The Future of Fighting Insurance Crime

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A webinar with slideshow. On screen text. Wednesdays with Woodward (registered trademark) Webinar Series.

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JOAN WOODWARD: Good afternoon. And thank you for joining us. I'm Joan Woodward, President of the Travelers Institute, the public policy division and the educational arm of Travelers. Welcome to Wednesdays with Woodward, a webinar series we started during the pandemic where we convene experts for conversations about today's biggest challenges both in your business and in your personal life. But before we get started, I'd like to share our disclaimer about today's session.

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About Travelers Institute (registered trademark) Webinars. The Wednesdays with Woodward (registered trademark) educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. Travelers Institute. Travelers.

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JOAN WOODWARD: A big thanks to our partners today, the APCIA, the MetroHartford Alliance, Young Risk Professionals of the Twin Cities, the Master's in Financial Technology, FinTech program at UCONN, and the Risk and Uncertainty Management Center at the University of South Carolina, Darla Moore School of Business. So today we're talking about fighting insurance crime. As we'll hear from our speakers, insurance crime has proven to be [a] prevalent and costly issue for the insurance companies and, most importantly, for consumers. As the industry has evolved, so have the criminals.

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Speakers. Headshots of Joan and two other speakers.

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They've gotten smarter, we've gotten smarter. Here today to help us understand the steps we can take to better protect ourselves and our businesses, our customers and -- are two experts in the field of insurance fraud. First, David Glawe comes to us from the National Insurance Crime Bureau where he serves as the President and the CEO. Dave is responsible for leading a united effort in the property and casualty insurance companies, law enforcement, car rental companies, and other strategic partners to prevent and combat insurance fraud and crime.

Prior to joining NICB, Dave served as the Undersecretary for Intelligence at the U.S. Department of Homeland Security. So, we're really, really privileged to have him join us today. Next, we have Nick Seminara. Nick is the Executive Vice President and Chief Claim Officer here at Travelers. Nick has extensive claim experience, is responsible for all claim functions at Travelers. Prior to his current role, he served as Senior Vice President and Claim General Counsel. He's also a member of the Travelers Management Committee, operating committees and serves on the Travelers Foundation Board.

Nick and Dave, thank you so much for joining us. To begin this conversation, I'm going to ask each of you to talk about, give us a sense of what you do, a brief overview of the current state of the insurance crime, and then we'll bringing everyone together to take audience questions and have a moderated discussion. So, I know there's a lot to talk about. We're thrilled you're all here with us today. Dave, why don't you go ahead and kick us off.

(DESCRIPTION) Dave joins Joan on screen.

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DAVID GLAWE: Thank you, Joan. It's a real privilege and an honor to [get] the opportunity to speak. And thank you, Travelers.

And Nick is a close partner and friend. I look forward to the conversation today, and especially the question and answer. But before we get into that, I wanted to kind of share a story with you.

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The Future of Fighting Insurance Crime. Wednesday, April 20, 2022. David J. Glawe. President and Chief Executive Officer. Logo: N I C B. National Insurance Crime Bureau.

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DAVID GLAWE: Last night I was at my six-year-old son's Little League game with Perry, my husband, and -- who's an FBI agent. And for 27, 30 years, Perry and I real sole purpose in life was protecting our communities and being there when the worst day happens in people's lives. And as we've had our two kids that are now seven and six years old, it's the future for them and how we evolve in the U.S. to prevent crime, insurance crime and fraud, being the topic today. And it was just an example last night of the purity and the innocence of our kids and the world we're going to leave them.

And I thought I would share that with the audience today because it drives me and I'm very fortunate and blessed to have this position to be the CEO and President of this organization. But it's the team that we bring together within the National Insurance Crime Bureau and our partners like you Travelers and our other carriers, and our law enforcement, state and federal local law enforcement partners to address these insurance crime. They're impacting United States. So, in my prior job as the Undersecretary and for intelligence, I annually did the worldwide threats hearing with director Chris Wray from the FBI.

And our job was to paint the picture of where the threat environment or the risk is from foreign intelligence services, nation states, terrorism, crime, and cybercrime. And I'm going to hit on one of those topics today. I was fortunate enough about three weeks ago to be asked by Senator Durbin and Senator Grassley of the judiciary committee to discuss the current state of affairs and crime in the United States specifically on carjackings and auto thefts, but crime in general. I'll illuminate those crime trends today.

