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Tips on busting fraud

Source: Middle East Insurance Review | Nov 2017

Only a fifth of all fraud is detected. With 10% of insurance claims said to be fraudulent, Mr Shahzad Alam of Oman Insurance Company suggests some fool-proof detection methods.
 
 
Like most developed and emerging market economies, motor and medical or healthcare are probably the two largest insurance products in the UAE, both in terms of total policy numbers and premium amount. As would be expected, these are two insurance lines which are most prone to fraud and yet its importance is often understated. 
 
   Industry experts estimate that healthcare fraud is about 100 times bigger than fraud in financial services, yet the industry spends only one tenth as much in fighting this problem.
 
   Unfortunately, there is very few published statistics available in the Middle East on insurance fraud. In 2013 a UAE Ministry of Interior report revealed that the misuse of health insurance coverage, including over-prescription for medicines and unnecessary tests, are pushing up insurance premiums in the UAE by nearly 20%. This may be a contributing factor to healthcare insurance in Dubai being the ninth highest in the world as reported in the Cost of International Health Insurance Report 2017, published by Pacific Prime, a multinational broker specialising in healthcare insurance. 
 
   A study by a multinational consultancy firm in 2013 estimated that as much as US$1 billion (AED3.67 billion), is being lost by healthcare insurers in the UAE. 
 
   In July 2015, the UAE press quoted a Fraud and Anti Money Laundering expert from SAS, a global business analytics software provider, that around 10% of insurance claims in the Middle East are said to be fraudulent, but only 20% of these are detected. 
 
   Motor insurance fraud is also not uncommon. Earlier this year, a gang of 11 were identified by Sharjah Police of “faking traffic accidents” in order to embezzle money from insurers. 
 
Many forms of healthcare fraud
Healthcare fraud can take many forms, and the perpetrators can be any of the involved parties, namely the patient, ie, the insured member, or the healthcare provider (HCP), for example, the hospital, the doctor, the laboratory, the pharmacy or any combination of these. 
 
   Typical patient driven frauds are “identity thefts”, ie, using an identification card that belongs to someone else, “doctor shopping”, ie, visiting several doctors to obtain multiple prescriptions, concealing information about past medical history, adding a non-eligible family member to the policy, failing to remove someone from a policy when he/she is no longer eligible, filing false claims for services not received, and forging or altering bills.
 
   There are various types of HCP fraud, to name a few: billing for services that are never rendered or completed, “up-coding”, ie, falsely billing for a higher-priced treatment than actually provided, billing for branded drugs when generics were dispensed, deliberately prescribing branded drugs when generics are required by law, not applying agreed tariff while billing and performing medically unnecessary tests, surgeries or other procedures. 
 
   There are also cases where patients and HCPs collude to defraud the insurer, and these are the most difficult to detect. For example, dentists may bill for procedures that are covered, such as fillings, but instead provide beautifying treatments such as veneers and whitening that are not. In other cases, surgeons will provide cosmetic surgery such as “tummy tucks”, which is not covered but invoice for a covered service such as hernia.
 
   Major UAE insurers now allow the pharmacies to dispense medication using the automated PBM or Pharmacy Benefit Management system. Rogue pharmacies have the opportunity to overbill the insurer for medication that are never dispensed or by overstating the quantity or type of medication dispensed. In some cases, physicians collude by issuing false prescriptions in exchange for commission. 
 
   Similarly it is not uncommon globally for the laboratories to share high commission with doctors, creating a financial incentive to prescribe unwarranted medical tests. 
 
Deterrence
Most major UAE insurers have their own medical audit teams who review the HCP records and recover costs based on anomalies discovered during their sampling. They also participate in treatment planning on a selective basis to minimise costs. 
 
   Whilst these measures are deterrents, the greatest deterrent is the vigilance of patients. Insurers need to be more proactive in educating their members about fraud risks and advise them on basic precautionary measures using online videos, leaflets, social media outlets, etc. Examples of such measures are asking simple questions such as:
 
  • Am I being asked to sign a blank or more than one claim form?
  • Did I notice a diagnosis on my claim form different to the actual one stated by the doctor?
  • Did the doctor undertake investigations, recommend treatment or prescribe medication that I felt were excessive or unnecessary?
  • Am I being asked to provide my healthcare card details when my services are not covered?
  • Am I being offered a waiver or special discount on my deductible or co-pay?
  • Did the doctor/pharmacist manage to get excluded conditions/items covered by my insurer?
  • Did the pharmacist enter the same diagnosis code in the PBM as the one described in the prescription?
  • Is the doctor unduly insisting on my going to a pharmacy of his/her choice?
 
   Major insurers, such as Oman Insurance Company, have set up a whistleblowing hotline where anyone can report fraud. 
 
   Other deterrents, such as automatic mobile app alert whenever a claim is submitted, will also go some way to prevent fraudulent claims getting processed.
 
   Other changes are also afoot. Technology will soon allow Connected Insurance Ecosystems to record fraud incidents and track perpetrators so that future incidents can be avoided. For example, Medical Information on Blockchain will offer transparency on member history, treatment and medication, thus curbing unnecessary medical examinations.
 
Motor insurance fraud
Motor insurance fraud is also not uncommon in the UAE. Again, unfortunately very little published statistics are available. Motor insurance fraud can also take various forms such as:
 
  • Contrived accidents: Claim for damage that did not occur as the result of an accident. 
  • Staged accidents: Individuals deliberately crash their vehicles into each other, potentially resulting in claims for damage caused, injuries, car hire, vehicle recovery, total loss, etc.
  • Application fraud: Policyholder dishonestly misrepresenting or not disclosing material facts such as car modifications, driver’s age or the vehicle value.
  • Provider collusion: Providers colluding among themselves in the bidding process.
  • Overcharging: Providers not replacing parts for which they have billed or charging for services unrelated to the accident damage.
 
Information sharing
Several mature insurance markets have successfully curbed motor insurance fraud by using shared database. For example, in the UK, at least three major databases are shared among the insurers:
 
  • Claims Underwriting Exchange (CUE) records all data evolving from motor claims made. The purpose of CUE is to prevent multiple claims fraud and the misrepresentation of claims histories.
  • Insurance Fraud Register lists all who have been convicted of insurance fraud. 
  • Motor Insurance Anti-Fraud and Theft Register records all vehicles which have been declared as a “write-off” due to an accident or have been stolen and not recovered. It is used to prevent fraudulent claims. 
 
   Establishing a similar central repository of actual claims fraud and accident experience data within the UAE market will go a long way to reduce insurance premium for the low-risk drivers who make up the bulk of the insurance customers. 
 
   Regulators should also consider allowing insurers to share fraud-related information among themselves so that they can jointly curb fraud. 
 
   Nevertheless, regional insurers are doing their very best to invest in affordable fraud prevention measures. However, more clarity is required in the definition of insurance fraud, and stricter penalties together with greater customer awareness can eventually lead to lessening of fraud and reducing premium for the UAE customers. M 
 
Mr Shahzad Alam, Vice President Anti-Fraud & Investigations Unit, Oman Insurance Company.
 
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