(Revised December 2003)

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Table of Contents
The Mission of the Fraud Division

Insurance Fraud Costs Consumers

Common Insurance Fraud Schemes

Automobile Insurance Fraud

Workers Compensation Fraud

Property Casualty Fraud

Filing a Complaint of Suspected Insurance Fraud

The California Department of Insurance Fraud Division Intake Unit

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The Mission of the Fraud Division:
To protect the public from economic loss and distress by actively investigating and arresting those who commit insurance fraud and to reduce the overall incidence of insurance fraud through anti-fraud outreach to the public, private, and governmental sectors.

The Fraud Division is a part of the Criminal Investigations Branch of the California Department of Insurance and is composed of three separate Insurance Fraud Programs:

• Automobile Insurance Fraud
• Wor kers Compensation Fraud
• Property Casualty (property, health, arson, life, and disability insurance fraud)

The investigators for the Fraud Division are the leading experts in the field of insurance fraud.  They are trained in criminal investigations and provide assistance as well as training for consumers and law enforcement agencies.  As sworn peace officers, they must possess eligibility for the Peace Officer Standards and Training (POST) Basic Certificate and are authorized to carry firearms and make arrests. They present prosecutable fraud cases to the District Attorney, the State Attorney General, and U.S. Attorney.
If you are solicited to commit insurance fraud,
                              Stop!
Insurance Fraud is a felony punishable by up to five years in state prison and a $50,000 fine.

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Insurance Fraud Costs Consumers
According to the National Insurance Crime Bureau (NICB), insurance crime nationwide costs $20 billion annually.  Although insurance fraud is sometimes referred to as a "victimless" crime, it does affect people in many significant ways.  Widespread insurance fraud ultimately translates into higher insurance premiums, which often results in the elevated cost of goods and services to the consumer.  It is estimated that auto insurance fraud alone costs each consumer an additional $200 a year per policy.

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Common Insurance Fraud Schemes
In order to protect yourself from being a victim or an unwitting participant in insurance fraud, it is important to familiarize yourself with common insurance fraud schemes.  Most businesses providing insurance or insurance related services to consumers are trustworthy; however, the more familiar you are with fraud indicators (red flags), the better equipped you will be to recognize potential fraud.  It is important to remember that no one indicator by itself necessarily constitutes a potential fraud. Even the presence of several indicators, while suggestive of possible fraud, does not mean that fraud is being committed. Moreover, insurance fraud can exist without any of the common indicators being present. The following indicators for Automobile, Workers Compensation and Property Casualty fraud should help isolate those insurance services that merit closer scrutiny.

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Automobile Insurance Fraud
Automobile insurance fraud in California has historically taken several forms.   The most common fraud schemes involve automobile property and automobile accidents.   Automobile Property - This type of fraud most often involves dishonest auto body and repair shops and/or insureds who may employ a variety of illegal or questionable techniques including: 

• Reporting parts of vehicles as damaged or lost when in fact they were not damaged or lost prior to the shop receiving the vehicle
• Charging an excessive final cost as compared to the original estimate of damage
• Listing charges for repairs on the billing statement that were not authorized
• Billing and charging for original manufacture parts when after-market or salvaged parts from junkyards were used
• Billing and charging for original manufacture parts when pounding out dents or using bondo for repairs
• Reporting vehicles as stolen or vandalized falsely in order to collect insurance monies

It is always very important for the consumer to carefully review all paperwork from auto body repair shops in order to protect against potential fraud.  Also, consumers should be cautious of any auto body or repair facility that makes referrals to medical or legal offices. This practice may be an indicator of "capping." Capping (a felony in California) is the illegal referral of clients to legal offices for a fee.

Automobile Accidents- Automobile fraud often involves organized auto accident rings. Staged auto accidents, which are not accidents at all, follow several basic schemes including:

• Stopping suddenly for no apparent reason
• Disregarding the right-of-way intentionally
• Giving up the right-of-way purposely in order to cause an accident
• Reporting passengers who were not in the vehicle at the time of the accident
• Listing witnesses who were not at the scene of the accident
• Claiming excessive bodily injury as compared to vehicle damage

It is also common for staged auto accidents to involve drivers who have temporary vehicle registration, vehicles that have prior damage from other "accidents," and attorneys who contact accident victims without being solicited.

If you have been in an auto accident, be cautious of any unsolicited referral to a body shop, law office, or medical office.  Organized accident rings and cappers actively solicit others in the community to participate in the creation of accidents. Often these accidents only exist on paper (referred to as paper accidents), and no innocent parties are involved. Paper accidents have gained popularity among fraud perpetrators, as they are less dangerous from a bodily injury standpoint, and there is less likelihood of police involvement.

