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Insurance Companies Are Paying Cops to Investigate Their Own Customers

221 points by henryw 7y ago

onetimemanytime 7y ago
The biggest and (maybe) the only problem are the incentives for LEO to manipulate proof to jail /convict innocent people. Even an arrest can ruin your life, let alone trial, regardless of outcome. Other than that, insurance companies have a right to cut down on fraud and jail fraudsters.
- onion2k 7y ago
  There are a couple more things wrong here. LEOs have access to tools that the public and corporations don't have access to, and the law prevents them having access to. By paying a LEO to access those tools the insurers are circumventing the will of the people. Also, by paying LEOs to investigate a particular crime that means the insurer is effectively getting to pick who is investigated and who isn't. They should be able to deny a claim, and report what they believe is fraud, but the insurer shouldn't be telling law enforcement who to look in to. That's law enforcements decision alone, and payments muddy the water. Paying for law enforcement is a bad idea. It changes the incentives too much.
- deeg 7y ago
  Not just the right but the fiduciary duty. Fraud raises premiums for all other clients.
- devoply 7y ago
  They paid salaries of police, the judiciary, and the guy who testified against him in a CRIMINAL trial. That's more than enough conflict of interest to have any such criminal trial thrown out.
  - onetimemanytime 7y ago
    I understand the issue, but you either committed insurance fraud or you didn't. Here's the evidence, counter it and let the jury decide.
    - pas 7y ago
      Direct incentives for law enforcement rarely lead to unadulterated truth and prevention.
    - deleted 7y ago
      [deleted]
unnouinceput 7y ago
This article sounds like FBI and/or Internal Affairs should be involved into investigating State Farm and their paid prosecutors/policemen. Anybody knows anything or is too early? Or maybe nothing will happen due to too much money poured into right pockets?
- writepub 7y ago
  Laws with inherent conflicts of interest are supposedly unconstitutional. Can any lawyer comment on this? Can we have the ACLU challenge these in court?
  - jkaplowitz 7y ago
    Such laws are generally unethical, I'd agree with that, but what rule of the constitution do they supposedly violate?
    - ceejayoz 7y ago
      The use of privately gathered evidence intended to be handed over to law enforcement may violate the Fourth Amendment via the exclusionary rule. That insurance customers are contractually obligated to assist the insurer with investigations may violate the Fifth if that contract is being abused in this way, as well. https://en.wikipedia.org/wiki/Exclusionary_rule https://en.wikipedia.org/wiki/Exclusionary_rule
      - SilasX 7y ago
        Yes, when third parties start acting under the direction of the police, they become the police in the eyes of the constitution, with the same restrictions. That has nothing to do with the GGP’s strange claim that there’s some general constitutional prohibition against laws with “an inherent conflict of interest”.
- sureaboutthis 7y ago
  I don't see whether the cops are doing this on their own time or not. I'm betting it's on their own time but it's unclear to me but cops pick up a lot of work for private companies on their own time so this would be nothing new.
writepub 7y ago
After a very long time, this is a fine piece of investigative journalism to make the top 30 on HN. I wish the main BuzzFeed site did more of this than the clicbait.
- ceejayoz 7y ago
  The clickbait largely funds the longform journalism. https://www.poynter.org/tech-tools/2016/how-buzzfeed-built-an-investigative-team-from-the-ground-up/ https://www.poynter.org/tech-tools/2016/how-buzzfeed-built-a... > But Schoofs acknowledges that BuzzFeed’s investigations may never rocket into the social media stratosphere with the same velocity as the company’s lighter fare. Major investigations seldom get fewer than 200,000 pageviews, but that’s a dribble of traffic compared to the 73 million pageviews garnered by The Dress.
deleted 7y ago
[deleted]
Glawen 7y ago
My god, the US judiciary system is so broken in many ways that it is beyond repair. It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated.
- cowsandmilk 7y ago
  > It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated. It doesn't have to be a company making false claims. Cross the wrong person anywhere in the world and you can have the police and courts come after you.
- huffmsa 7y ago
  No, the judiciary is perfectly sound. The overreaching, self-important bureaucrats in the Executive branches at all levels are the problem. Like they always are whenever a society let's government centralize and "administer".
  - randcraw 7y ago
    To be precise, the problem is deeper than any one branch. In the US system of government, checks and balances are essential to counter overreaching and abuse from any single branch. If no such checks exist against unjust prosecutions by law enforcement (the executive branch), then by default, either the judiciary or legislative branch must be at fault, or both. In this case, it's clearly BOTH the US legislature and US courts have been remiss. Both should step in and outlaw any private funding of public law enforcement, as well as require ALL public court prosecutions to abide by the same burden of proof and evidence required of any gov't/DA-led investigation. To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing.
    - colejohnson66 7y ago
      > To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing. I’ve always wondered why plea deals don’t count as perjury? You’re saying you did something when you didn’t.
snazzycalynx 7y ago