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A black and white photo of Mr. Glawe speaking in front of a panel in a courtroom setting. Copyright 2022 National Insurance Crime Bureau.

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And it's a bad picture, I'm going to be honest with you. And why is that? So, we have to look at what have we, where are we at in the state, in the geopolitical environment and in the United States. Because it's not in a vacuum that crime is -- has accelerated where it is. So, we have a geopolitical environment of tremendous unrest. We have Russia, China, Iran. We have a war going on in Europe. You have the anxiety that comes with that in society. You have the COVID-19 pandemic that hit us hard in 2020, really began in 2019, to some level.

And that has impact society. We've had a changing of how we operate socially in the United States. The initial economic downturn, the shuttering of our social services program, our academic programs. And then we had the general frustration society and the anger over the law enforcement abuses. And all of that has created globally and in the United States a perfect storm -- a perfect storm for anger, frustration that has led to increased crime. Crime in some areas that we've never seen before in the history of the United States of keeping statistics in it. And we'll talk about carjackings.

And us at the NICB have never been more important or more relevant to the public and to our insurance carrier partners because we bring unique expertise intelligence to drive intelligence-driven operations to fight insurance fraud and crime, to pass information on to our partners. It'll also help our state and federal local law enforcement to put the bad actors in jail and identify those ones that we don't normally see without good data programs. And let me give you a few case examples in the history – 110-year history of NICB.

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Photos of destruction of buildings. World Trade Center Bombing, 1993. Oklahoma City Bombing, 1995. September 11 Attacks, 2001. Nashville Christmas Day Bombing, 2020.

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Many of you don't know that we actually work terrorism cases here. We are the subject matter experts and the expert witnesses in vehicle identification. Some of the beginning cases were the 1993 World Trade Center bombing, which is an improvised explosive device placed in a vehicle detonated in a parking garage. The 1995 Oklahoma City building on the Murrah building. We helped identify the axle that blew approximately six blocks away after it was detonated, the actual VIN number that was on it. We worked tirelessly after September 11, identifying the vehicles that were destroyed in the attack trying to identify if they were part of the attack.

We were actually at the crime scene at the fresh kills land site as they were going through the evidence. And then as recently as 2020, the Nashville Christmas Day bombing, we helped identify the RV that was used in that vehicle-borne IED. We bring unique capability -- that you don't necessarily know we do -- in all aspects of law enforcement and national security. So, what are we doing at NICB? How do we look at this? Well, the national crime trends are, well, to be very direct, unprecedented and it's staggering.

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Catalytic Converter Thefts Since 2019, plus 1,215 percent. Auto Thefts, Top 5 States. Colorado, 79 percent. Wisconsin, 74 percent. Vermont, 64 percent. New York, 59 percent. Washington, D C, 52 percent.

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But for those of us in national security and law enforcement, did we not see this coming?

We did. We saw those trends that I mentioned earlier about the geopolitical environment, COVID-19, frustration, anger at law enforcement. And it's no surprise that we have increased in the United States, as far as our crime trends. Let's talk about some of the data that's occurring. Auto thefts nationwide since 2020, actually 2019, we've seen a 16% increase totality. But some of the major metropolitan areas have seen a much, much higher increase.

And we're seeing those numbers continue to accelerate in 2022. It's looking right now we will surpass 1 million stolen vehicles. We haven't seen those numbers in the last three decades. Carjacking trends are just as staggering. These are the numbers that are the highest we've seen since we kept statistics. New York City, 286% increase. Philadelphia, 238% increase. Chicago, we're currently at right now with 207% increase. We're averaging approximately five carjackings a day in Chicago, almost 1900 we had in 2021. A tremendous increase and a high number. Washington, D.C., a 200% increase in our nation's capital.

In New Orleans, 159% increase. Every one of those carjackings has a victim of either a weapon pointed at them being a gun or the threat of physical bodily harm when they steal a vehicle. It's not an auto theft, it's a violent act in those carjackings. The U.S. has also seen a dramatic increase in all sorts of property crimes involving automobiles. Catalytic converters. Catalytic converters are part of your exhaust system. They clean and filter the combustion from your gas and oil. They're required by law. They contain precious metals, rhodium, palladium and platinum. And during times of crisis, precious metals become rare because of supply chain issues, and a lot of these precious metals are produced in Russia.

