Survival Chances

Statistics are subject to interpretation, however. A couple of years ago, an elderly neighbor, Joann, had a heart attack and died on our lawn. How long before a passing neighbor saw her lying there and came to our door to tell us to call 911 nobody knows, but she was clearly long dead. Nevertheless, the EMTs arrived, along with the police, fire, and 50 other neighbors, and began CPR. Perhaps, just maybe, if someone had seen her collapse and had begun CPR immediately, I suppose Joann possibly – just possibly – might still be with us. But that is doubtful.

The reason is that EMTs with their CPR are, according to Firehouse Magazine's contributing editor, a Memphis deputy fire chief and retired chief paramedic from the St. Louis Fire Department, cooking the books on cardiac survival rates. The problem, says Gary Ludwig, is that there is no agreed-upon standard for what constitutes a save. He considers a CPR-successfully saved life to be a victim who has been reached in time by an EMT and transported quickly to the emergency room, and who has survived with the ability to walk out of the hospital on his own two feet.

Not all fire departments or paramedic providers have those criteria, Ludwig says. Some count it a save if they restore a heartbeat, even if the person dies immediately afterward. It may also be a save if the person makes it to the ER, but has lost brain function and is vegetative until the tubes are disconnected. Is this wise usage of our expensive medical services?

According to Ludwig, a series in USA Today in 2004 examined the EMT cardiac arrest save rates in the 50 most populous cities of America. (These figures do not include trauma victim situations.) They ranged from many at 0 percent to 45 percent in Seattle. (I would have expected that, as Seattle dispatches a cardiac physician with their EMTs.)

Ludwig also noted a 40 percent save-rate in Boston, and 20 percent or slightly better in Oklahoma City, Kansas City, San Francisco, and Houston. “Why the discrepancy?” Ludwig asks. “Were the other cities so bad, or were places like Seattle and Boston so good?”

He goes on to explain, “The cities that [rightfully] can claim cardiac arrest survival rates over 20 percent [should] use a standard for measuring cardiac arrest survival called the Utstein template.” In the 1980s, the survival of cardiac arrest victims was measured in different ways and different formats around the world. In response to these differences, the Utstein template was developed by an international group of scientists, who met in June 1990 at Utstein Abbey in Stavanger, Norway, to address their concerns with research involving out-of-hospital cardiac arrest.

Recommendations from a follow-up conference held in December 1990, in Brighton, England, were published in America and European medical journals. “The report included uniform definitions, terminology and recommended data sets to assist clinical investigators in reporting human resuscitation studies,” Ludwig reports. In short, “only those victims who have a good chance to be saved are counted. Further, the Utstein template counts only those survivors who leave the hospital without serious brain damage.” By this standard, many of those cities showing high percentage rates of cardiac arrest survivals would fall to Ludwig's own observation level, that “hardly any survive.”

A Fraud Template

As many of the Iconoclast's readers will recall (and more than a few have complained), I have long questioned the fraud figures put out by the Insurance Information Institute and its member companies. If those figures are correct, the insurance industry should be ashamed of itself for not doing the necessary work to fight fraud.

Rather, what this old image-smasher has said in the past is that the costs of real fraud are being shoveled along to those of us paying the premiums (whether it be 6.8 percent or 20 percent of our income) because, well, isn't premium level a key factor in profit? Were the insurers — not only those in the property casualty business, but all insurers: health, life, and surety bonding — to hire sufficient field personnel to adequately investigate each and every claim, there would not be the temptation to commit fraud.

Barring that, we need some Utstein template to quantify exactly what constitutes a real fraud loss. We need a standard of uniform definitions, terminology, and recommended data sets. The Insurance Information Institute hashes around a bit as to what fraud is: “Insurance fraud is a deliberate deception perpetrated against or by an insurance company or agent for the purpose of financial gain.” Okay, I'll buy that.

“Fraud may be committed at different points in the insurance transaction by applicants for insurance, policyholders, third-party claimants, or professionals who provide services to claimants.” True again. “Insurance agents and company employees may also commit insurance fraud.” Yep, that they do.