Insurance companies obviously end up being the front line of insurance fraud and should definitely turn over those cases to the proper authorities. But this shit? "Erie had even paid part of the salary of the lead detective who knocked on Schmidt’s door that day, as well as that of the prosecutor who went on to charge him with felony insurance fraud. And it would also secretly cover the costs of an expert witness to testify against Schmidt in court." Why on gods green earth is it legal for any person or company to directly pay police departments like this? How is this not a bribe?
- 4ntonius8lock 7y ago
  The really crazy thing is a small time blogger I know got fined thousands of dollars for not disclosing a product endorsement on her small time blog. The FTC is up and active and enforcing the rules... on the smallest companies in the US. Somehow in this country if I get a free meal at a restaurant, post about it and don't disclose the free meal, I'm a target. But bribing police is legal without disclosure to courts? I can pay 'experts' to testify in court without revealing I'm paying? Just when I though the corruption couldn't get any more entrenched, I keep finding new areas of deep rot.
  - FireBeyond 7y ago
    Oh yes. Just the other week, the largest workplace immigration raid in history took place. Seven factories owned by the same company. 680 individuals arrested for being undocumented - a misdemeanor, leaving aside all the other polarization of opinions on that. It's a felony to (knowingly) employ someone without work authorization. Not one supervisor, manager, or executive has been charged with anything in relation to these raids. And ICE has announced no plans to do so.
  - CocaKoala 7y ago
    > I can pay 'experts' to testify in court without revealing I'm paying? I feel like it's generally understood that when expert witnesses get called to the stand, they're being compensated for their time by whoever is calling them.
mirimir 7y ago
> Erie Insurance, one of the nation’s largest auto insurers, had not only provided the cops with evidence against its own loyal customer — it had actively worked with them to try to convict him of insurance fraud. OK, but there is no "loyal customer". There is only the prospect of a payout. And the incentive to avoid it.
- skj 7y ago
  Honestly I don't get the slant from the article. "Loyal customers" of an insurance company and "insurance fraud" don't mix. Maybe I should read the article instead of just comments here...
  - mirimir 7y ago
    It's quite simple. I gather that he'd been a customer for many years. So "loyal customer". And I gather that he owned an expensively customized vehicle. So something bad happened, and he filed a claim. And the insurance company's systems presumably flagged the claim. Probably because it was much larger than expected, based on the type and age of vehicle. So they paid police to investigate for fraud. And I gather that they eventually did file a crime report. And at trial, their expert presumably testified that the vehicle wasn't worth as much as claimed.
- marcus_holmes 7y ago
  loyal customers pay premiums for years. Often at rates higher than new customers get (the "loyalty tax").
  - mirimir 7y ago
    Indeed. Perhaps counter-intuitively, for many customers. More irony about the concept of a "loyal customer".
- Ensorceled 7y ago
  Ah, loyal customer is a commonly used term for a customer who has conducted business with a company for a long time. Not sure why you put it in quotes or why it confused you, but you can google it.
reaperducer 7y ago
This has been going on for a long time. At least decades, if not centuries (remember that insurance is a very old business). In the 1940's there were very popular radio dramas that aired every week following the adventures of insurance investigators, and their cozy alliances with law enforcement.
- RcouF1uZ4gsC 7y ago
  Johnny Dollar: the man with the action packed expense account
- jimbob45 7y ago
  For anyone who's interested, I suggest the 1946 thriller 'The Killers' about an insurance agent who teams up with a cop to investigate a murder.
  - nothrabannosir 7y ago
    This is the premise behind the classic 1944 film Double Indemnity. It holds up today and is worth a watch!
syshum 7y ago
Remind me never to do business with State Farm, they seem to over the top at least in this story, I would hate to have Hail Damage to my home then be put in prison if I expect to have that damage fixed.... Wow
- qrbLPHiKpiux 7y ago
  That husband that burned down his wife’s “she shed.” You know he did it...
- daniel-cussen 7y ago
  Yeah makes the decision of whether to take out insurance remarkably easy.
obituary_latte 7y ago
Does anyone have any carriers that they would recommend? I’m currently with State Farm, but this is really concerning. Anyone know of any more ethical insurance providers? Thanks.
- jcadam 7y ago
  USAA is great if it you meet the membership qualifications - I've been with them since my Army days (They keep loosening up the requirements, at this point if your father's brother's nephew's cousin's former roommate was ever in the military you might qualify)
  - sokoloff 7y ago
    I’m also with USAA (banking and insurance) for the last 30 years. Very happy (though no longer using them for investments as they’ve just not kept up). Banking products have been available for a long time. Insurance used to be closed to just the military officer corps, then they offered insurance to some “affiliated” groups, but it was under different terms I think. I had one auto claim and they were excellent. Parents had a homeowners claim and they were likewise excellent.
  - codazoda 7y ago
    USAA has their own set of problems.
    - astura 7y ago
      Such as?
    - pdonis 7y ago
      What are they?
- turk73 7y ago
  State Farm is bottom of the barrel, but they're all pretty bad these days. Prices just keeping going up, up, up.
- 7y ago
drtillberg 7y ago