We've seen a 1200% increase in crimes associated with catalytic converters, cutting off the catalytic converters and selling them to scrap metal yards. And going back into the supply chain through some organized crime networks. As an example, right now, rhodium is going $18,400 an ounce. It's up in some areas over 100% increase for what it was three years ago. The totality of this is why is this happening?

I talked about this in my Senate testimony. Many factors are contributing increase in crime. The COVID-19 pandemic surely had an impact.

The law enforcement use-of-force issues in the United States had a tremendous impact. Law enforcement realignment as a follow-on to that has had an impact. Depleted social programs and school programs has had an impact. Frustrated young adults, usually young males and juveniles, have had an impact. And unemployment and lack of school programs during COVID-19 had an impact. And what I said before: It's a perfect storm.

And then a reduction in the resources that we also saw to law enforcement had an impact. Now, fortunately, and you've seen that in bipartisan support between the Democrats and Republicans, Senator Durbin and Senator Grassley, they want to come up with common sense solutions to invest in our youth, invest in our law enforcement programs, and including also in investing in NICB. So where is this coming? The sophistication of organized crime ring. If you think about crime, and I'm not talking about violent crimes or crimes of passion, but organized crime -- these are crimes of power and for business. How to make money.

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Insurance Fraud. 85 billion dollars plus. Annual Losses to Insurance Carriers. Covid Schemes. Cargo Theft. Smash and Grab. Staged Accidents. Medical Fraud. Slip and Falls. Smoke and Ash. Contractor Fraud. Organized Crime. Sophisticated Criminal Networks. Identity Theft. Telemedicine. Workers' Compensation Fraud. Encrypted Communications. Fraudulent Billing. Business Interruption. Property Fraud.

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And we talk about fraud and insurance fraud schemes and that's what it's about. It's about how to make money, how to defraud the financial institutions, defraud the insurance carriers. We've seen this over and over again in law enforcement. And if there's not a victim of a violent crime, there's a resource issue right now, because the crime is so high in other areas of the United States, on violent crime, there's a lack of resources to address the sophisticated criminal networks that are committing financial crimes. That's where the National Insurance Crime Bureau in partnership with insurance carriers, and state and local law enforcement come into play.

We bring the resources to bear the intelligence and big data solutions to identify these unknown criminal actors you can't see on its face to identify them as buried in these different data programs. And as this slide represents, the magnitude of the organized crime and the criminal conspiracies involving all sorts of criminal schemes. That's what we do at the National Insurance Crime Bureau in partnership with Travelers and other carriers to identify these unknown actors that are impacting the public and, as a second effect, driving up those insurance premium because crime is increasing in the United States.

We try to help them with these very complex problems. NICB has seen an exponential increase in all crimes, across these different these different nodes. So, what are we doing about it?

What is our recommendation going forward?

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Photos. People in N I C B jackets inspecting a car and bomb destruction. Security cameras outside a building. A plane in the sky.

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We need to increase in law enforcement, not more -- I'm sorry, increase law enforcement. We need to have better policies and infrastructure to address these crime [inaudible] to empower organizations being not-for-profits associations and law enforcement organizations to identify these unknown criminal actors. And also evolving into the emerging technology of how we bring together big data solutions. Desperate datasets, insurance carrier data, private sector data, law enforcement data into a hub, the NICB cloud. How we bring that together to identify these unknown criminal spaces.

Also, we've also partnered right now with the geospatial intelligence center through Vexcel, bringing together geospatial intelligence into this arena to identify where the fraud is occurring before a policy is written, say if somebody says that they have a brand-new roof on a house, in reality it was damaged, when they were applying for an insurance policy, and then a damage occurs after the fact. We're able to compare that with before and after pictures through geospatial intelligence in that capability. And then also after a catastrophic event.

We are able to bring resources to bear at those catastrophic sites where there's damage occurs to help the claims adjusters to pay those claims quicker, but also to identify where those frauds may be occurring as well. And then on the policy side, when I testified before the Senate. Some of the key components of how we're going to help invest in communities and partner with the carriers to identify these crime trends. Increase in community policing; We need more policing not less. Revisit the well-intentioned criminal justice reform policies.

