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Holidays Sometimes Prompt Second Thoughts About Insurance Fraud, State Farm Says

14 December 1999

Holidays Sometimes Prompt Second Thoughts About Insurance Fraud, State Farm Says
    BLOOMINGTON, Ill., Dec. 13 -- When Don Petteway one recent
morning opened a cardboard envelope addressed to no one in particular, the
mail center assistant at State Farm's regional office in Duluth, Ga., was in
for a couple of surprises.
    The first was the 5-inch stack of $20 bills that fell out.  "I did a
double take, then I locked the money up in a desk until the assistant manager
came to work," Petteway said.  Later, when the cash was counted, the total
came to $5,520.
    The second surprise was the anonymous note.  The writer explained the
money was "restitution" for a less-than-honest claim made years ago.  The
writer said that having become a Christian, "I cannot have peace until I
(have) paid back what I owe, plus interest."
    "I realize that it is dishonesty which causes insurance rates to be so
high," the former claimant added.  The money was placed in a fund earmarked
for general claim expenses.
    The National Insurance Crime Bureau estimates that property-casualty
insurance companies pay about $20 billion a year for fraud-related claims-and
that means higher premiums for their customers.
    Most of this money is never recovered.  If an insurer has evidence that a
claim involved insurance fraud, it may try to recover the claim payment.  And
then there are cases such as that of the letter writer in which a guilty
conscience seemingly motivates someone who had cheated an insurer to give the
money back.
    How often does this happen?  "It's not an everyday occurrence, but it's
not rare either," according to Frank Hall, assistant vice president in charge
of special investigative units for State Farm and a veteran claims management
person.
    "I've been involved in a number of cases like this, and I've noticed that
a lot of them come up during the holiday season.  It seems like this is a time
when some people want to atone for their past sins, and that might include
defrauding an insurance company."
    Another fairly common scenario, Hall said, is a person who had a substance
abuse problem and cheated State Farm because he was in financial trouble, but
is now going through a recovery program that encourages repentance and "making
things right."  "A priest who had defrauded us out of $5,000 on a theft claim
returned the money in a situation like this," he said.
    "Whatever the reason, we're always pleased when someone who had committed
insurance fraud realizes that honesty is the best policy and tries to do the
right thing.  The vast majority of our policyholders are honest, but when
someone who has been dishonest sees the light and wants to make amends, that's
great.  Honesty in making claims is one thing that helps us keep our premiums
as low as possible."
    On occasion, however, the outcome of a "guilty conscience" case isn't what
might be expected.  Earlier this year, a man sent State Farm a check for
$10,000, explaining that he had torched his car about 20 years ago and claimed
the fire was accidental.  But he evidently had a change of heart; before State
Farm could cash the check, he stopped payment on it.