The author gets this topic utterly backward. Large insurance companies each have essentially no business incentive to do anything except pay claims. Maybe they try to get insureds back to baseline on the cheap, but deny an insured loss entirely? No. Not even investigate them. And so fraudulent claims and the shadow industry that surrounds them grow in size until something bad happens, like a grandma dies in a commercially-staged motor vehicle accident.[1] And then everyone gets all introspective and tries to figure out how we got to that regrettable point and what we can do to walk things back to a sane place where fraudulent activity is not acceptable. Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims. What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced and are generating erroneous or weakly-supported evidence of fraud, which the companies then hand off to public authorities who apparently have no better resources. That leads to two observations: 1. If the problem is irrational, counterproductive prosecutions due to poor training and resources, writing a hit-piece about supposed conflicts of interests over supplemental funding being used to patch the resource problems isn't really part of the solution. 2. The insurance companies are paying for the consequences of poor-quality investigations communicated to authorities by their investigators. The article talks about some of the claimants suing the insurers for bad faith practices (and defamation?), which I'd call a "cottage" industry in the U.S., except that the industry is quite large and active. The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions-- maybe not to refer prosecutions at all-- and so we'll repeat the cycle mentioned above until at a future time a grandmother, aunt or child is killed again in a staged fraudulent insurance claim, and then everyone will get introspective again and muse that at one point we had laws that incentivized insurers to identify and prosecute scam artists but bad press like this article led to changes that made them stop. [1] https://www.ifb.org/(X(1)S(dzqyttjltzr0pry1l1wmvlxj))/ContentPages/CIFI/DefaultCIFI.aspx https://www.ifb.org/(X(1)S(dzqyttjltzr0pry1l1wmvlxj))/Conten...
- Ensorceled 7y ago
  Are you saying that the incidents in this article didn't happen and that State Farm isn't paying LEO to investigate customers it believes are fraudsters?
RickJWagner 7y ago
It's a necessary part of the business, and it keeps rates down for every insurance holder. I just wish they were more public about punishing the bad ones they catch. It would help people understand the necessity of investigations, and probably discourage some would-be fraudsters.
- CocaKoala 7y ago
  > In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an “unwritten policy” within the company to withhold evidence from customers that could help prove their innocence. If withholding evidence that might prove your customer's innocence is a necessary part of the business, I submit that your business is bad and should not continue in its current form.
skrebbel 7y ago
Just today, Dutch newspapers reported that courts in the Netherlands are running trial processes against suspected insurance fraudsters without any involvement from the police or the DA's office [0]. The idea is that the police force is too understaffed to do research against smalltime insurance fraud, but the insurance companies are more than happy to build the case independently. And the judge is still impartial, so everything is fine, right? This worries me because the insurance isn't exactly impartial, right? I assume that once they suspect fraud, they really really want you to have indeed committed fraud, because there's hardly any downside for them if they wrongly accused you. They'll build up a very one-sided case. Apparently in the US, the same problem is solved with an undereducated instead of an understaffed police force, plus semilegal bribes. To be honest I don't really see the fundamental difference between that and the new Dutch idea. I wonder what HN thinks should be the solution. Staff more cops? What if recruiting good ones is prohibitively hard? What if the good ones would really prefer to be put on other cases than "we think Joe Smith stole $2000 from an enormous cash-loaded faceless financial corporation"? It's a hard problem. [0] https://www.ad.nl/binnenland/proefproces-verzekeringsfraudeurs-voor-de-rechter-zonder-politieonderzoek~a131ac17/?referrer=https://www.google.nl/ https://www.ad.nl/binnenland/proefproces-verzekeringsfraudeu...
- speeder 7y ago
  When lightning struck my house, insurance company just flat out refused to help, one employee of their just flat out told us on the phone that unless we could prove lightning hit our property specifically, they wouldn't even bother sending someone over to check our claims, because or the claim was false, or the lightning hit the power lines, and in this case we should bother the power company... (by the way, we know the lightning hit our property, the damage got bigger and bigger in specific direction, and following it the place with highest amount of damage was the tall metallic post where the motor for the gate was attached...)
  - michaelbuckbee 7y ago
    Curious what they would have accepted as proof in that case?
marcus_holmes 7y ago
What a way to destroy your own industry. If getting insurance increases the cost of a bad thing happening, instead of decreasing it (because your claim will be refused, and you'll also be charged with fraud for even trying to make a claim) then what is the point of taking out insurance on anything?
- hanniabu 7y ago
  Because it's the law to have certain insurance like health and car insurance.
  - daveFNbuck 7y ago
    You don't have to have health insurance. You have to pay a fine for not having health insurance. Many people decide that the fine is the cheaper option, so health insurance companies at least have to compete with that.