I just heard the New York Police Commissioner as well as the Mayor say this Sunday, that we really need to look at where these policies and reforms -- when did they go too far? We welcome those conversations to look at those policies, enforce the laws of [inaudible]. We need to enforce the laws of [inaudible], focus on the most violent offenders, those criminal organizations that are impacting the communities, and collect information on carjack data.

Right now, surprisingly, the only organization that actually is putting this together is the National Insurance Crime Bureau. The recommendation by Senator Durbin and Senator Grassley was for the federal bureau of investors [investigation] to start collecting carjacking data specifically as a subset of auto theft. And identify early and implement early intervention programs, identifying the at-risk youth or individuals before they commit a crime and provide them off-ramps.

But then also for individuals that are being released from penitentiaries after serving a jail sentence or prisoner sentence after they've committed a crime, making sure they can reintegrate back in society. Investing in our people, investing in our community. And then what does NICB do? We have an education and crime prevention. The National Insurance Crime Training Academy, which Travelers is a huge component of, is teaching our new SIU investigators and our law enforcement partners where these new crime trends are going.

How we're going to use data analytics and intelligence to drive operations to identify these unknown criminal networks. How we're going to evolve those programs and invest in those programs so we can prosecute the criminal subjects, seize their assets, but then also pass the information onto the insurance care, the crime information, so they're not paying those fraudulent criminal claims. A multi-pronged approach to attack this crime problem that we've seen historic highs.

As I wrap up here, we've celebrated 110-year anniversary. And crime continues to evolve. The criminal networks, the criminal conspiracies, the criminal businesses are trying to stay two to three steps ahead of us. We've got to stay right with them and get in front of them. And we're going to talk about how data, data analytics and intelligence helps keep pace, as with the evolution of crime and trying to stay ahead of them. And also maintaining that partnership, the responsible use of big data and passing that to the insurance carriers so they aren't paying those claims that have a criminal network.

I want to thank Joan and Nick for the opportunity to speak with you here today. I really look forward to the opportunity to answer some questions as we go through this hour. And I want to turn it over to Nick for a few comments from him, as well.

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NICK SEMINARA: Thank you, Joan. And good afternoon to everyone.

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Nick appears on screen. Text: The Future of Fighting Insurance Crime. Logo: Travelers.

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NICK SEMINARA: Just a little bit about my background. I've been with Travelers for 27 years. I started, after starting with my career with another carrier, I've spent the time in the bond organization. I've spent that time as a lawyer, running part of the legal organization. About 10 years ago, I also had my responsibilities broadened to including fraud at Travelers. And then in 2017, I took over the entire claim organization, 12,000 folks. I'm on my second stint as a board member of NICB.

And I'm happy to be partnering with David, as I think he's making really important changes that are going to be critical to the success in the industry in the future. So, moving on. Next. Thank you.

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Importance of Combatting Insurance Crime. The Three Laws of Claim. 1. Payout Discipline and Insights. Pay what we owe and provide valuable insights. 2. Great Customer Experience. Deliver exceptional customer experiences, so long as it does not conflict with the first law. 3. Efficiency. We must look for the most efficient way possible unless these efficiencies conflict with the first or second laws. Claim Laws Apply to Fraud. Rigorous crime prevention and detection. Customers expect a frictionless experience. Low and no touch claims truncate/shorter process.

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OK so, as many of the people on this call know Travelers’ mission is to create shareholder value. And we're focused on that. We're also very committed and focused on innovation, recognizing that we need to simultaneously perform and transform if we're going to remain the top choice for our customers and our distribution partners. And in order to remain that top choice, Travelers is committed to three strategies. First, extending our advantage and risk expertise.

Second, providing great experiences for customers and distribution partners. And third, but not least, improving productivity and efficiency. We use this framework in the businesses and also in Claim with slight variation. So, in Claim, our risk expertise is making sure that we pay what we owe. We're also experts in providing claim insights back to the business partners. So, we make sure we provide valuable insights about loss trends, customers, products and the business environment, in general.

Travelers has a very tight feedback loop which informs pricing, reserving risk selection and steps to fight insurance crime. This competitive advantage is a function of a system rich with data and a collaborative culture that knows what to do with that data. Now you'll hear me use the term "payout discipline" and what we mean when we say payout discipline is, we pay what we owe, and we pay promptly. We don't want to pay more than we owe, but we also don't want to pay less than we owe. Pay out discipline and quickly paying, particularly our first party and workers comp claimants, is very much at our core.

