[drtillberg]

The author gets this topic utterly backward. Large insurance companies each have essentially no business incentive to do anything except pay claims. Maybe they try to get insureds back to baseline on the cheap, but deny an insured loss entirely? No. Not even investigate them.

And so fraudulent claims and the shadow industry that surrounds them grow in size until something bad happens, like a grandma dies in a commercially-staged motor vehicle accident.[1] And then everyone gets all introspective and tries to figure out how we got to that regrettable point and what we can do to walk things back to a sane place where fraudulent activity is not acceptable.

Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims. What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced and are generating erroneous or weakly-supported evidence of fraud, which the companies then hand off to public authorities who apparently have no better resources. That leads to two observations:

1. If the problem is irrational, counterproductive prosecutions due to poor training and resources, writing a hit-piece about supposed conflicts of interests over supplemental funding being used to patch the resource problems isn't really part of the solution.

2. The insurance companies are paying for the consequences of poor-quality investigations communicated to authorities by their investigators. The article talks about some of the claimants suing the insurers for bad faith practices (and defamation?), which I'd call a "cottage" industry in the U.S., except that the industry is quite large and active. The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions-- maybe not to refer prosecutions at all-- and so we'll repeat the cycle mentioned above until at a future time a grandmother, aunt or child is killed again in a staged fraudulent insurance claim, and then everyone will get introspective again and muse that at one point we had laws that incentivized insurers to identify and prosecute scam artists but bad press like this article led to changes that made them stop.

[1] https://www.ifb.org/(X(1)S(dzqyttjltzr0pry1l1wmvlxj))/Conten...

[syshum]

>>Unfortunately, the basic incentives in the insurance industry still are, and always will remain, for companies to do as little as possible about fraudulent claims

Incorrect, the entire point of an insurance company is to collect as much in premiums as possible while paying out as little in claims as possible

the Clear basic incentive is to DENY as many claims as possible

>> What I see in the facts reported by the article are companies that have used fraud investigators who are poorly trained or under-resourced

I don't see that at all. I see the companies incentivizing "investigators" to find away to deny claims even if it means fabricating a good story wholesale.

The Contractor that had is business ruined by State Farm because he was talking to the press is a clear example of that

>> The insurers named in the article most definitely have been incentivized to learn the lesson not to refer marginal fraud prosecutions

Where on earth do you get any of these companies have "Learned their lesson"

Let me guess you are an insurance sales man, or in some way make your living connected to the Insurance scam?

[drtillberg]

The insurance business is about paying claims with minimal friction, expense, and dispute, and making sure premiums are set at an appropriate level . Triggering bad faith discovery and expensive extracontractual settlements is not the point, and it is exactly what the companies identified in the article have done. The ability of claimants to bring those claims more than levels the playing field.

I'm just floored to see a post on HN criticizing someone else personally on HN and then calling insurance a "scam"? It's a regulated industry, it's definitely not a scam, and I'm really saddened at the level of misunderstanding brought about by a poorly written one-sided article that doubtless was inspired by some kind of sharp-elbowed personal injury litigation strategy by sources in the story.

[syshum]

> It's a regulated industry,

That does not in anyway "prove" it is not a scam, it is a legal scam backed by the government which there are many of those

The Insurance Industry for decades now have succeeded in regulatory capture where the "regulators" are made up of industry insiders that ensure the regulations favor the companies not the citizens

That is one of the biggest points of the story, is how the "regulations" mainly shield the insurance companies from liability and prohibit them from being sued

>I'm really saddened at the level of misunderstanding brought about by a poorly written one-sided article

It is not the article, the article just confirms what many of us has already experienced in Real Life when it comes to insurance.

Submit a claim, only to have it denied because you insurance only covers you if the event happens on the 5th tue during a full moon, if you are standing on one leg while praise the xenu god... That clause was on page 900 of the 4 point font contract you "agreed" to when you took out the policy

Or if the do approve your claim, You are Dropped from the insurance the second they legally can, or they jack your rates up Sky High to ensure they recover the costs, never mind that you paid in premiums for years well in excess of the claim....

[drtillberg]

Ok, point taken on underwriting and excluded risks, both of which are closely regulated and create legal commitments which insurers scrupulously honor by paying claims.

I think in any organization when management constantly is trying to squeeze costs there will be instances of incompetent conduct (which folks on HN will quickly note is often indistinguishable from malice). That said, if an insurer denies claims where liability and damages are reasonably clear, or abuse legal processes-- both of those are torts, legal fees are often available for the successful party, and if you feel you've been wronged by an insurer in any of those ways by all means go speak with a bad faith insurance attorney and good luck.

[Ensorceled]

Are you saying that the incidents in this article didn't happen and that State Farm isn't paying LEO to investigate customers it believes are fraudsters?

[drtillberg]

The insurers paid their own investigators to investigate the insurance claims. When those investigations generated evidence that in retrospect was defective or weak, the companies handed the file to the police. I don't know who pays whose salary in Pennsylvania, but the article goes after all kinds of public/private coordination in the SIU space, from NICB on down for alleged collusion, and from that perspective simply has it wrong.