    - gtCameron 7y ago
      The "fine" is now $0 after the tax cuts last year
    - homonculus1 7y ago
      You don't "have to" do anything under the law. Nobody comes and holds you by the wrist and makes you do it. You just have to pay fines, or go to jail for not doing it.
  - syshum 7y ago
    To drive on the public roads you have to prove "Financial Responsibility" for most people the cheapest and most effective way to do that is Auto Insurance, however every state i am aware of has alternatives, aka "Self Insure" that can be a Bond, or some other guarantee that you are able to cover the minimum liability of state
- jen_h 7y ago
  No worries for the insurers -- you're legally required to get insurance for all sorts of things in the US. Vehicles, mortgages...even some landlords require that renters hold a renters' insurance policy.
judge2020 7y ago
I'm drawing connections to the Black Mirror episode Crocodile https://en.wikipedia.org/wiki/Crocodile_(Black_Mirror) https://en.wikipedia.org/wiki/Crocodile_(Black_Mirror)
Circuits 7y ago
I feel like, until a defended has been prosecuted and some time has passed (post prosecution) any potential defamation of character should be illegal. So no printing news stories about how guilty someone is prior to a guilty verdict actually being had. Haven't enough people's lives been ruined over this yet? Can't we all just grow up and stop acting like 4'th graders in the schoolyard pointing fingers and tossing rocks?
bytematic 7y ago
The investigative wing for life insurance is really interesting. They can sniff out fraud from a mile away. They still have to do a lot of insurance apps manually because people lie so often. How can people say they don't smoke but it shows up all over their medical records?
deleted 7y ago
[deleted]
neilv 7y ago
Good faith reporting of suspected fraud sounds fine, but a couple concerns about this: > In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an "unwritten policy" within the company to withhold evidence from customers that could help prove their innocence. Besides the appearance of possible bad faith, that might also -- in the context of government relying on the insurance company to do some of the investigative work -- thwart government obligations to share evidence with a defendant.
- olliej 7y ago
  If the insurance company withholds the evidence from the police and prosecutors they never “know” it exists and wouldn’t need to provide it. What irks me is that they can destroy people’s lives with impunity: if they lose they just have to pay out the insured amount, they don’t need to compensate someone for making them homeless or for destroying their business. All officers and prosecutors should be criminally liable as they are accepting bribes for prosecuting these victims. The insurers should be liable for subverting the course of justice, and any deliberately withholding evidence that demonstrates the claim of fraud is false should make the insurance companies liable for all costs, and all “witnesses” should be separately liable for false testimony.
- celticmusic 7y ago
  honestly, these companies should be fined so heavily that it's just not worth it for them. I understand that legitimate insurance fraud needs to be investigated and prosecuted, and I'm all for it. But you give them all the evidence, period, and let them decide. You do not manipulate them to save yourself from a payout. That crosses a line that has no grey in it.
  - gamblor956 7y ago
    It is a finable offense...in some states, like California. Indeed, something like this could even get an insurance company's license to sell insurance in one of those states revoked.
deogeo 7y ago
While everyone involved surely deserves either life in jail or the death penalty, there's something we can do without going through the corrupt 'justice' system: Inform all the clients of these companies of what they're doing. Let them know they bribed the police to put clients in jail after filing a claim. And don't forget to name names - don't let them hide behind the corporate facade.
- saagarjha 7y ago
  What you're asking for sounds awfully like extrajudicial punishment that doesn't match the severity of the crime at all.
  - homonculus1 7y ago
    Debatable. To me life imprisonment sounds like a perfect match for perverting the legal system to jail and ruin innocent people for profit. This corruption is not just a crime against the victims, but against society itself for its erosion of the public trust in the institution of law.
rconti 7y ago
So, I've seen the flip side of this. I have a friend who does building inspections for insurance companies. He sees what's basically outright fraud all the time, but companies rarely press it. Think about it: their main incentive is to avoid paying out claims where they shouldn't have to. They're more than happy to deny a claim, stop offering your services to that person and let the next insurance company get defrauded by the person. The companies have minimal incentive to rat out their own clients (especially when they're merely 95% sure it's fraud), and so lawlessness can easily continue. So, I can see both sides of this. The government might WANT to prosecute insurance fraud, but they're rarely aware of it, because how would they find out?
- Mathnerd314 7y ago
  I assume he's seeing construction fraud? Then the builder would be liable rather than the policyholder, and IANAL but probably the insurance company wouldn't have standing to do anything even if they wanted to since they don't own the building. Or is he correcting details of the properties used in some actuarial model? I suppose that would be more interesting but I can't imagine that a 4x premium adjustment or whatever would be worth suing for.
  - rconti 7y ago
    Policyholder/homeowner fraud.