And a critical part of paying what we owe is making sure we are rigorous in our efforts to prevent and mitigate insurance crime. So, second. We seek to deliver exceptional claim experiences for our insured and our claimants. So long as, in doing so, we don't lose sight of paying what we owe. Our largest brokers routinely rate Travelers number 1 in claim service, and we are responding to consumer expectations to provide fast and frictionless claim handling.

And third. We look for the most efficient ways possible, including leveraging digital tools and analytics. So long as that efficiency gain does not put our great customer experiences or our payout discipline at risk. So over the past few years, we've provided more self-service, we have broader interaction options. For example, we introduced a bunch of new mobile apps, additional communication channels and more web features. We've extended many capabilities to be available 24/7, we've optimized claim handling based on complexity.

We've completely automated the processing of some of our simpler claims. And over the next couple of years, you'll see us actually automating and more and more of our claims to straight-through processing. We're providing Claim professionals with better data-driven insights to support decision-making and resolution. And as a result of all these efforts, we operate more efficiently, and we've shortened the length of the time from notice of loss to payment, often from weeks to days, or from days to hours, or sometimes even minutes.

So, as you can imagine, handling a claim in hours or minutes creates challenges for us to make sure we're not opening ourselves up to insurance crimes and new schemes. Moving on. So, Travelers’ SIU group is called Travelers Investigative Services. Sometimes TIS or TIS. And they support both the claim and the business units with a mission to deter, detect and investigate insurance crime, as well as collaborate across stakeholders. So, our deterrence is focused on making sure Travelers is not an easy target. We do this with proactive investigations, criminal prosecutions and strong underwriting products.

The best fraudulent claim is the one that never happens. And being vigilant to fraud does make a difference. For instance, we see suspect medical providers we encounter in some states openly advertise not to come to their clinic if Travelers is the carrier. Now this is a result of our earned reputation as a company that makes things hard for those providers that are in the business of ripping off insurance companies. Our detection is focused on early detection before any dollars are paid out.

We have a dedicated data analytics team that mines data for unusual behavior by suspected criminals on the front end. We also have specialized units in cargo theft, cyber prosecution, medical fraud, fire losses, defense counsel support, along with units that attack organized crime and criminal ring activity. We also leverage a lot of the industry awards that are available through NICB. Of course, we investigate. That's a big part of it. TIS has approximately 300 highly trained investigative experts located across the country that cover all lines of business, and they are made better through our robust investment in data and analytics.

They’re also focused on collaboration, and collaborating with business partners, in Claim and with the company's business units, as well as with law enforcement and organizations and industry groups such as NICB. For example, we gather industry intelligence from NICB from insurance fraud bureaus and law enforcement at every level -- global, federal, state and local. And then we also share information back to all those groups to make them more effective in our joint fight against insurance crime. Moving on.

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Preventing Fraud at Every Stage. The stages include: Loss Consultation. First Notice of Loss. Assignment. Damage Investigation, Inspection and Valuation. Resolution. Tools include: Our People. Our Models. Our Technology.

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We focus our efforts at every stage of a claim process, starting with the loss consultation and first notice of loss, all the way through resolution and payment. So, let's start by talking about our people. So many of our dedicated fraud experts come from law enforcement backgrounds, which is traditionally where we've concentrated our recruiting. Today, however, we have people coming from Claim backgrounds from medical backgrounds, backgrounds in psychology, physical therapy, as well as analytics and technology.

And it is undeniable the importance of data and analytics has grown. And in my opinion will continue to grow. In fact, the leader of Travelers Investigative Services, Pranay Mittal, comes out of our analytic discipline and now he leads TIS. And although we seek to bring in more diverse talent and expertise into the effort, we still very much value the expertise brought by our folks that come out of law enforcement.

The biggest difference in our recruitment from law enforcement today is that the candidates today need to have some level of expertise in technology and data. They don't need to be programmers, they don't need to be data analysts, but they do need to be able to understand how to use data, how to use technology, and put that as part of their efforts in fighting fraud and crime. It's also worth mentioning across Claim, we have over 360 technology employees and another 225 analytic professionals.

These claim-dedicated tech and analytics experts complement the larger investment Travelers have made across the businesses and functions in technology and analytics. We continue to build artificial-intelligence-powered advisory tools that are assisting frontline employees with daily tasks. It's driving automation, decisioning, efficiency and ultimately better outcomes. In fact, we have over 40 unique artificial intelligence play models.