Then they talk about hard and soft fraud. “Common fraud includes 'padding,' or inflating actual claims, misrepresenting facts on insurance applications, submitting claims for injuries or damage that never occurred, and 'staging' accidents.” Well now, that's a mouthful. If this kind of fraud is what is costing us billions of dollars a year, then shame on the insurers for not getting feet on the street to investigate. If somebody were to eyeball the damage, visit the injured, compare the application with the risk, and make sure that the damage and injury is real, we would be left only with those professional crooks who stage wrecks — and those are the guys all those expensive special investigation units are supposed to be catching.

Then the I.I.I. goes on to tell us, “Soft fraud, which is sometimes called opportunity fraud, occurs when a policyholder or claimant exaggerates a legitimate claim.” So, how do we know that it is occurring? We don't. Like Ludwig's survival rate, there is no common measurement for what constitutes exaggeration.

There used to be an adjuster motto, “If you don't go, you won't know.” It does not take a rookie adjuster long to figure out who is fudging the facts of injury or damage if he visits enough claimants and insureds. As old Leonard Hammond, the infamous “master” of adjuster education at Crawford & Company in the 1960s, used to tell his students, “The first year you are out there, you will believe everything you hear. The second year you're out there, you won't believe anything you hear. By the third year you are out there, you'll begin to know the difference.”

The trouble today is that, first, nobody is “out there.” Claims are handled remotely, by phone and mail and computer. Secondly, nobody sticks around the claim department until that third year. By then, the claim rep has either disappeared or has been put in charge of the operation. So, is all that “fraud” real? Who knows?

Realistic Measurements

At the Claims/Society of Claim Law Associates Annual Claims Exposition and Conference in Orlando this October, the opening session will be on fraud. The speaker, Dennis Jay, executive director of the Coalition Against Insurance Fraud, will try to answer the question, “Are we winning the battle?” I will be curious to hear his answer.

Additionally, five separate seminars during the two-day conference will be about fraud. We will hear about going all the way to a jury verdict (a tough road, but needed if the proof is there), use of technology and other tools, and ways to detect fraud.

Two weeks later, the CPCU Society will go at it again in Atlanta with seminars titled, “Fraud in the Personal Insurance Arena” and “Fraud in Reinsurance.” Perhaps the entertainment of the day will be the hanging, drawing, and quartering of some recently indicted insurance executive.

All this is good stuff, but the fraud battle is a bit like the war in Iraq; the insurgents are everywhere and progress is hard to pin down, even harder to define. Some sort of international standard is needed (the United States is not the only place with insurance fraud; it has been around for centuries, all over the world). It is not sufficient to say, “This claimant must be committing fraud because she complained so loudly about her pain, and it was obviously an exaggeration of her injury,” or “The insured submitted an estimate that was too high.” (So? Do an IME or an appraisal.) There must be a standard.

I will go listen to all these good folks at their seminars and see what they have to say. Perhaps some standard criteria for what really constitutes fraud can be agreed upon and, if so, then our industry will have something real to look at, not just a bunch of conjecture, such as the I.I.I.'s statement that “Fraud is estimated to be between $85 billion and $120 billion a year.” That is a pretty vague figure.

There are textbooks available that provide checklists or templates for fraud, such as Michael H. Boyer's Property Investigation Checklists: Uncovering In-surance Fraud, now in its eighth edition, published by West Group. Casualty Insurance Claims, 4th and Casualty Fire & Marine Investigation Checklists, 6th Ed. (also published by West), has all sorts of anti-fraud techniques in its three volumes and paperback handbook. The wheels do not need to be reinvented; they are already rolling.

We in the claim business are not dealing in good faith with our premium-paying policyholders if we are failing to properly detect, and refusing to pay, fraudulent claims, or if we are falsely accusing legitimate insureds and claimants of being frauds because we think that they may be exaggerating.

Methinks the I.I.I. is exaggerating, but I do not think that they are a bunch of crooks. If I am paying $1,200 in fraud costs for my wife and myself every year, however, while claim reps sit on their bums in some office cubicle, then my insurer is, indeed, a crook. Sorry, folks, our image is not as a victim; no indeed: we are the culprits.

Ken Brownlee, CPCU, is a former adjuster and risk manager, based in Atlanta. He now authors and edits claim adjusting textbooks.