221 points by henryw 7y ago

The biggest and (maybe) the only problem are the incentives for LEO to manipulate proof to jail /convict innocent people. Even an arrest can ruin your life, let alone trial, regardless of outcome. Other than that, insurance companies have a right to cut down on fraud and jail fraudsters.

onion2k 7y ago
There are a couple more things wrong here. LEOs have access to tools that the public and corporations don't have access to, and the law prevents them having access to. By paying a LEO to access those tools the insurers are circumventing the will of the people. Also, by paying LEOs to investigate a particular crime that means the insurer is effectively getting to pick who is investigated and who isn't. They should be able to deny a claim, and report what they believe is fraud, but the insurer shouldn't be telling law enforcement who to look in to. That's law enforcements decision alone, and payments muddy the water. Paying for law enforcement is a bad idea. It changes the incentives too much.
deeg 7y ago
Not just the right but the fiduciary duty. Fraud raises premiums for all other clients.
devoply 7y ago
They paid salaries of police, the judiciary, and the guy who testified against him in a CRIMINAL trial. That's more than enough conflict of interest to have any such criminal trial thrown out.
- onetimemanytime 7y ago
  I understand the issue, but you either committed insurance fraud or you didn't. Here's the evidence, counter it and let the jury decide.
  - pas 7y ago
    Direct incentives for law enforcement rarely lead to unadulterated truth and prevention.
  - deleted 7y ago
    [deleted]

unnouinceput 7y ago

This article sounds like FBI and/or Internal Affairs should be involved into investigating State Farm and their paid prosecutors/policemen. Anybody knows anything or is too early? Or maybe nothing will happen due to too much money poured into right pockets?

writepub 7y ago
Laws with inherent conflicts of interest are supposedly unconstitutional. Can any lawyer comment on this? Can we have the ACLU challenge these in court?
- jkaplowitz 7y ago
  Such laws are generally unethical, I'd agree with that, but what rule of the constitution do they supposedly violate?
  - ceejayoz 7y ago
    The use of privately gathered evidence intended to be handed over to law enforcement may violate the Fourth Amendment via the exclusionary rule. That insurance customers are contractually obligated to assist the insurer with investigations may violate the Fifth if that contract is being abused in this way, as well. https://en.wikipedia.org/wiki/Exclusionary_rule https://en.wikipedia.org/wiki/Exclusionary_rule
    - SilasX 7y ago
      Yes, when third parties start acting under the direction of the police, they become the police in the eyes of the constitution, with the same restrictions. That has nothing to do with the GGP’s strange claim that there’s some general constitutional prohibition against laws with “an inherent conflict of interest”.
sureaboutthis 7y ago
I don't see whether the cops are doing this on their own time or not. I'm betting it's on their own time but it's unclear to me but cops pick up a lot of work for private companies on their own time so this would be nothing new.

writepub 7y ago

After a very long time, this is a fine piece of investigative journalism to make the top 30 on HN. I wish the main BuzzFeed site did more of this than the clicbait.

ceejayoz 7y ago
The clickbait largely funds the longform journalism. https://www.poynter.org/tech-tools/2016/how-buzzfeed-built-an-investigative-team-from-the-ground-up/ https://www.poynter.org/tech-tools/2016/how-buzzfeed-built-a... > But Schoofs acknowledges that BuzzFeed’s investigations may never rocket into the social media stratosphere with the same velocity as the company’s lighter fare. Major investigations seldom get fewer than 200,000 pageviews, but that’s a dribble of traffic compared to the 73 million pageviews garnered by The Dress.

deleted 7y ago

[deleted]

Glawen 7y ago

My god, the US judiciary system is so broken in many ways that it is beyond repair. It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated.

cowsandmilk 7y ago
> It is crazy how a company making false claims can ruin you so easily, and you cannot fight back or be compensated. It doesn't have to be a company making false claims. Cross the wrong person anywhere in the world and you can have the police and courts come after you.
huffmsa 7y ago
No, the judiciary is perfectly sound. The overreaching, self-important bureaucrats in the Executive branches at all levels are the problem. Like they always are whenever a society let's government centralize and "administer".
- randcraw 7y ago
  To be precise, the problem is deeper than any one branch. In the US system of government, checks and balances are essential to counter overreaching and abuse from any single branch. If no such checks exist against unjust prosecutions by law enforcement (the executive branch), then by default, either the judiciary or legislative branch must be at fault, or both. In this case, it's clearly BOTH the US legislature and US courts have been remiss. Both should step in and outlaw any private funding of public law enforcement, as well as require ALL public court prosecutions to abide by the same burden of proof and evidence required of any gov't/DA-led investigation. To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing.
  - colejohnson66 7y ago
    > To allow the routine "negotiation of guilt" between prosecutors and the prosecuted to circumvent due process certainly is a violation of the Constitution -- something all three branches share culpability for allowing. I’ve always wondered why plea deals don’t count as perjury? You’re saying you did something when you didn’t.

snazzycalynx 7y ago

Insurance companies obviously end up being the front line of insurance fraud and should definitely turn over those cases to the proper authorities. But this shit? "Erie had even paid part of the salary of the lead detective who knocked on Schmidt’s door that day, as well as that of the prosecutor who went on to charge him with felony insurance fraud. And it would also secretly cover the costs of an expert witness to testify against Schmidt in court." Why on gods green earth is it legal for any person or company to directly pay police departments like this? How is this not a bribe?

