So, what's an insurance company to do?

First, re-direct the focus. Assignment of Benefits (AOB) provisions are not the problem — fraudulent companies are and they will continue to exist and submit fraudulent claims with or without any restrictions on the assignment of benefits. Carriers should stop trying to fight fraud by eliminating AOBs and, instead, identify the companies that consistently submit fraudulent claims, then focus on stopping the problem at its source.
Start by examining which companies have the largest financial impact on the carrier. Bigger doesn't necessarily mean bad, but they should start where the stakes are highest if they hope to keep the bottom line from bleeding money. Then, find those high-impact companies that have been shown to submit inflated claims on previous occasions, or who conveniently dispose of damaged pipes, preventing inspection of the actual damage, and focus their efforts on those companies.
Identify suspect water mitigation claims early and develop an efficient internal structure to collect and distribute information. Insurers need to develop standard operating procedures that facilitate early contact with the insureds to authenticate the extent of damages and to verify work performed by water mitigation companies.
Develop standard questions for recorded statements by adjusters in order to determine the number of days mitigation actually occurred on site, confirm how many employees and machines were used, and how often they were checked.
Assign specific in-house and field adjusters to investigate these claims so they are sure to follow proper protocols; are better able to identify trends, associations with plumbers and other contractors; and all relevant information is efficiently shared up and down the chain of command.

Insurance companies and their investigators also must recognize that mitigation companies don't work alone. Identifying the fraudulent mitigation company is like uncovering just the tip of an iceberg. In most cases, active fraud participation extends beyond the mitigation company to a much larger network — everyone from rebuild contractors and plumbers, to public adjusters and even insurance agents. Many unscrupulous mitigation companies pay finder's fees to plumbers and insurance agents for profitable referrals — passing on that expense to the insurer.

Special Reports /

Underwater: Cleaning up fraudulent water mitigation claims

Related Stories

Recommended For You