Most run in real time, providing claims professionals insights throughout the claim process, and assisting in things like claim triaged, assignment severity identification, attorney prediction, and of course, fraud detection, that's a big part of it. And these claim analytic models provide on a yearly basis 750,000 recommendations. And they're becoming increasingly sophisticated all the time as we refresh them with new data, with new techniques and new technology. Of that 40-some-odd artificial intelligence claim models, 17 of those models directly impact our fraud efforts. Some of the other great technology and tools beyond fraud models include using the data from vehicles.

So, whether it's coming from a car's black box after an accident or real-time telematics, we can know things like time of accident, vehicle location, acceleration, braking, who was in the car and the passenger occupancy, the force of the impact, likelihood of injury. Similarly, phone data can provide many of the same indicators. The point is that data tells the story accurately and makes it much harder to get away with something like a staged accident.

We also have a state-of-the-art digital forensic lab at Travelers that allows us to have insights into cyber fraud, and an ability to detect any abnormalities in any digital media. So if we get a picture of a damaged vehicle, we know through the metadata if that picture was doctored in any way, whether it was copied, where and when it was taken, et cetera. I also remember recently we had a claim, it was a fire claim of a business, and the security cameras that were in the business were destroyed in the fire.

And the only thing we got was a melted piece of digital media. And that digital forensic lab was able to take that and reconstruct what was on there. And we actually, not with 100-percent clarity, but enough clarity to see that that was actually an arson and they deliberately destroyed, as part of the arson, the cameras and the digital recording of that. So, again, that's a great resource we have at Travelers.

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Partnerships and Our Processes. Logos of Partners: Carpe Data. Hover. Westhill (trademark). Walk Me. C C C. Verisk. Wysa. Near map. List of technologies: Virtual Assistance. Image Analysis. Advanced Text Analysis. Intelligent Capture. Speech to Text. Intelligent Automation

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Next, moving on, so the use of data and technology in the fight against insurance crime allows us to be much more proactive as opposed to reactive. Now we don't explicitly build our own technology and software, nor do we completely rely upon third parties. Instead, we employ a hybrid model where we partner with third parties and integrate their technology into our proprietary systems when that makes sense.

Particularly with the technologies quickly advancing, and the shelf life of the software may be limited. However, we also sometimes build our own solutions, mainly when the capability is not available in the market or we feel our proprietary build can differentiate us among competitors. For example, we might build where we can leverage that breadth of our 45 billion claim data attributes. And certainly, we leverage that advantage in our avoidance of insurance crime.

Although I do want to say we do definitely cooperate with NICB and our industry partners -- this is a joint fight that we all got to be together on. We've been accelerating the development of our digital experiences as well as our journey to the cloud. So, modernizing our tech environment enables us to bring new capabilities to market at a significantly faster pace than ever before, and allows us to deploy powerful analytic tools that didn't exist several years ago -- tools that can be deployed and are deployed over a much broader dataset to fight insurance crime is one example.

We use artificial-intelligence-powered image analysis. We use advanced text analysis, intelligent capture where we can take a PDF and ingest and understand the data captured on that PDF and run that through our models. We also have phone calls that can be immediately translated to text, to mine that for insights. All these tools and capabilities provide advantages today that we didn't have just in the recent past. Now the slide captures just a few of our partners in Claim.

Verisk is a significant player in the industry providing some great new tools and alerts for our investigators and Claim professionals. Near Map is our geospatial vendor. They provide us with very high-quality aerial imagery that can give us a true understanding of a loss site, both before a loss and after a loss, to compare. As Dave mentioned, we couple that technology with our proprietary machine learning artificial intelligence tools that allow us to size up a situation after a cat very quickly as well as find out what damage existed at key points in time.

Additionally, we are early investors --Travelers is an early investor -- in 10 insurtechs. Two companies that we first partnered within Claim are Carpe Data and Hover. One of the things that Carpe Data helps us with is to see risk through open-source intelligence where we can scour, they can scour the internet for clues that something is amiss from the story we're being told. And we look across social media -- and not just social media of the claimant, but anybody associated with that claimant. Open social media, I should say.

Government data, public medical databases, news sources, web browsers, online marketplaces, all of that, really looking for any aberrations that then can be shared with an adjuster or an investigator, so they can follow up with appropriate questioning. And so, with that let me hand it back to Joan and get into the questioning.

