The effects of the economy on SIU operations

by Thomas Mulvey

The economic downturn affects all facets of our economy — and the insurance industry is certainly not immune to those developments. The SIU community is seeing the ramifications of the downturn through an increase in claims and a decrease in coverages.  

Carrier staffing resources are shrinking, state fraud bureau budgets are under scrutiny, and, sadly, claimants are more desperate. All of those factors have led to new challenges for SIU operations.

The loss of jobs coupled with the loss of equity is a fairly new phenomenon. Owners may view property claims involving mysterious disappearances, fires, staged break-ins, and other thefts as sources of income. If you see that a homeowner has made a claim close to the time of a mortgage default, that claim is certainly worthy of close scrutiny.

We can expect to see more lapsed coverages. As money becomes tighter, it’s more difficult for insureds to make premium payments. That can lead to an increased number of reported losses just before a policy’s cancellation date. It can also lead to the manipulation of loss dates to gain coverage fraudulently.

When consumers are trying to save money, they may drop coverage on risks that aren’t tied to loans. Consumers who own their own homes, renters in financial straits, and automobile owners with paid liens may be hard-pressed to continue to pay for insurance. Uninsured motorist claims are on the rise.

In the commercial arena, businesses close to bankruptcy must make some hard choices. We’re uncovering desperate policy misrepresentations when examining workers compensation and general liability claims. Insurers must scrutinize fire and inventory theft claims very closely.

The loss of healthcare coverage following layoffs and terminations intensifies the strain for many — and leads some individuals to commit fraud. If an insured incurs a post-employment injury, he may try to cover the injury through an auto claim. A college graduate who is off his or her parents’ healthcare policy and cannot find employment may use the same tactic.   

As our industry unravels the latest scams, companies need to plan specialized training for customer service and claim representatives to teach them how to handle new scenarios. In addition, our industry must study and implement new ways to use data to improve investigative efficiency.

One thing is for sure. As the economic environment changes, SIU operations will become even more critical to the effective administration of claim departments.

Tough times create more opportunities for SIUs to protect the carriers they work for — and to protect the honest policyholders who are their customers. It’s time to step up.