CP Advice

• The individual insurance agent is the agent of his appointing insurance company.  He uses medical certificates with exaggerated injuries in support of the claims applications to deceive his appointing insurance company (i.e. his principal) for claims payment.  He contravenes Section 9(3) of the Prevention of Bribery Ordinance (Cap. 201) (POBO) as he uses claims application supporting documents with false information in respect of which his principal is interested and with an intent to deceive his principal.

• The individual insurance agent, the medical practitioner, the Chinese medicine practitioner and the other accomplices, also contravene, amongst other offences, the offence of conspiracy to defraud, contrary to the Common Law.

Some corrupt insurance intermediaries might abuse their career knowledge and collude with customers and third parties (e.g. a medical practitioner) to submit false claims to deceive insurance companies for claims payment and solicitation/acceptance of advantages (e.g. sharing of the proceeds).  Aside from the above case, there are other ways of deceiving claims payment (e.g. unscrupulous insurance intermediaries using particulars of perfectly healthy customers to take out high-compensation critical illness insurance policies from insurance companies and subsequently recruiting cancer patients posing as the policy holders and presenting themselves at medical centres for biopsies to deceive insurance companies for handsome claims payment).  The modus operandi of insurance bribery scams are becoming more complicated, with more parties getting involved in the crimes.  Apart from contravention of the POBO by the parties concerned and causing financial loss to the insurance companies, those corrupt practices also have a negative impact on the integrity culture of the companies and may drive up the premiums of other honest customers.  If there are inadequate controls in the insurance company, this would create opportunities and temptation for exploitation by the corrupt parties concerned.  In order to deter/detect the related malpractice in the above case, insurance companies are advised to pay attention to red flags (i.e. indicators of areas where management oversight is required to safeguard against possible corruption) and put in place adequate corruption prevention safeguards.  Examples of red flags and safeguards include –

Red Flags

• Policy holders filing claims, via insurance intermediaries, with insurance companies for high compensation with loss purportedly incurred from accidents/death occurred outside Hong Kong shortly after the issue of insurance policies.

• Suspicious claims applications such as –

• vague or ambiguous information on a claims application as to the details of the hospitalisation (e.g. date, place of treatment or name of hospital); and

• claimants’ supporting documents (e.g. medical report) issued by a third party (e.g. medical practitioner) who is being identified as having a history of involvement in dubious/suspicious claims.

• Insurance intermediaries’ portfolios having a high ratio of rejected claims applications, or claims applications with similar nature (e.g. similar illness / bodily injuries) and/or involving the same third party (e.g. same medical practitioner / garage).

Safeguards

• Remind the claims verification staff to approach the clinics / medical centres concerned to verify the authenticity of the medical attendance / hospitalisation record issued by them (e.g. whether the clinics / medical centres concerned have diligently verified the identities of patients before issuing medical attendance / hospitalisation record).

• Ensure that clinics / medical centres have established an effective internal control system (e.g. put in place a mechanism to ensure that medical practitioners and clinic staff stay vigilant in verifying the identities of patients) while having business dealings with them, and include suitable anti-corruption and probity requirements in the agreements with them.

• Put in place adequate procedures for examination and approval relating to claims involving accidents happening outside Hong Kong (e.g. cross-check the claimant’s immigration records such as the Statement of Travel Records issued by the Immigration Department on his purported hospitalisation date(s) outside Hong Kong).

• Deploy external resources to identify potential corruption/fraud cases such as obtaining expert opinion on the loss or damage reported by the claimants, inspecting pertinent sites and where necessary, engaging professional investigation agencies for further investigation of suspicious significant claims cases.

• Develop an internal database containing intelligence of any individuals or companies who/which have a history of dubious/suspicious claims, and require claims verification staff to conduct checks against the database to identify any potential corruption/fraud cases.

• Establish a liaison channel with other insurance companies to facilitate timely communication about the suspicious claims (e.g. by checking with other insurance companies to see if the claimant has filed similar claims applications with them) to identify fraudulent claims submitted to different insurance companies at the same/similar time.

• Cross-check claims cases against intelligence/database which indicates claims anomalies based on past claims data of other insurance companies (e.g. the Insurance Fraud Prevention Claims Database launched by the Hong Kong Federation of Insurers) to sniff out suspicious claims applications and to deter fraudsters from committing corrupt/fraudulent practices because they will be detected.

• Be alert to any irregularity in the change of beneficiary (e.g. change of beneficiary shortly before a claims application).

• Take technological measures (e.g. social network analysis, predictive modelling) to facilitate detection of anomalies during the underwriting and claims verification process.