DESCRIPTION: Joan and Dave join Nick on screen.

JOAN WOODWARD: Terrific. Well, Dave and Nick, that was just great, a high-level overview and what we're kind of looking for. And now we really want to dig deeper in both your organizations and find out a little bit more about how our agents can be more successful in identifying crime with your talented staffs as well.

But first we're going to turn the tables on the audience here a little bit. And we're going to ask a couple of audience polling questions. We've done this in the past. These are just easy ways to see what our audience is thinking. So, let's pull those audience polling questions up if we can. I'm going to read the first one for us, and then, Dave, I'm going to ask you to comment. Within the past two years what holiday has seen the most vehicle thefts?

What holiday has seen the most vehicle thefts since the onslaught of the pandemic. And then we're going to get Dave's reaction. Well, first we need the answer from Dave, and then we'll see what -- Christmas is coming in. It looks like kind of Christmas. People think Christmas is the day the most cars are stolen and maybe New Year’s is next. What is the right answer here?

DAVID GLAWE: So, Joan thanks for the question. It's New Year's Day. Lots of reasons for that. A lot of cars left out on the street. A lot of key fobs left in cars, probably a few too many cocktails maybe the night before. Unattended vehicles. There's a whole reason why we've seen an increase in auto thefts in the United States, especially during COVID. But New Year's Day we average about 2,500 vehicles stolen on a New Year's Eve and New Year's Day. So that's the answer. So pretty close, Christmas and New Year's were close.

JOAN WOODWARD: Wow. All right. Let's try the next question. And then I'm going to go to Nick for this one. So, question is what percentage of the PNC insurance losses involve fraud? What percentage of all PNC insurance losses involve fraud in the U.S.? Let's see what our audience is thinking here -- 5, 10, 15 or 20%. All right. So, Nick we have almost a tie between 10 and 15% are including fraud. What is the right answer and tell us your thoughts on it.

NICK SEMINARA: Well, the common understanding is, and the common belief is about 10%. But, I'm not so sure that people that said 15% are wrong. It's a very tough thing to measure. So, you know first, you know, what is insurance crime? What is fraud? Generally, if a medical provider has a fee schedule and knows they can only bill for a hundred bills for a thousand, we don't consider that fraud. But you might you could consider that fraud. So, 10% is the number, but it's a tough thing to measure.

And I think if you broaden it, that definition a little bit then the way the industry has defined it, I think it would actually be quite a bit higher. OK. So, let's kind of stay on this topic of vehicle theft and carjackings, and, Dave, I want to go to you. So, we heard a lot about the pandemic has caused a lot of disruption in society and people are feeling uneasy. Why in the last three years have we seen such a spike in vehicle theft and carjackings in your view?

DAVID GLAWE: Joan, thanks for the question. And as I stated in my opening remarks, crime is indicative of bigger societal issues. And right now, we're going through an evolution of great change in the world. And the frustration and anger over the COVID-19 pandemic. We have unrest in Europe that's going on by war. We had at the initial COVID unemployment, social services, schools, bars and restaurants were shuttered. You couldn't have any outreach.

Then you had law enforcement use-of-force issues in the United States and anger over that, justifiable anger. And then you got a lot of cars parked on the streets stagnant. And really there was some personal security, what I call personal security hygiene. People were not paying attention to where they put their key fobs and where they parked the car and going to check on them. So, holistically, we've seen an exponential increase in crime in the United States for those of us that have done this line of work for years, myself, chiefs of police, national security officials.

There's no surprise to us. I think the magnitude of it is staggering, but it wasn't a surprise that this happened. And as Nick talked about earlier, we're going to talk about it more, is unpacking the need for intelligence-driven operations and intelligence-driven decision-making based on data analytics and information responsible use, and how we can partner with Travelers insurance carriers and our state local partners to drive operational decisions, but also to make good strategic and policy decisions to curb this really awful trend.

JOAN WOODWARD: So, kind of same question to you, Nick. In the Travelers context, are we seeing at Travelers an increase in this vehicle crime as it pertains to the submissions that you're saying through the Claim department?

