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Among the many insightful presentations at the 2018 69ɫ��Ƭ Fraud Conference, attendees had the opportunity to hear from Michael Ferguson, Co-owner of , an insurance investigation firm specializing in life and health cases. Mike spoke to us about nomadic claims fraud (also referred to as community fraud). “Nomadic” is a broad term to refer to the various ethnic groups of “gypsies” or “travelers” for whom insurance fraud is a way of life.

I recently sat down with Mike to learn more about nomadic fraud, to define steps insurers can take to avoid it, and to look for lessons that we might apply to all forms of insurance fraud.

You compare investigating nomadic claims to solving a Rubik’s Cube. Explain.

Like a Rubik’s Cube, investigating a claim from a nomadic group member is complex and has many sides – from the manner of acquiring insurance through the claims process. For new claims examiners especially, the webs of deceit can be so intricate that they are very difficult to detect. Little changes – altering dates, replacing one digit in a social security number, mismatching names and signatures – make it hard to follow the trail.

So where should insurers start in addressing nomadic fraud?

Becoming familiar with the customs, cultures and traditions of nomadic groups is essential. These claims are similar to handling foreign investigations in that the nomadic ways of life are completely different than those we adhere to. Their norms are not our norms. Arguably the biggest challenge is that culturally they don’t see any problem with misrepresenting on insurance forms, so fraudulent practices are shared among the group and passed from generation to generation. As a result, they have developed very effective, sophisticated techniques. I recommend the book Gypsies, The Hidden Americans by Anne Sutherland to start your education.

How do insurers diagnose a nomadic application?

Underwriters are the first line of defense. Start with the applicant’s name: Does it match one of the names commonly used by nomadic groups? How about occupation and place of residence? Here too a list of common nomadic jobs and geographic locations can be extremely helpful. Also look for application information that stays right under policy thresholds – a date of birth just under the age limit or policy benefits just below non-medical limits, such as applying for a $95,000 policy when $100,000 would necessitate medical testing. All parties involved should be scrutinized: Does the beneficiary have insurable interest issues? Is the owner someone other than the insured? Is the payer someone other than the insured? Really, many best practices for detecting fraudulent applications in general are applicable to nomadic groups, but with a higher level of scrutiny.  

How about a nomadic claim?

Look for many of the same red flags you’d look for on an application, but also keep a close eye out for discrepancies – down to the letter – on all documentation. For example, does the information on the death certificate match the medical examiner’s report? Has the date of birth on the application (that was just under the age threshold when the person applied) somehow turned back in time to indicate a much older person on the death certificate? Their methods are many, and the best defense is constant vigilance.

So what do insurers do once they suspect fraud?

Proactively, identify existing business on the books still within the contestable period and positively identify the insureds – then begin live rescission investigations. Reactively, wait until you are faced with a claim. If within the contestable period, proceed with a misrepresentation investigation. If beyond, determine if fraud existed.

What are some key steps insurers should take to defend themselves against nomadic fraud?

First, admit that you are not immune. Just because they haven’t struck your company yet doesn’t mean they won’t. A major federal indictment in 2016 of nomadic residents of the infamous “Murphy Village” in South Carolina seemed to slow activity down for a number of months, but it has ramped back up. And with the switch to digital applications and automated processing, new opportunities for fraud are availing themselves every day. Some basic actions can help you be prepared:

1. Training, training, training. Everyone from the CEO to the mail clerk needs to know what they can do to identify these files.
2. Tighten underwriting guidelines – know your applicants.
3. Query your systems to identify these policies.
4. Be tenacious and thorough in your investigations to create a deterrent. They will soon move on to another company.