CALA Risk Management & Fraud Prevention in Claims Handling 3 — Questions and Answers
Question 1: What is the primary purpose of a Suspicious Activity Report (SAR) filed by an insurer?
- To notify the claimant of coverage denial
- To alert state insurance fraud bureaus of potential criminal activity (Correct answer)
- To request an independent medical examination
- To initiate subrogation recovery
Correct answer: To alert state insurance fraud bureaus of potential criminal activity
SARs are filed with state insurance fraud bureaus to report suspected fraudulent activity for potential criminal investigation.
Question 2: Which vehicle damage pattern is a known indicator of a 'swoop and squat' fraud scheme?
- Front-end damage to the swoop vehicle
- Rear-end damage to the squat vehicle with no front damage to the swoop vehicle (Correct answer)
- Side-impact damage on both vehicles
- Undercarriage damage inconsistent with road conditions
Correct answer: Rear-end damage to the squat vehicle with no front damage to the swoop vehicle
In swoop and squat, the squat vehicle sustains rear damage after the swoop vehicle cuts it off, but the swoop vehicle typically shows no front damage.
Question 3: An insured claims a catalytic converter theft but the exhaust system shows no fresh tool marks or cuts. What investigative step is MOST appropriate?
- Immediately deny the claim
- Request an EUO and retain a forensic mechanic (Correct answer)
- Pay the claim under good faith obligations
- File a SAR and close the file
Correct answer: Request an EUO and retain a forensic mechanic
The absence of physical evidence warrants an Examination Under Oath and forensic inspection before any coverage decision.
Question 4: Which principle requires an insurer to conduct a reasonable investigation before denying a claim, even when fraud is suspected?
- Subrogation doctrine
- Good faith and fair dealing obligation (Correct answer)
- Res ipsa loquitur
- Collateral source rule
Correct answer: Good faith and fair dealing obligation
The duty of good faith and fair dealing requires insurers to investigate reasonably before denial, even in suspected fraud cases.
Question 5: A claimant's medical bills show treatment for whiplash, but surveillance video shows them loading heavy furniture the day after the accident. This evidence is BEST described as:
- Circumstantial evidence of comparative negligence
- Direct evidence contradicting claimed injury severity (Correct answer)
- Hearsay inadmissible in civil proceedings
- Evidence supporting a coverage defense
Correct answer: Direct evidence contradicting claimed injury severity
Surveillance footage showing physical activity inconsistent with claimed injuries is direct evidence contradicting the severity of the alleged injuries.
Question 6: What is 'rate evasion' in automotive insurance fraud?
- Failing to report a prior accident to avoid premium increase
- Misrepresenting the vehicle's garaging location to obtain lower rates (Correct answer)
- Omitting driver information on the application
- Understating annual mileage on renewal
Correct answer: Misrepresenting the vehicle's garaging location to obtain lower rates
Rate evasion most commonly involves misrepresenting the garaging location (e.g., listing a rural address instead of a high-rate urban area) to obtain lower premiums.
Question 7: Which organization maintains the Fraud Intelligence System (FIS) used by U.S. auto insurers to share suspected fraud data?
- NICB (National Insurance Crime Bureau) (Correct answer)
- NAIC (National Association of Insurance Commissioners)
- ISO (Insurance Services Office)
- FBI Financial Crimes Unit
Correct answer: NICB (National Insurance Crime Bureau)
The NICB operates the Fraud Intelligence System, a database that member insurers use to share and access suspected fraud data.
CALA Risk Management & Fraud Prevention in Claims Handling 3
What is the primary purpose of a Suspicious Activity Report (SAR) filed by an insurer?