Your Social Security number: A crook’s ticket to insurance fraud
January 19th, 2012
Nick DiUlio
You might call it Social Insecurity.
Experts say a growing segment of insurance fraud involves the theft of individual Social Security numbers. The crimes perpetrated by scammers who obtain them are vast and intricate.
Consider, for instance, the case of Maria Gonzales.
According to the North Carolina Department of Insurance, Gonzales allegedly got a job using the Social Security number of a dead person. She then obtained a group insurance policy through her employer with that same Social Security number and eventually submitted a fraudulent claim for long-term disability, authorities say. Mutual of Omaha Insurance Co. paid Gonzales $ 11,300 for the claim; Gonzales was arrested and charged with one count each of identity theft, insurance fraud and obtaining property by false pretense. As of mid-January 2012, her criminal case was pending.
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| A North Carolina insurance investigator says that when insurance fraudsters are arrested, “they’ve usually got two or three different Social Security cards on them.” |
Guarding your Social Security number
Al Koehler, director of investigations for the North Carolina Department of Insurance, says that while stealing the identity of a dead person isn’t common, it is part of a larger problem that should serve as a warning to consumers.
“People try to assume other people’s identities all the time. When we arrest someone, they’ve usually got two or three different Social Security cards on them,” Koehler says. “With a Social Security card, scammers can do almost anything.”
Koehler says his department arrests nearly 100 people a year for insurance fraud. In 2011, that number climbed to 150.
Insurance identity theft on the rise
James Quiggle, a spokesman for the nonprofit Coalition Against Insurance Fraud, says the scope and complexity of insurance identity theft — particularly connected to health insurance — is “going up like a Roman candle.”
The World Privacy Forum estimates that as many as 500,000 Americans have been victims of medical identify theft. And the crime is spreading fast, with the Federal Trade Commission receiving almost 19,500 reports of medical ID theft from January 1992 to April 2006.
“It’s the newest form of insurance fraud, and scammers are busily perfecting the business model for stealing people’s IDs to make bogus insurance claims,” Quiggle says.
The two types of insurance identity fraud
Insurance identity fraud usually takes on two forms: individual and wholesale.
In individual cases, a thief often obtains important personal information from a relative, friend or co-worker in order to pay for an operation, get medication or even file a false insurance claim.
Wholesale insurance identity theft, Quiggle says, is more common and “far more insidious.” This brand of fraud involves the theft of an entire roster of individual Social Security numbers. Those numbers then are sold to “dealers” who use that information to make large numbers of bogus claims against insurers. Or the numbers are sold on the black market.
Linda Webb, who once ran AIG’s fraud operations, is president of Contego Services Group, which conducts fraud investigations and provides other services to insurers. She suspects that the case in North Carolina was part of an elaborate wholesale scheme.
“There are a lot of creative ways of obtaining a dead person’s Social Security number, such as a mortgage company employee who has access to large databases, or even someone reading an obituary and backtracking to obtain personal information,” Webb says. “And then there are people out there selling these Social Security numbers on the street.”
Senior citizens susceptible to scams
Quiggle says senior citizens are particularly vulnerable to insurance identity theft. He says scammers often will set up elaborate operations in which they call senior citizens and lie about placing them on a national — and non-existent — Medicare registry in exchange for their Social Security numbers.
Scammers might even invite seniors to fake medical screenings, where they’ll have their blood pressure taken and be supplied with nutrient drinks — all for the simple cost of presenting their Medicare cards.
“Suddenly, those thieves now have a large database of Social Security numbers,” Quiggle says. “And they do it very quickly.”
Protecting your identity
Amy Bach is executive director of United Policyholders, a nonprofit that advocates for insurance consumers. She says the most effective way to curb this burgeoning form of fraud is simple: Be vigilant about protecting your personal information.
“I always remind people that insurance fraud hurts all of us,” Bach says. “Policyholders are always looking to pay the lowest possible premiums … but fraud costs everyone money, and honest people wind up paying more for their insurance because of scammers.”
According to the Coalition Against Insurance Fraud, the nationwide cost of insurance fraud runs as high as $ 80 billion a year. The nonprofit National Insurance Crime Bureau estimates that fraud inflates average consumer premiums for auto, home and health insurance by $ 200 to $ 300 a year.
Mike Barry, a spokesman for the nonprofit Insurance Information Institute, says consumers never should share their Social Security numbers with strangers or other people they don’t trust.
“In today’s society, (the Social Security number) is one of the key components to creating an individual profile,” Barry says. “That number has to be guarded as closely as possible.”
The risk of medical mistakes
Not only does insurance identity fraud harm consumers financially, it can have serious medical ramifications as well.
Quiggle says one of the worst consequences comes in the form of inaccurate medical records. For instance, if a thief’s medical history ends up on your records because he or she underwent surgery using your insurance, your blood type and medical allergies may be inaccurate.
“If their blood type is incompatible with yours and you go to the hospital unconscious, you might receive the wrong blood type or medications,” Quiggle says. “It’s an incredibly dangerous prospect.”
