposed fact that the street smart with no proper training cannot do the academic things the MBA can. Whats so difficult, clever and/or unique that the MBA can do because of their academic training that the street smart cannot muster the common sense to master, after all is it not a fact that most of MBAs supposed knowledge and brilliance is simple cut and paste or unoriginal plagiarism. This is a world full of copy cats... ask Steve Jobs, lol.

Kuok was a savvy commodity trader during his days. (Well, MBAs trades on information and knowledge) But if he is to present at an analyst conference today, he won't be able to answer with industry-wide terms the questions they will throw at him (The Kuoks of this world make up the top 1% to 5% of the world population, they do not need to do the presentations themselves. They surround themselves with people with brains to do the work, as Henry Ford once said, " You do not need to have brains to run your business, you can always hire them").It is the brains and killer instinct to build the businesses from scratch that the MBAs lack and would take a lifetime to acquire cos there is such a thing a information overload and over analysing an issue to death before one musters the courage to make the killing before it is too late or someone swoops in.

The last part of what the blogger wrote to say the street-smart can do this and that ..actually how many nonMBA street-smarts think enough like that to be able to know what to do next to get quantitative answers to acceptable levels of confidence? Why dont you provide the answer if you are so smart, and please quantify and support it with solid scientific data from your so called skilled academia schooling.

Unless what is being pushed here is some zen-like qualitative personal insight seared out of big-time losses rehashed as street-smart wisdom. Pompous sounding goobledigook.

But street-smart wisdom is about three chapters; ( the 1% to 5% Kuoks of this world are more focussed on making things happen and creating real emplyment and multiplying wealth and adding value to the world they live in, unlike MBAs who have too much time on hand to wonder how is it they are so brainy and yet they are left behind to ponder what has actually happened, and then with hindsight, write thesis about the art of management and leadership as if they know better than the rest of the world) MBA is at least three-hundred. And that's how investors have been looking at proposals since they have to answer on what basis they would plough in billions.

A lot of the success stories is by reverse engineering. Karma, luck, and dogged persistence lead to one big killing out of fifty, and it's success to be reverse engineered into some nice homilies.In the end, arc knowledge-practice with culture. Then imponderable forces will be the only variable left.No links, this one. (Pompous assertions yet again with no basis and solid scientific data to support, how disappointing coming from a supposed highly trained mind).

Fair comment Walla, (More like smart arse comments to me from a probably very clever guy but a career lifer who has reached the zenith of his profession who doubles up as an expert pedestrian commentator).
I am not into bashing MBAs, its the rote learning of methods that removes the fine art of business dealings. The inability to use their tools for the softer skills required. (Why be defensive, nobody saying you were bashing MBAs. you were only making a statement of fact)

Its true, you probably can find 1 or 2 out of 10 MBAs who are also street smart. You would need 100 street smart personnel to get four or five that can do what an MBA can without getting one. (Ambivalent statement I am not smart enough to comprehend).
True or not, most MBAs end up working for the street smarts. You are spot-on here.

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Why MBA Is Not All Good

 Ivan said...

Hello,

What was so important about academic, if MBA is not so call important?

11:23 AM

 

Academic achievement is good provided it is part of an well rounded education. I have had to hire many people for various roles, analysts, sales traders, etc... To me, a degree tells me you can read and write (I hope), thats all. Nowadays, a number of graduates can read and write, maybe write horribly, but cannot even carry a conversation in simple English. I say that as English is a business language, and I am talking about business graduates primarily.

In some developed nations and some high-esteemed corporations / GLCs, they value the pedigree degree from the Top 20 universities globally because they get to pick from the cream of the crop. Fine, if thats the kind of graduates you want. In the end, you want performers, enthusiastic workers, people who think outside the box, people who can work around issues and problems, good interpersonal skills ... street smartness. We all know that a degree will not tell you any of those quality.

I think why Robert Kuok frowns upon MBAs is that an MBA gives a person who has had some biz background a sort of license that they are now biz experts, which is clearly a silly proposition. The most galling thing to me about MBAs is the "schematic way of thinking through problems". Got an issue, lets do a data collection and analyse them. Lets do a client testing before rolling out a product, do a client survey, etc... All these while inherently OK, are all ass-covering methods of doing business. I believe Steve Jobs would not have rolled out the iPhone, iPad if he had a room full of MBAs.

If you put an entire room full of analysts, fund managers and bankers with a company that wants to boost its liquidity, valuation and raise funds - how many will come up with the right solutions. There are textbook solutions which will prescribe the usual: bonus, placements, new share issues, analysts coverage, press coverage, etc. MBAs will always attack everything with financial modelling, variance and regression analysis, case studies, client surveys, ... cause thats what they have been trained to do.

The ones that get to achieve more in their careers will go further to focus on potential dilution, company's branding, management's perception in the market place, concentration of business in value-add segments, margin maintenance, longevity of market share/penetration/growth of segment, their place in the ladder of competitiveness, and get to the real end objectives of the owners (fear of losing control, no money or don't want to spend their own money, family control issues, lack of foresight/drive).

To do all that well, an MBA will not get you there, its the interpersonal skills, the connection you can make with people. Basic concepts, knowledge are just basic tools for you to leverage on.

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Tune In To BFM Friday Morning

Do tune in to BFM 89.9 tomorrow morning at 8am where the "cruel interviewers" will try and ask difficult questions to unsettle Professor Glen Arnold and Koon Yew Yin. Those who did not buy tickets for Saturday's seminar will have to make do with the live interview.


Yes, I believe Koon will be talking about certain stocks he like. I will briefly mention one stock I like. Glen will be doing the entire thesis of great investors, plus his own valuegrowth investment thesis.

