Fraud Tools for Claims Adjusters - Part 1 by Willie Handler (Guest Post)

Willie Handler will be a guest speaker for our SmartSimple Community Conference on April 17th, where he will present a session on claims management. 

Handler is an Ontario automotive insurance expert and the operator of Willie Handler and Associates, a consulting practice.

Fraud Tools for Claims Adjusters – Part 1

by Willie Handler, Willie Handler and Associates

The state of the Ontario auto insurance product prior to September, 2010 was frightening. Accident benefits costs increased by over 100% in just a 4-year period (Exhibit 1).

During the same period, assessment costs had increased by 250%, housekeeping costs had increased by 195% and medical costs by 120% according to data published by the General Insurance Statistical Agency (GISA).  These cost increases have translated into higher premiums for consumers.

Many of those involved in the Ontario market believe that fraudulent activity has been on the rise during this period. Much of the evidence is anecdotal but the rapid increase in claim costs could not be ignored.  The situation was particularly acute in the Greater Toronto Area.

The good news is that a number of initiatives both past and present are providing adjusters with new tools to address those that abuse the system and control costs. 

These initiatives include reforms that were introduced by the government on September 1, 2010, recommendations made by the Automobile Insurance Anti-Fraud Task Force and a number of guidelines released by the Superintendent at the Financial Services Commission of Ontario (FSCO).

September 2010 Reforms

Changes implemented on September 1, 2010 flowed largely from the first statutory five-year review that was submitted by the Superintendent to the Minister of Finance in 2009. The growing abuse in the system was a factor in many of the reforms. 

These reforms appear to have removed considerable costs from the system and have had some impact on fraudulent behavior. These changes were as follows: 

• A standard medical and rehabilitation benefits coverage of $50,000 (reduced from $100,000) and included assessment costs;
• A standard attendant care benefit coverage of $36,000 (reduced from $72,000);
• Caregiver, housekeeping and home maintenance expense coverage now optional;
• Capped coverage for treating and assessing minor injuries at $3,500; and
• Capped assessment costs at $2,000 per assessment whether initiated by an insurer or a treating practitioner.

New SABS Fraud Tools

There are some significant regulatory tools in the new Statutory Accident Benefits Schedule (SABS) introduced in September 2010 to assist adjusters in controlling all forms of fraud.  

Minor Injuries

The SABS expands on the previous definition of whiplash-associated disorders (WADs) by including sprains, strains, dislocations, lacerations, contusions, abrasions and any clinically associated sequelae (secondary consequences or results of an injury) in a new minor injury definition. Including associated sequelae in the definition is meant to cover common complaints associated with soft tissue injuries such as pain, headaches, dizziness, difficulty sleeping, anxiety, depression and fatigue.

The Minor Injury Guideline (MIG) and a $3,500 cap on treatment and assessment expenses apply if the claimant sustains an impairment that is predominantly a minor injury. Currently, there is no guidance provided from the Superintendent, arbitrators or the courts on how to determine the predominant impairment of a claimant who sustains multiple impairments. However, another impairment may not necessarily create entitlement to medical and rehabilitation expenses in excess of $3,500.

The MIG was not intended to cover complete tears of muscles or ligaments, fractures or serious psychological impairments. Still, a minor fractured nose or finger may require little treatment in comparison to a WAD injury. Therefore, it could be argued that the WAD injury is the predominant one. Adjusters should seek independent medical advice when a claimant appears to have multiple impairments or a more serious impairment that would exclude them from treatment under the MIG.

The MIG and $3,500 cap do not apply to a claimant if his or her practitioner provides compelling evidence that a pre-existing condition prevents the claimant from achieving maximal recovery under the cap. There is no guidance as yet as to what constitutes "compelling evidence" but these situations should be rare and an independent medical opinion would be appropriate.

Common diagnoses used by providers to escape the $3,500 cap are psychological impairment and WAD III. Depression and anxiety are common complaints following an auto accident and often resolve themselves over time. That is not the case with post-traumatic stress disorder. Again, an independent medical opinion would be appropriate in these situations.

Incurred Expense

Although "incurred expense" has been a term used in the SABS since 1990, it has never been defined. Over the years the interpretation of the term has undergone some change. It was originally intended to allow claimants to be reimbursed for actual out-of-pocket expenses, such as payments for physiotherapy or the purchase of a wheelchair. Arbitrators and the courts have expanded reimbursement to include situations where no actual out-of-pocket expense exists.

The September 2010 reforms introduced a definition for "incurred expense". The new definition indicates that for an expense to be considered incurred, the claimant has already paid the expense or is legally obligated to pay the expense. Additionally, the person who provided the goods or services either did so in the course of the employment or sustained an economic loss as a result of providing the goods or services to the claimant. 

The plaintiff bar has not fully accepted the intent of the new definition and has suggested that any economic loss (such as the cost of gas while driving to assist a family member) would open the door to claim the full benefit. A recent court decision, Henry v. Gore Mutual, has shed some light on the new definition.

Direct Payments

Section 48 of the SABS covers the method of payments for medical and rehabilitation goods and services.  The common practice is that health care providers are paid directly by insurers despite the fact that the default rule in the SABS is that payments are made to the claimant.

Claimants are more than happy to have payments go directly to their providers. Insurers have discretion when it comes to paying providers directly except when specifically directed in writing by the claimant.


Stay tuned for part 2 of Willie Handler's guest post: Fraud Tools for Claims Adjusters.

Contact Willie Handler by email or visit his official blog. 

To learn more about SmartSimple IME360 °for Medical Claims Management visit our website.

Click here to register your spot for Handler's guest Community Conference session.