Barry, the Insurance Information Institute spokesman, recommends that consumers review the explanation-of-benefits forms sent by health insurance companies after services are billed by health care providers. It’s on one of these forms that a consumer might spot medical treatments that he or she never received.
Furthermore, Quiggle says, consumers should check their medical records each year and ask their health insurance provider or agent for a list of benefits paid under their policies.
“Many people don’t ever check these important documents because they can be dense and intimidating to read,” Quiggle says. “But it’s essential. Identity theft insurance fraud can destroy your credit, cost you your policy, and be dangerous to your health and even life.”
Marcia Frellick
As thousands of members of the U.S. military adjust to life after Iraq, they may want to undo or revise some of their changes they made to their insurance before they were shipped off to the Middle East.
“Without the changes, they are exposing themselves to a lot of risk, and that’s probably not the first thing on their minds as they return from overseas,” says Joe Morrin, senior vice president for financial planning at First Command Financial Services in Fort Worth, Texas.
Experts encourage returning troops to let insurance providers know they’ve returned, update their information and review their policies. It’s also time to reclaim power of attorney if it was transferred before deployment, and to change passwords and PINs associated with financial accounts.
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| For American troops returning from Iraq, experts recommend a review of auto, home, health and life insurance coverage. |
Here’s a checklist of insurance coverage areas to review.
Auto insurance
To cut costs, service members who left cars that wouldn’t be driven may have dropped optional collision and comprehensive coverage and kept only the liability coverage. Be sure to contact your insurance agent or insurance company to see what coverage makes sense for the type of vehicle you drive, its age and the kind of driving you’ll do, says Ron Fredrickson, consumer advocacy manager with the Oregon Insurance Division.
Some choose to crank up the deductible to cut costs while they’re deployed because the risk of filing a claim is lower.
When the car is driven again, the risk returns, so adjust the deductible accordingly after you do the math on how much you could afford to pay in the event of a claim, Fredrickson says. That number may have changed while you were away. With extra deployment pay, you may have built up your savings and now can handle a higher deductible.
It’s a good time to review your budget in general and see how your auto insurance fits in, Morrin says. If you can move from a $ 250 to a $ 1,000 deductible, you’ll save on your premiums.
Since an older car will have depreciated further while you were away, it’s also a good time to review whether you need optional collision coverage. The cost for coverage no longer may be worth it. Meanwhile, you should consider whether you have enough liability insurance.
“The state-mandated minimums for most people are inadequate,” says Joseph Montanaro, a financial planner with USAA Financial Planning Services Insurance Agency in San Antonio. “Property damage is a great example — if you were at fault and hit the wrong car, it’s very easy to run right through $ 25,000 or $ 50,000 worth of coverage. I think at a minimum you’d want to have at least $ 100,000 worth of property damage coverage, and it’s relatively inexpensive to get that coverage.”
Home insurance
If someone leaves a home vacant during deployment, he or she may have told the insurer that the home wouldn’t be occupied, so the insurer needs to know the house is being lived in again, says Shane Ostrom, deputy director at the Military Officers Association of America,
Home insurance isn’t designed to cover vacant homes, because the risk of vandalism, fire and water damage is too high. “Also, if they rented out the home while they were deployed, the policy could have been changed to rental insurance and needs to be changed back if the owner returns to live in the home,” Ostrom says. The same holds true if the home was leased or subleased.
It may be wise to review how much protection you have for your home after returning from deployment.
“Sometimes people associate the coverage on their policy with the value of the home. As we’ve seen over the last few years, values have gone down, but that doesn’t necessarily mean building costs have gone down,” Montanaro says.
Don’t assume you can carry less coverage because your home’s appraised value has gone down. And make sure you have enough liability coverage — at least one to two times your net worth, Montanaro says.
Health insurance
Active-duty personnel are covered through the government’s Tricare program. That doesn’t change after deployment or retirement.
“However, reservists who were put on active duty and are now returning to the civilian world do need to make sure as they leave their active tour that they have adequate health insurance — whether through their employer or a commercial policy,” Morrin says.
Also, people transitioning out of the military need to study options to replace Tricare, Montanaro says. They may have a six-month extension of Tricare benefits, but they have to meet certain requirements. The military equivalent of COBRA is available, but it’s expensive — nearly $ 10,000 a year for a family, according to Montanaro.
Life insurance
Life insurance considerations come into play more if you’re transitioning out of the military, Montanaro says. “Whenever you have a big life event, it’s a great time to determine if you have an adequate amount (of life insurance),” he says.
If you’re exiting the military, it’s likely that you’ll lose your Servicemembers Group Life Insurance coverage; for most military personnel, that amounts to about $ 400,000 worth of insurance. Montanaro recommends using the life insurance calculator at www.va.gov or talking to your insurance agent to examine your best options.
Kansas Insurance Commissioner Sandy Praeger warns returning military personnel who are looking at changing their life insurance coverage against entering a contract without making sure the insurance agent has explained everything fully and without feeling pressured to sign on the dotted line.
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