In the processing of claims, the indexes of the American Insurance Association (AIA) may be checked to determine whether the claimant has had a series of prior losses or is submitting claims for the same loss to other companies. These indexes -cover fire, burglary and theft, and fine arts losses, as well as third-party personal or bodily injury claims arising under automobile, homeowners, malpractice, and worker's compensation policies.39 Many property and liability companies in the industry subscribe to the loss indexes. When a claim is filed, the insurer reports basic information on the claim to the proper index and, in return, receives from the index a copy of any previously filed reports on the claimant. In addition, the insurer, on the basis of such a report, can go to the company that filed it for further information.
The Fire Marshal Reporting Service
The Fire Marshal Reporting Service (FMRS) reports to fire marshals in 27 States on fire claims its members have paid. In addition, the FMRS maintains an index on reported fire losses in every State which any member can use to determine the prior loss record of a claimant as a check, for example, on arson. Membership in the Service is available to all interested insurance companies in the United States. At present 189 belong.40
Unlike reports made to the other indexes, reports made to the Fire Marshal Reporting Service are made after the claim has been paid. Reports are mandatory in those 27 States where the Fire Marshal must be notified of all losses above a minimum amount ranging from $10 to $250. Otherwise, the Service accepts reports of losses in amounts of $250 or more. Currently, there are 1,067,000 loss reports on file, all of them generated within the previous six years.41
Like Index System records (see below), Fire Marshal Reporting Service records are obtainable solely for the purpose of processing claims. "For a subscriber's authorized reporting office to initiate a search, the office must be handling and report a claim under the lines of coverage serviced . ... 42 The requirement that records be used only for claims purposes is enforced by requiring an index card from the inquiring subscriber before making any search or giving out any information.
The Burglary and Theft Loss Index
The Burglary and Theft Loss Index is maintained separately from the Fire Marshal Reporting Service, but membership in the FMRS entitles a company to receive reports from both systems. By using the Burglary and Theft Index, a member may detect simultaneous claims on the same item or a claim on a loss for which the claimant has previously been reimbursed. Part of the Burglary and Theft Loss Index is the Fine Arts Loss Index whose function is to expose fraudulent claims involving art objects and to help locate missing ones that have been the subject of prior claims.43
The National Automobile Theft Bureau
The National Automobile Theft Bureau is a service organization sponsored, operated, and supported by approximately 500 insurance companies writing automobile, fire and theft insurance. The primary objectives of the Bureau are to assist in the recovery of stolen automobiles, to investigate automobile fire and theft losses which may be fraudulent, and to promote programs designed to prevent or reduce such losses. The Bureau operates as a national clearinghouse for stolen car information. Member companies report automobile thefts to the Bureau and the Bureau notifies member companies of recoveries, which are made primarily from police tow-away pounds.
According to its operations manual, the Bureau maintains the following record systems:
- National Stolen Vehicle File. This contains all Bureau members' reports on stolen vehicles and is used to detect fraudulent theft claims when several companies provide theft coverage on the same vehicle. Subfiles include information on impounded vehicles and stolen parts.
- National Salvage File. Records in this system indicate the disposition of all late model vehicles sold for salvage by member companies. Each entry of a salvage record creates an automatic inquiry against the master file by vehicle identification number, State license number, named insured, and salvage purchaser. Inquiries to the system may detect dual insurance coverage, multiple losses by a named insured, fraudulent claims based on the use of salvage documents or counterfeit documents on nonexistent vehicles.
- Manufacturers' Production Records. These are used in verifying that a vehicle was actually produced, and may also be used to find the dealer to whom a particular vehicle was originally sold. Each of the major U.S. manufacturers provides them to the Theft Bureau on microfilm.
The Index System
The Index System accumulates and makes available to its subscribers records concerning third-party personal and bodily injury claims. The Index System is maintained solely for use in claims processing. Ten branch offices serve all 50 States, the District of Columbia, the Commonwealth of Puerto Rico, and the Virgin Islands.44 Subscribers report claims to the office servicing the territory where the incident occurred. Receipt of a properly completed index card from a subscriber triggers a search of the Index. If the search turns up prior submissions on the claimant, the subscriber will be sent a photocopy of all of them.
The Index System is decentralized. Searches are normally limited to the records of the receiving branch office. Where the submitted index card shows that the claimant lives or once lived in the geographic area of another office, however, the inquiry is automatically referred to that other office for further checking and disclosure directly to the inquiring company of any record found.45 The Index System "Instructions for Subscribers" says that "each subscriber is expected to cooperate by furnishing information contained in its claims files to other subscribers ...,"46 and also permit the insurer who has been asked for information to ask, in turn, for information from the inquirer. This allows two insurers who are in the act of settling claims by the same individual to communicate with each other.
There are two limits to these exchanges of claims information directly between insurers. First, ."the exchange of information on [auto-related] medical payment, death and disability claims is at the discretion of the subscriber."47 Second, "the Inquiry Form is to be used only in cases where substantial claims are involved to relieve subscribers of unnecessary work in procuring and examining closed files."48 (Italics in the original.)
Reports to the Index System must be limited to claims of the following types: automobile liability (including uninsured motorists); automobile accident reparation (or personal injury protection); liability other than automobile, including liability claims under homeowners, commercial, multiple peril, yacht, pleasure craft, and aircraft policies; claims based on false arrest, assault and battery; malpractice claims; and worker's compensation claims. Worker's compensation claims are supposed to be reported only when they involve: (1) disability due to amputation, back injury, disfigurement, dislocation, eye injury, fracture, head injury, hernia, loss of hearing; (2) injuries with possible lost time payments of $500; (3) occupational diseases with possible medical and lost time payments of $1,000; (4) lost time claims by longshoremen and construction workers; or (5) a suspicion of fraud. A report must be made on any claim falling in these areas, except that reports on auto-related medical, death and disability claims are discretionary.49
Subscription to the Index System is open to "all insurance companies writing bodily injury liability coverages without regard to membership in the American Insurance Association."50 To belong to the System, one must either be a liability insurer where liability claims are made against an insured, or a self-insurer (such as an employer) which may have liability claims made directly against it.51 About 26 percent of the Index System subscribers are selfinsurers, but they represent a very small percentage of those that report.52 In total, the Index System currently has 1,183 subscribing insurers and self-insurers and maintains records on approximately 28 million bodily injury claims reported during the System's six-year report retention period.53
A witness from the Index System offered some anecdotal evidence of its efficacy in uncovering fraud. One story tells of an elderly woman who constantly sustained minor injury to ;per mouth because of glass in a sandwich.
In appearance, she resembled the classical image of . . . [a] grandmother-unassuming, nondemanding, doing a public service by calling attention to a deficiency in an insured's kitchen with no intent of making a fuss. From the viewpoint of the insurance carrier, liability was there; the demand was modest. The settlement was simple and uncomplicated. In fact . . . the insurance company almost had to force payment upon the claimant to accept any compensation for her inconvenience and minor injury.
The sad truth was that "grandma" was a professional claimant. In her purse, she carried glass fragments which she would place in her mouth to cause a laceration. She would, then, call the waiter, display the physical evidence of the glass bit and the bloody napkin. Her manner would be mild and full of concern for other diners who might not be so fortunate in sustaining only a minor injury. She was literally in the claim business.
Fortunately, in her travels, she did establish a pattern of reports involving subscribers [to the Index System] which led to an investigation of her activities and ... agreement to divert her activities to more constructive lines.54