Railway spine was a controversial disease first described in the 1860s by a British doctor as one with symptoms with a source in “microscopic changes to the spine that could not be seen.” Naturally, railway spine became a leading cause for personal injury compensation in rail accidents in Britain and the United States (Dornstein, 1996, pp. 209-219).
Article first published online: 25 OCT 2002
Journal of Risk and Insurance
Volume 69, Issue 3, pages 271–287, September 2002
How to Cite
Derrig, R. A. (2002), Insurance Fraud. Journal of Risk and Insurance, 69: 271–287. doi: 10.1111/1539-6975.00026
This trip though fraud publication history is necessarily short and incomplete. Apologies to those making important contributions that are omitted here.
An annotated searchable bibliography on insurance fraud is available on the Insurance Fraud Bureau of Massachusetts Web site at http://www.ifb.org/IFRR/ifrr_ind.htm.
It is highly likely that proprietary models were developed during this time frame but were not published.
In its annual report for 2000, the CAIF (2001a) produced a section called “Pin the Tail on the Estimate.” Estimates for the cost of insurance fraud ranged from a low of $18 billion by the National Insurance Crime Bureau for property-liability fraud to a high of $96 billion by Conning & Co. for all lines of private-market insurance.
Of course, surveys such as the International Research Council/Insurance Services Office [IRC/ISO] 2001 survey provide an accurate picture of the perceptions of fraud, if not fraud itself.
In one such sampling, four different coders provided subjective appraisals on the fraud content of Massachusetts personal injury protection (PIP) and bodily injury (BI) liability claims. While each set of coders identified 5–10 percent of the claims as suspected fraud, no claim was judged as suspected fraud by all four coders (Derrig and Ostaszewski, 1995).
While the vast majority of referrals concerned property-liability lines, occasional referrals were for other lines such as life and viaticals.
For example, in my opinion, prosecutors are most important (Rank 1) for deterring fraud but least important (Rank 10) for mitigating abuse. My full ranking for the Ten Defenses (in the alphabetical order of Table 3) for fraud are 5, 7, 3, 6, 8, 9, 10, 4, 1, and 2, and for abuse they are 5, 4, 9, 3, 7, 8, 1, 2, 10, and 6.
DM algorithms can also serve the more specialized sorting required within the set of claims handled by SIU personnel. Indeed, the more sophisticated algorithms may be reserved for SIU use, perhaps because of sensitive information and privacy concerns.
Actual claim processing systems may contain more complicated layers such as medical bill reductions of upside outliers to so-called reasonable and customary levels.
One potential example would be the use of credit scores as a separate criterion not derived from the company claim data. Another example would be some scoring of providers by their propensity for involvement in questionable or exaggerated claims.
EFD is the acronym coined by Major and Riedinger for electronic fraud detection.
See Biddle, 2001.
- Issue published online: 25 OCT 2002
- Article first published online: 25 OCT 2002
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