Going through FSCO Licensing

Posted on: October 22, 2014

As most people who are involved in personal injury claims are aware one of the many recommendations of the latest five year review was to license all Independent Medical Examination companies conducting work for insurance companies. At Benchmark Independent Medical Examinations Inc. (Benchmark IME) we just recently went through the FSCO licensing process and we wanted to comment on our experience and what a thorough job FSCO is doing. In order to put our situation in context and for background information, our head office is located in Oakville, part of the GTA, which has been identified as the epicenter for insurance fraud in Canada; in particular, complex fraud that involves staged accidents and false insurance claims. In fact, Rick Dubin, VP of Investigative Services for the Insurance Bureau of Canada (IBC) has recently stated, “For the first time, we see medical practitioners allegedly operating at private, for-profit medical clinics included in the charges…speaks to the suspected highly organized exploitation of the insurance system.”

While this level of sophistication is relatively new to Canada, the model has been going on for some time in the United States with staged accident rings costing insurers billions of dollars for phantom injuries, according to the Coalition Against Insurance Fraud. As just one example, three years ago the FBI arrested 36 people in New York – including 10 doctors and three lawyers — for their alleged involvement in a $279-million auto insurance fraud, believed to be the largest ever of its kind for the state. The U.S. Attorney Preet Bharara called it a “colossal criminal trifecta” and it reached directly into the medical, legal and insurance systems. The alleged ring even operated its own chain of medical clinics and paid commissions to ambulance chasers convincing real car-crash victims to seek unnecessary care at corrupt clinics.

We now know the same practices have crossed the border to Canada and, “It’s not just about auto fraud, it’s about organized crime,” says Kadey B.J. Schultz, a partner with Hughes Amys LLP. Calling it a societal issue, Schultz says auto insurance fraud “is a way the criminals access money to fund their other much more harmful activities.” The amount of money estimated is significant, one that KPMG pegs at between $769 million to $1.6 billion annually in Canada.

While some have criticized the new requirements for IME companies to become licensed, believing that it is just another bureaucratic tax grab by the government in an effort to put a band aid on the very serious situation outlined above; our experience has indicated that it is an excellent first step in gaining more control over the IME component of insurance claims. As an example, after we filled out quite a detailed application for our license and submitted it for consideration we were very impressed to see that we received a phone call from a FSCO representative several weeks later indicating that they were reviewing our application and they required further clarification about our physical place of business. We were pleased to see that, contrary to the popular belief that they are just pushing paper and collecting the registration fee, FSCO actually has their team reviewing the physical addresses of each of the IME applicants and when this FSCO representative noticed that there was a UPS store in our building they called and validated that we were not just a PO Box location in the building. It was very impressive that the FSCO representative actually took the time to review our address on Google Maps to look for anything suspicious and this is how they discovered the UPS location in the same building. Once we explained that our office was actually a large portion of the third floor of the office building and that we were in no way connected to UPS they were then satisfied that we did, in fact, operate out of a legitimate bricks and mortar location.

We applaud FSCO for following through with this because the IME industry has certainly become tainted, as per the example above in New York, and we support providing FSCO with more tools and information in order to better determine and separate the legitimate IME companies from the fraudulent companies.

At Benchmark IME we feel that now that FSCO is switching from a regulator of the auto insurance industry to a regulator of the auto insurance marketplace that licensing is a good first step and, as per the task force’s recommendations, FSCO should be given the power for:

• investigating and sanctioning unfair or deceptive acts or practices
• overseeing and auditing the business and billing practices of health clinics and individual practitioners who invoice auto insurers
• having a range of sanctions that can be applied where clinics are not following FSCO’s business practice standards
• having investigators working in the private sector provide information to FSCO where it would be relevant to detecting, investigating and enforcing sanctions against those engaged in organized or premeditated auto fraud

In order to support these four key points, we feel that all IME companies should be forced into transparency through the use of real bricks & mortar locations, a publically available website, a comprehensive privacy policy, a published complaint handling process, and reports that can be made available to insurers indicating how well the IME is meeting their objectives.

A publically available website with all of the IME company’s details, locations, privacy policy, complaints handling process, and contact information is vital in establishing a business’s credibility and legitimacy. An IME is no different than any other business and if the company seems to lack readily available information about them, that is certainly cause for concern and/or suspicion. In fact, when releasing the final task force report, finance minister Duncan stated that, “a vital part of combating auto insurance fraud in Ontario is informing and engaging drivers so they can detect fraud and avoid becoming victims.” We believe in this statement fully and feel that it should not just apply to the obvious aspects of an auto claim like chaser tow trucks and fraudulent auto body shops, but also to the less visible portions of the claim such as the IME and agree with the IBC’s Rick Dubin that, “Partnerships with Crime Stoppers and other key stakeholders in law enforcement are essential to beating increasingly sophisticated insurance crime.

We believe that raising awareness and encouraging people to take the time to report insurance crime will significantly improve the detection and conviction of fraudsters.” The best way to achieve this is for an IME to facilitate easy communication with both its insurance partners and the claimants through the use of tools such as a quality website and a robust customer feedback program based upon third party best practices and protocols validated through objective external validation.

Organized crime rings are running the majority of large scale fraudulent activities and they are becoming increasingly organized and creative with their tactics. They know the system, they know what companies to target, and they know which vendors to work with in order to ensure success. The best way for an IME to combat these sophisticated criminals is with a comprehensive privacy policy that is custom developed and takes each step of the IME’s process into account. Privacy, or lack of it, is now becoming one of the largest sources of fraud and Rick Dubin commented, “We’ve seen a definite increase in identity theft within the medical clinics with regard to claiming accident benefits.” In fact, the staged crash is just the first step of a well orchestrated process that produces supposedly injured people and gets them sent to compromised rehab centres and medical clinics where they can “play the system” and collect substantial sums of money in the form of payouts from insurers. “This is where the real money is,” said Dubin. “And this is where it’s had a very serious impact in terms of the payouts by insurers, which again is passed on to the innocent customer.”

The best way to protect a legitimate claimant from becoming a victim of identity theft and fraudulent claim payouts is not just a “Privacy Statement” but a “Privacy Policy” where each of the IME’s processes is broken down into quality controlled steps with full audit and tracking capability and not provide any opportunity for identity theft to occur in the first place. This type of process is not easy and requires a significant investment of time and money for an IME. However, compared to the amount of fraudulent activity taking place it is a small price to pay to ensure that the IME has done everything possible to mitigate the many risks of a privacy breach.

Another one of the task force’s recommendations on which we feel the IME can make a strong impact is the fact that, “insurers themselves as they are already uniquely poised to change their own practices and should have an inside track on trends, data and the release of such data.” We feel that the best way to support this is by adopting a true internal electronic system and controlling and recording all aspects of the IME process. This way all of the information is captured and can be reported on and presented to the insurers in the form of real-time management reports. If all of the IME’s provided this sort of intelligence to the insurer, they could aggregate the data and through the use of standard analytics determine the predominant trends, good or bad, and the most efficient way of dealing with them. However, it is a chicken and egg scenario because before this can be achieved the insurer has to be presented with high quality data and we feel that the provision of this data is another step in the right direction for an IME.

In summary, we support the effort of the government and FSCO, applaud them for following up with us to see if we were located in a legitimate building, and feel that IME’s should make every effort to be proactive and follow the suggestions of the task force in order to better equip FSCO and the insurance companies in combatting insurance fraud which is currently running rampant through the AB process right now.