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Thoughts On Business & People

"WHEN I hear somebody's got an M.B.A., I have a feeling of dread, because normally they come to me with an overpompous sense of their own importance. And no way are you going to prick that bubble, with the result that one day there will be a cave-in in their department" - ROBERT KUOK







An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.
Laurence J. Peter

Ask five economists and you'll get five different answers - six if one went to Harvard.
Edgar R. Fiedler

Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats.
Howard Aiken

I rate enthusiasm even above professional skill.
Edward Appleton

Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.
W. Edwards Deming

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What Has Happened To My Good Friends?

Just got back from a short trip to Singapore. I meet my good friends there 3-4 times a year, all of them are Malaysians who studied in NUS, some may have married other Malaysians or Singapore girls. Plus I worked in Singapore for 3 years in the early 90s, mixing with the same group of friends.

I do not have many good friends, maybe less than 20 but the group in Singapore (some taken on citizenship there even) has evolved like Darwin's best pets.They are still inherently the same people but the stuff they talk about PISSED me off no end:

a) "waaa... so cheap" - everything to them is so cheap, one must be empathetic enough to visualise how their attitude or even genuine statements make themselves appear in the eyes of other

b) "flaunting of brands, labels, airline miles, etc.." - you can be a consumerism victim, you may even say what things you bought or which ski lodge you holidayed at ... BUT NOT ALL THE FUCKING TIME ... these are THINGS. If I come to visit and have dinner, talk about you and your family, your aspirations, even your troubles or happy stuff. Things are things are things.

In terms of being successful in the careers, most of them are, my friends in Singapore but I also have a similar group in KL, just as successful, but do not engage in pathetic marialistic talk ALL THE TIME. It gets very tiring when you talk about queuing up for LV bags, how many you are limited to buy, the bloody ski holiday in Korea and planning your next ski holiday in Europe, getting enough Biz Class frequent flyer miles, where to get the most expensive ham, how you attended the expensive Chinese dinner drinking S$300 soup ... ALL IN the first 20 minutes of dinner ....

Real friends, good friends when we have little or no money .... the trouble is when some of us get a bit of money. I know my friends, if they read this they know what I am talking about and why. Is it the recognition, the need to be validated, the high life you are living, you need people to know ... Just like the ostentatious HK rich man who said, when asked why he keeps flaunting his wealth: "IF I DON'T DO THAT, HOW WILL PEOPLE KNOW HOW RICH I AM ... IF PEOPLE DON'T KNOW, WHY BOTHER GETTING RICH".

If you can find ten things wrong about that person with that last statement, you can be my good friend.

It is sad and it makes me angry, but I guess they have been Singapor-ed ... I hope they realise before I give up on them.

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Ubuntu ... Do We Have It In Us?

Ubuntu sounds so much like many swear words in our mlulti lingual society. Sounds like buntut, pundek ... Are we all conditioned not to have ubuntu in our capitalistic, survival of the fittest, winner takes all, meritocracy only society???
Give me a Ubuntu society anytime. Naturally, its hard to just have unbuntu in the modern world, just that no matter how tiny the flicker of flame of ubuntu we all may have, just don't let it die out. If we can pass on "courage, survival, interpersonal, integrity" skill sets and values to our children, make sure you pass on the essence and beauty of ubuntu to your kids ... to be totally human and to live well.





An anthropologist proposed a game to the kids in an African tribe. He put a basket full of fruit near a tree and told the kids that who ever got there first won the sweet fruits. When he told them to run they all took each others hands and ran together, then sat together enjoying their treats. When he asked them why they ran like that when one of them could have had all the fruits for himself, the kids responded: "UBUNTU, how can one of us be happy if all the other ones are sad?" UBUNTU in the Xhosa African culture means: I am because we are. 


Ubuntu (Zulu/Xhosa pronunciation: [ùɓúntʼú]; English: /uˈbʊntuː/ oo-buun-too) or "uMunthu" (Chichewa) is an African ethic or humanist philosophyfocusing on people's allegiances and relations with each other. Some believe that ubuntu is a classical African philosophy or worldview^[1]whereas others point out that the idea that ubuntu as a philosophy or worldview has developed in written sources in recent years.

Ubuntu: "I am what I am because of who we all are." (From a translation offered by Liberian peace activist Leymah Gbowee.)

Archbishop Desmond Tutu offered a definition in a 1999 book:^[3]

A person with Ubuntu is open and available to others, affirming of others, does not feel threatened that others are able and good, based from a proper self-assurance that comes from knowing that he or she belongs in a greater whole and is diminished when others are humiliated or diminished, when others are tortured or oppressed.

Tutu further explained Ubuntu in 2008:^[4]

One of the sayings in our country is Ubuntu – the essence of being human. Ubuntu speaks particularly about the fact that you can't exist as a human being in isolation. It speaks about our interconnectedness. You can't be human all by yourself, and when you have this quality – Ubuntu – you are known for your generosity. We think of ourselves far too frequently as just individuals, separated from one another, whereas you are connected and what you do affects the whole World. When you do well, it spreads out; it is for the whole of humanity.

Nelson Mandela explained Ubuntu as follows:^[5]

A traveller through a country would stop at a village and he didn't have to ask for food or for water. Once he stops, the people give him food, entertain him. That is one aspect of Ubuntu, but it will have various aspects. Ubuntu does not mean that people should not enrich themselves. The question therefore is: Are you going to do so in order to enable the community around you to be able to improve?

Tim Jackson refers to Ubuntu as a philosophy that supports the changes he says are necessary to create a future that is economically and environmentally sustainable.^[6]

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