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Workers Compensation Fraud
Workers compensation fraud schemes can range from the very simple faked accident on-the-job, to complex systems of medical billing for services that were never rendered. The following are some examples of the most common workers compensation fraud activities:

• A company employee knowingly files a claim for an injury that did not occur or for or an injury that did not occur on the job or in relationship to the job
• A company employee receives total temporary disability benefits as a result of lying about outside employment, re-employment, or their ability to work
• A medical or legal provider bills for nonexistent services
• A medical or legal provider regularly bills for more time than was actually spent with a client or for more services than were actually provided

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Property Casualty Fraud
Property Casualty handles the investigation of all suspect fraudulent claims involving health, life, property (including arson) and all other non-auto and non-workers compensation cases. Property repair, property claims adjusting, and billing of medical services not provided are three important areas of fraudulent activity that are overseen by Property Casualty.

Property Repair - Fraud having to do with property repair usually involves unethical or incompetent building contractors.  Consumers should be aware of the following red flags when getting quotes frombuilding contractors:

• The contractor does not maintain a local work office and/or does not have a local telephone number.
• The contractor is not able or willing to provide references.
• The contractor's place of contact is a hotel, tavern, work truck, or another place that is not his/her place of employment or residence.
• The contractor handles all business in person, avoiding the use of the mail.
• The contractor wants a full cash payment up-front.
• The contractor does not have adequate equipment to perform the job.
• The contractor arrives at a loss site (home or business) without being solicited.
• The contractor's estimate is very general.
• The contractor does not have a contractor's license bond.
• The contractor is unwilling to provide a certificate of insurance from his/her general liability or workers compensation insurance carrier.
• The contractor's bid is far below the bids you have received from other contractors.  The old adage "if it sounds too good to be true, then it probably is" applies here.

Property Claims Adjusting - This type of fraud is usually perpetrated by claims adjusters who are using illegal or questionable methods.  Indicators of this kind of fraud include the following:

• The public adjuster is unlicensed
• The claims adjuster requests to have his/her name included as the payee on the insurance check
• The claims adjuster requests the payee to endorse the insurance check, making it payable to the adjuster
• The claims adjuster handles all business in person, avoiding the use of the mail
• The amount of the claim check is noticeably larger than repairs made
• The invoice of services performed includes repairs not rendered

Billing of Medical Services - Medical billing fraud often involves a billing statement that is falsified by dishonest staff who employ a variety of illegal or questionable techniques.  The Fraud Division encourages consumers to report the following:

• Billing for treatment that was not provided
• Billing for medical tests or evaluations that were not conducted
• Billing for medical supplies that were not used
• Billing for office visits that were not made
• Billing for cancellation charges for office visits that were not originally scheduled
• Billing for referral fee for medical services that were never rendered

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Filing a Complaint of Suspected Insurance Fraud
The Fraud Division has established a method for consumers to report suspected insurance fraud. A few examples of suspected insurance fraud may include:

• Complaints against illegal auto body and repair shops
• Organized staged accident rings
• Dishonest contractors
• Unethical claims adjusters
• Over billing of medical services
• Unsolicited attorney contact
• Other fraudulent business services

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Notification of these types of fraud can be made in person or mailed to:

THE CALIFORNIA DEPARTMENT OF INSURANCE Post Office Box 277320 Fraud Division Intake Unit Sacramento,CA 95 82 7-73 20 Regional Office Address Zip

Regional Office	Address	Zip
Benicia	1100 Rose Dr., #100	94510
City of Commerce	5999 E. Slauson Ave.	90040
Fresno	4969 E McKinley Ave., #204	93727
Morgan Hill	18425 Technology Dr.	95037
Orange	333 S. Anita Dr., #450	92868
Rancho Cucamonga	9674 Archibald Ave., #100	91730
Sacramento	9342 Tech Center Dr., #500	95826
San Diego	1495 Pacific Hwy., #400	92101
Valencia	27200 Tourney Rd., #375	91355

The California Department of Insurance has a Consumer Hotline to serve the needs of the public.  If you have any information regarding fraudulent insurance activity, you may call the Consumer Hotline at 800-927-HELP (4357).  Callers who reside out-of-state dial (213) 897-8921. All suspected fraudulent insurance claims reported to the Consumer Hotline are forwarded to the Fraud Division.

It is important to know that notification of insurance fraud may be made anonymously. You may feel free to discuss anonymity or personal disclosure to the officers that staff the Consumer Hotline.  The Insurance Code states that no insurer, or the employees or agents of any insurer, shall be subject to civil liability for libel, slander, or any other relevant cause of action by virtue of providing information, in good faith, concerning a suspected fraudulent claim to law enforcement, including the California Department of Insurance Fraud Division.

The California Department of Insurance is here to help you if you need more information or assistance with fraud or any other insurance related matter.  Please see the "Talk to Us" section on the opposite page for the many ways to contact the California Department of Insurance.

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