4ntonius8lock 7y ago
The really crazy thing is a small time blogger I know got fined thousands of dollars for not disclosing a product endorsement on her small time blog. The FTC is up and active and enforcing the rules... on the smallest companies in the US. Somehow in this country if I get a free meal at a restaurant, post about it and don't disclose the free meal, I'm a target. But bribing police is legal without disclosure to courts? I can pay 'experts' to testify in court without revealing I'm paying? Just when I though the corruption couldn't get any more entrenched, I keep finding new areas of deep rot.
- FireBeyond 7y ago
  Oh yes. Just the other week, the largest workplace immigration raid in history took place. Seven factories owned by the same company. 680 individuals arrested for being undocumented - a misdemeanor, leaving aside all the other polarization of opinions on that. It's a felony to (knowingly) employ someone without work authorization. Not one supervisor, manager, or executive has been charged with anything in relation to these raids. And ICE has announced no plans to do so.
- CocaKoala 7y ago
  > I can pay 'experts' to testify in court without revealing I'm paying? I feel like it's generally understood that when expert witnesses get called to the stand, they're being compensated for their time by whoever is calling them.

mirimir 7y ago

> Erie Insurance, one of the nation’s largest auto insurers, had not only provided the cops with evidence against its own loyal customer — it had actively worked with them to try to convict him of insurance fraud. OK, but there is no "loyal customer". There is only the prospect of a payout. And the incentive to avoid it.

skj 7y ago
Honestly I don't get the slant from the article. "Loyal customers" of an insurance company and "insurance fraud" don't mix. Maybe I should read the article instead of just comments here...
- mirimir 7y ago
  It's quite simple. I gather that he'd been a customer for many years. So "loyal customer". And I gather that he owned an expensively customized vehicle. So something bad happened, and he filed a claim. And the insurance company's systems presumably flagged the claim. Probably because it was much larger than expected, based on the type and age of vehicle. So they paid police to investigate for fraud. And I gather that they eventually did file a crime report. And at trial, their expert presumably testified that the vehicle wasn't worth as much as claimed.
marcus_holmes 7y ago
loyal customers pay premiums for years. Often at rates higher than new customers get (the "loyalty tax").
- mirimir 7y ago
  Indeed. Perhaps counter-intuitively, for many customers. More irony about the concept of a "loyal customer".
Ensorceled 7y ago
Ah, loyal customer is a commonly used term for a customer who has conducted business with a company for a long time. Not sure why you put it in quotes or why it confused you, but you can google it.

reaperducer 7y ago

This has been going on for a long time. At least decades, if not centuries (remember that insurance is a very old business). In the 1940's there were very popular radio dramas that aired every week following the adventures of insurance investigators, and their cozy alliances with law enforcement.

RcouF1uZ4gsC 7y ago
Johnny Dollar: the man with the action packed expense account
jimbob45 7y ago
For anyone who's interested, I suggest the 1946 thriller 'The Killers' about an insurance agent who teams up with a cop to investigate a murder.
- nothrabannosir 7y ago
  This is the premise behind the classic 1944 film Double Indemnity. It holds up today and is worth a watch!

syshum 7y ago

Remind me never to do business with State Farm, they seem to over the top at least in this story, I would hate to have Hail Damage to my home then be put in prison if I expect to have that damage fixed.... Wow

qrbLPHiKpiux 7y ago
That husband that burned down his wife’s “she shed.” You know he did it...
daniel-cussen 7y ago
Yeah makes the decision of whether to take out insurance remarkably easy.

obituary_latte 7y ago

Does anyone have any carriers that they would recommend? I’m currently with State Farm, but this is really concerning. Anyone know of any more ethical insurance providers? Thanks.

