As with so many aspects of modern life, the COVID-19 pandemic has transformed the work of life insurance claims departments. Amid a hasty transition to remote working and stay-at-home protocols affecting engagement with clients and partners, claims adjudicators face an influx of COVID-19 cases.
Ensuring timely processing of policyholders’ claims has never been more challenging, and working to detect and prevent fraudulent activity never more important.
The accelerated implementation of new ideas and solutions in these unprecedented times has opened the door for fraudsters, and opportunity is one of the three elements in the fraud triangle. The other two – motivation and rationalization – have also been amplified. Approximately one in four Americans has filed for unemployment since March, increasing financial motivation for fraud. Economic hardship also provides a common rationalization for committing fraud: as a means to support one’s self and loved ones.
What does this mean for insurance claims professionals? How can they best detect and prevent fraud in the claims review process? Below are six important steps to take:
1. Validate the Death CertificateWith the exception of fast-track or express claims, which fall under a designed threshold face amount, all death claims should require a certified death certificate or, at a minimum, a copy of a certified death certificate. However, a death certificate does not guarantee the legitimacy of a claim. In fact, most fraudulent claims will contain what appears to be a valid death certificate. Even amid mass disruption, it is vital to remain vigilant in following established protocols for identifying potential red flags.
Learn more: “Decoding the Death Certificate”
In order to better accommodate their customers during the pandemic, some insurers have considered increasing their express claim threshold. Note that fraudsters quickly become aware of such a practice and will target those companies that relax their death claim requirements. This is not a recommended practice.
Is it acceptable to waive the death certificate at the beneficiary’s request due to an inability to obtain one during the pandemic? Although several municipalities have closed offices to the public, death certificates can be obtained online and should not be waived. Beneficiaries may experience a slight delay before the certified documents become available, but if immediate funds are needed for burial services, in some cases alternative death certification can be obtained, such as hospital or physician records that confirm the illness and the cause and date of death.
2. Confirm Cause of Death
As a response to COVID-19, a new ICD-10 code (International Classification of Diseases, Tenth Revision) has been developed for reporting of COVID-19 cases: code U07.01. According to the U.S. Centers for Decease Control and Prevention (CDC), “These can include laboratory confirmed cases, as well as cases without laboratory confirmation. If the certifier suspects COVID-19 or determines it was likely (i.e., the circumstances were compelling within a reasonable degree of certainty), they can report COVID-19 as ‘probable’ or ‘presumed’ on the death certificate.”
The concern is that many certifiers are provided no prior health history of the deceased by the family and must complete death certificates based on limited events related to COVID-19. Numerous anecdotal sources report that many deaths linked to the pandemic are incorrectly coded: While the deceased may have had medical conditions contributing to a COVID-19 death, the cause of death is recorded as COVID-19 with no underlying conditions noted on the death certificate. This is extremely challenging if the death occurs within the contestable period. Simply attributing the cause of death to COVID-19 without valid background certifications can be misleading, and policy beneficiaries may intentionally leave out critical medical history when informing the certifier registering the death.
When reviewing the death certificate, examine and verify the place of death, the certifying individual, as well as the time of certification. For example, if the death occurred at home, who certified it and when? Was it a medical director with a valid license number? Was the deceased transferred directly to a funeral home? Throughout the pandemic, funeral homes have become overwhelmed and may not follow proper protocol, and other practices have been adjusted to account for logistic challenges. This should not prevent insurers from seeking all necessary verifications.
Note: I recently reviewed a death certificate from the U.K. in which the certifier was the “widower of deceased.” I later learned that as a result of COVID-19, if a death occurs in the U.K., it can be registered by a family member or over the phone. In this particular case, the death occurred at home with the husband noting the cause and manner of death.
3. Investigate Contestable Claims
All contestable claims should be investigated thoroughly, regardless of the cause and manner of death, to eliminate fraud opportunities. Some beneficiaries may expect that if the cause of death is related to COVID-19, no investigation is warranted, even if death occurs within the contestable period of the policy. If a beneficiary pressures to waive or conduct a limited investigation, it should raise a red flag. As stated previously, the cause of death on a death certificate may be coded as COVID-19 with very little or no prior known medical history about the deceased. The contestable investigation may identify other significant medical conditions that were originally not provided on the death certificate, yet appear in pre-COVID-19 medical records.
Consider this example recently posited by an investigator well-known among claims professionals: Someone under hospice care for cancer dies at home within the contestable period, and the death is attributed to COVID-19. The funeral director completes the death certificate without knowing the medical history of the insured, leaving out cancer as an underlying condition. A COVID-19 test may or may not have been performed, making identification of any material misrepresentation extremely difficult. In this case and many others like it, a thorough investigation is warranted. This can be especially difficult in a jurisdiction where a causal relationship between the misrepresentation and the loss is required.
4. Verify Foreign Deaths
Fraud is particularly prevalent in certain developing countries, and proper investigation and confirmation of death occurring in these nations is recommended. Unfortunately, the current climate makes this process very difficult: The closure of public offices can prevent any type of in-person verification. But persistence is key, and claims professionals should avoid the temptation to cave in and waive a proper investigation. A reputable foreign death investigator should be able to utilize a local network of contacts to follow appropriate leads and provide verification.
5. Beware of Community Groups
As with other forms of fraud, the pandemic has provided ample opportunity for community fraud to flourish, with the same effective techniques used pre-COVID-19 likely to see increased use. Discrepancies in personal information, such as name, date of birth, and/or social security number, between the death certificate and the original application may indicate fraudulent activity. Another red flag: The death certificate may be completed by a funeral director associated with the community group. The location of death is often a clue for certain community groups as well, with hot spots including North Carolina, Chicago, Arizona, and Augusta, Georgia.
6. Collaborate with Underwriters
Many insurers have implemented modified underwriting requirements to account for current challenges in gathering traditional evidence such as in-person medical examinations and fluid testing. Claims teams should coordinate with underwriters to implement a system for flagging these policies for future claims processing as an extra precaution against fraud. Fraudsters are well aware of less stringent underwriting requirements at the time of issue, which in turn provides ample opportunity for them to use a stand-in applicant – a process often utilized with community groups – or employ other forms of deception. Claims examiners will need to take extra care when adjudicating policies issued during the pandemic for years to come.
In addition to new policies, coverage increases for existing policies provide an enticing target for fraud. If a coverage increase has been requested during the pandemic, the agent or insured may have become aware of temporarily relaxed underwriting guidelines, leaving an opening.
See also: Modernizing Insurance Fraud Prevention
In these times of crisis, claims professionals must work under challenging conditions to pay all appropriate claims timely and accurately within state regulations and policy provisions, all while keeping a wary eye out for increasing fraudulent claims. It is therefore essential that they remain vigilant, avail themselves of all available resources – fraud experts, reinsurers, and other partners, and follow their instincts: If something doesn’t look right, there is a good chance it isn’t.
This article is Part IV, the final, in a series that addresses fraud prevention during the coronavirus pandemic by following the life cycle of an insurance policy – from application, underwriting, and administration through claims.
To learn more about this year's RGA Fraud Conference and to register, visit the conference webpage, and contact us with your fraud and data privacy questions.
- Coalition Against Insurance Fraud: https://www.insurancefraud.org/IFNS-detail.htm?key=35067
- CDC – Centers for Disease Control and Prevention: https://www.cdc.gov/
- Worldwide Resources: https://worldwideresourcesinc.com/