jcadam 7y ago
USAA is great if it you meet the membership qualifications - I've been with them since my Army days (They keep loosening up the requirements, at this point if your father's brother's nephew's cousin's former roommate was ever in the military you might qualify)
- sokoloff 7y ago
  I’m also with USAA (banking and insurance) for the last 30 years. Very happy (though no longer using them for investments as they’ve just not kept up). Banking products have been available for a long time. Insurance used to be closed to just the military officer corps, then they offered insurance to some “affiliated” groups, but it was under different terms I think. I had one auto claim and they were excellent. Parents had a homeowners claim and they were likewise excellent.
- codazoda 7y ago
  USAA has their own set of problems.
  - astura 7y ago
    Such as?
  - pdonis 7y ago
    What are they?
turk73 7y ago
State Farm is bottom of the barrel, but they're all pretty bad these days. Prices just keeping going up, up, up.
7y ago

drtillberg 7y ago

The author gets this topic utterly backward. Large insurance companies each have essentially no business incentive to do anything except pay claims. Maybe they try to get insureds back to baseline on the cheap, but deny an insured loss entirely? No. Not even investigate them. And so fraudulent claims and the shadow industry that surrounds them grow in size until something bad happens, like a grandma dies in a commercially-staged motor vehicle accident.[1] And then everyone gets all introspective and tries to figure out how we got to that regrettable point and what we can do to walk things back to a sane place where fraudulent activity is not acceptable. Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims. What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced and are generating erroneous or weakly-supported evidence of fraud, which the companies then hand off to public authorities who apparently have no better resources. That leads to two observations: 1. If the problem is irrational, counterproductive prosecutions due to poor training and resources, writing a hit-piece about supposed conflicts of interests over supplemental funding being used to patch the resource problems isn't really part of the solution. 2. The insurance companies are paying for the consequences of poor-quality investigations communicated to authorities by their investigators. The article talks about some of the claimants suing the insurers for bad faith practices (and defamation?), which I'd call a "cottage" industry in the U.S., except that the industry is quite large and active. The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions-- maybe not to refer prosecutions at all-- and so we'll repeat the cycle mentioned above until at a future time a grandmother, aunt or child is killed again in a staged fraudulent insurance claim, and then everyone will get introspective again and muse that at one point we had laws that incentivized insurers to identify and prosecute scam artists but bad press like this article led to changes that made them stop. [1] https://www.ifb.org/(X(1)S(dzqyttjltzr0pry1l1wmvlxj))/ContentPages/CIFI/DefaultCIFI.aspx https://www.ifb.org/(X(1)S(dzqyttjltzr0pry1l1wmvlxj))/Conten...

Ensorceled 7y ago
Are you saying that the incidents in this article didn't happen and that State Farm isn't paying LEO to investigate customers it believes are fraudsters?

RickJWagner 7y ago

It's a necessary part of the business, and it keeps rates down for every insurance holder. I just wish they were more public about punishing the bad ones they catch. It would help people understand the necessity of investigations, and probably discourage some would-be fraudsters.

CocaKoala 7y ago
> In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an “unwritten policy” within the company to withhold evidence from customers that could help prove their innocence. If withholding evidence that might prove your customer's innocence is a necessary part of the business, I submit that your business is bad and should not continue in its current form.

skrebbel 7y ago

Just today, Dutch newspapers reported that courts in the Netherlands are running trial processes against suspected insurance fraudsters without any involvement from the police or the DA's office [0]. The idea is that the police force is too understaffed to do research against smalltime insurance fraud, but the insurance companies are more than happy to build the case independently. And the judge is still impartial, so everything is fine, right? This worries me because the insurance isn't exactly impartial, right? I assume that once they suspect fraud, they really really want you to have indeed committed fraud, because there's hardly any downside for them if they wrongly accused you. They'll build up a very one-sided case. Apparently in the US, the same problem is solved with an undereducated instead of an understaffed police force, plus semilegal bribes. To be honest I don't really see the fundamental difference between that and the new Dutch idea. I wonder what HN thinks should be the solution. Staff more cops? What if recruiting good ones is prohibitively hard? What if the good ones would really prefer to be put on other cases than "we think Joe Smith stole $2000 from an enormous cash-loaded faceless financial corporation"? It's a hard problem. [0] https://www.ad.nl/binnenland/proefproces-verzekeringsfraudeurs-voor-de-rechter-zonder-politieonderzoek~a131ac17/?referrer=https://www.google.nl/ https://www.ad.nl/binnenland/proefproces-verzekeringsfraudeu...

speeder 7y ago
When lightning struck my house, insurance company just flat out refused to help, one employee of their just flat out told us on the phone that unless we could prove lightning hit our property specifically, they wouldn't even bother sending someone over to check our claims, because or the claim was false, or the lightning hit the power lines, and in this case we should bother the power company... (by the way, we know the lightning hit our property, the damage got bigger and bigger in specific direction, and following it the place with highest amount of damage was the tall metallic post where the motor for the gate was attached...)
- michaelbuckbee 7y ago
  Curious what they would have accepted as proof in that case?

marcus_holmes 7y ago

What a way to destroy your own industry. If getting insurance increases the cost of a bad thing happening, instead of decreasing it (because your claim will be refused, and you'll also be charged with fraud for even trying to make a claim) then what is the point of taking out insurance on anything?

hanniabu 7y ago
Because it's the law to have certain insurance like health and car insurance.
- daveFNbuck 7y ago
  You don't have to have health insurance. You have to pay a fine for not having health insurance. Many people decide that the fine is the cheaper option, so health insurance companies at least have to compete with that.
  - gtCameron 7y ago
    The "fine" is now $0 after the tax cuts last year
  - homonculus1 7y ago
    You don't "have to" do anything under the law. Nobody comes and holds you by the wrist and makes you do it. You just have to pay fines, or go to jail for not doing it.
- syshum 7y ago
  To drive on the public roads you have to prove "Financial Responsibility" for most people the cheapest and most effective way to do that is Auto Insurance, however every state i am aware of has alternatives, aka "Self Insure" that can be a Bond, or some other guarantee that you are able to cover the minimum liability of state
jen_h 7y ago
No worries for the insurers -- you're legally required to get insurance for all sorts of things in the US. Vehicles, mortgages...even some landlords require that renters hold a renters' insurance policy.

judge2020 7y ago

I'm drawing connections to the Black Mirror episode Crocodile https://en.wikipedia.org/wiki/Crocodile_(Black_Mirror) https://en.wikipedia.org/wiki/Crocodile_(Black_Mirror)

Circuits 7y ago

I feel like, until a defended has been prosecuted and some time has passed (post prosecution) any potential defamation of character should be illegal. So no printing news stories about how guilty someone is prior to a guilty verdict actually being had. Haven't enough people's lives been ruined over this yet? Can't we all just grow up and stop acting like 4'th graders in the schoolyard pointing fingers and tossing rocks?

bytematic 7y ago

The investigative wing for life insurance is really interesting. They can sniff out fraud from a mile away. They still have to do a lot of insurance apps manually because people lie so often. How can people say they don't smoke but it shows up all over their medical records?

deleted 7y ago

[deleted]

neilv 7y ago

Good faith reporting of suspected fraud sounds fine, but a couple concerns about this: > In one case, investigators at State Farm withheld several crucial reports contradicting their fraud allegations from the bundle of evidence they handed over the law enforcement. In another, a Farmers manager admitted under oath that there was an "unwritten policy" within the company to withhold evidence from customers that could help prove their innocence. Besides the appearance of possible bad faith, that might also -- in the context of government relying on the insurance company to do some of the investigative work -- thwart government obligations to share evidence with a defendant.

olliej 7y ago
If the insurance company withholds the evidence from the police and prosecutors they never “know” it exists and wouldn’t need to provide it. What irks me is that they can destroy people’s lives with impunity: if they lose they just have to pay out the insured amount, they don’t need to compensate someone for making them homeless or for destroying their business. All officers and prosecutors should be criminally liable as they are accepting bribes for prosecuting these victims. The insurers should be liable for subverting the course of justice, and any deliberately withholding evidence that demonstrates the claim of fraud is false should make the insurance companies liable for all costs, and all “witnesses” should be separately liable for false testimony.
celticmusic 7y ago
honestly, these companies should be fined so heavily that it's just not worth it for them. I understand that legitimate insurance fraud needs to be investigated and prosecuted, and I'm all for it. But you give them all the evidence, period, and let them decide. You do not manipulate them to save yourself from a payout. That crosses a line that has no grey in it.
- gamblor956 7y ago
  It is a finable offense...in some states, like California. Indeed, something like this could even get an insurance company's license to sell insurance in one of those states revoked.

deogeo 7y ago

While everyone involved surely deserves either life in jail or the death penalty, there's something we can do without going through the corrupt 'justice' system: Inform all the clients of these companies of what they're doing. Let them know they bribed the police to put clients in jail after filing a claim. And don't forget to name names - don't let them hide behind the corporate facade.

saagarjha 7y ago
What you're asking for sounds awfully like extrajudicial punishment that doesn't match the severity of the crime at all.
- homonculus1 7y ago
  Debatable. To me life imprisonment sounds like a perfect match for perverting the legal system to jail and ruin innocent people for profit. This corruption is not just a crime against the victims, but against society itself for its erosion of the public trust in the institution of law.

rconti 7y ago

So, I've seen the flip side of this. I have a friend who does building inspections for insurance companies. He sees what's basically outright fraud all the time, but companies rarely press it. Think about it: their main incentive is to avoid paying out claims where they shouldn't have to. They're more than happy to deny a claim, stop offering your services to that person and let the next insurance company get defrauded by the person. The companies have minimal incentive to rat out their own clients (especially when they're merely 95% sure it's fraud), and so lawlessness can easily continue. So, I can see both sides of this. The government might WANT to prosecute insurance fraud, but they're rarely aware of it, because how would they find out?

Mathnerd314 7y ago
I assume he's seeing construction fraud? Then the builder would be liable rather than the policyholder, and IANAL but probably the insurance company wouldn't have standing to do anything even if they wanted to since they don't own the building. Or is he correcting details of the properties used in some actuarial model? I suppose that would be more interesting but I can't imagine that a 4x premium adjustment or whatever would be worth suing for.
- rconti 7y ago
  Policyholder/homeowner fraud.