NICK SEMINARA: Yes. So, what I would say is we're certainly not immune from the larger trends in the environment, including street crime and insurance crime. So, yes, auto theft and catalytic converter thefts are up. And also, I think another factor is the cost and supply issues for auto parts. That's leading to some spikes in theft and vandalism. Some other trends worth mentioning, not necessarily in the auto front, but telemedicine. So, telemedicine has provided some great advantages.

We use it ourselves to great effect, but it is allowing some providers to leverage telemedicine and bill for services provided virtually that maybe they're not providing those services. And a little easier for them to set up that fraud via telemedicine. And we'll figure that one out, but that's a recent trend. Some other trends, litigation funding, and what we're seeing is that was kind of focused on class actions maybe eight years ago, but it's kind of been moving down in severity, and we're seeing that in some of our routine cases.

And you're getting then a collaboration between plaintiff, lawyers and medical providers, and now lenders and investors. And I think that's a ripe area where we're going to see fraud. Durable medical equipment fraud continues to be an ongoing challenge. And, of course, cybercrime is a trend that we're working through.

JOAN WOODWARD: All right. Let's just quickly, because I have a lot of audience questions that ask this particular specific question. I think, Dave, this is to you. How do you prevent catalytic converter crime and people stealing the catalytic converter for the precious metals that are in it? How does someone protect from that?

DAVID GLAWE: Great question. It's on the news every day. And I get updates on that because we are helping sponsor legislation at the state and federal level. We recently were helping Congressmen Baird out of Indiana sponsor federal legislation to help combat this. Because this, as Nick was talking to about on the medical fraud side, these are criminal organizations. So, the theft of the catalytic converter and the extraction of those precious metals is more of a holistic criminal conspiracy involving why they're being targeted. So upfront, what can you do?

We're a partnering with local law enforcement, sheriff's departments, on VIN etching. So, you can type the VIN of your car on the catalytic converter. There's also different like Club-like devices that can encase the catalytic converter to make it much more difficult to be stolen, because realistically it takes about 30 seconds with a reciprocating saw. You can cut right through the exhaust device and you're out of there within about 30 seconds to a minute.

So, creating deterrent effect, but then also parking your vehicles in a well-lit area. In areas that can be surveilled, so law enforcement can be contacted by the passing public or by a security service, but then upfront creating a deterrent effect that cases will be prosecuted and investigated. In reality, this is a property crime. There's usually not violence with it, full stop. We just had a deputy sheriff in Houston Harris county that was shot and killed during a catalytic converter theft that he tried to stop by -- I was recently on Fox News in Houston on that one.

So, it's really a holistic approach to prevention and deterrence and investing in resources. But also, we're in a real bad spot right now with precious metals are rare. I talked about the cost of precious metals are exponentially up, and that's not going to go away for a while. So catalytic converters are going to continue to be stolen because the cost of replacement is so much, and those precious metals are so valuable once they're in extracted.

JOAN WOODWARD: OK, well, thank you for that. So, Nick, I want to go back to data and analytics. You spoke about this a little bit, but I really want to dig deeper. Provide us with some insights as to Travelers use of data and analytics really to identify criminal activity before it happens. I mean, we all know your forensics department is amazing with identifying it after the fact, but is there a way to use data analytics to potentially predict criminal activity?

NICK SEMINARA: Yeah, absolutely. So, as I mentioned we have 225 data scientists just in Claim, and data science and analytic professionals. And, we have 41 models, 17 that have a fraud detection element that run constantly. And so, today, about one-third of all referrals, early referrals, come from our predictive models. And that impact rate for our model referrals is actually seven points higher than our human referrals. Also, on the business side, they're, you know, using some of these same tools to make sure that they're underwriting the right risks.

I should also mention that our models help us identify claims that have a very low likelihood of having a fraudulent element. So, for instance, a model maybe looks at how long an insured has been a customer without any suggestion of wrongdoing, a low claim activity. And, again, that's something that we can leverage to then fast-track a claim. So, it kind of works on both sides, but the use of models, we're adding models every year.

We're improving the models that we have constantly with greater accuracy. You know, as I said, the model referrals are actually -- give us a better, by seven points, end result than our human referrals. That wasn't always the case. That wasn't the case when we first started. So, it's continually evolving and improving.

JOAN WOODWARD: OK. Dave, I want to talk a little bit about your background because it's very very impressive, working with the FBI, working at the FBI, and DHS, Department of Homeland Security. And many of us on this call have not had the opportunity to work in those kinds of positions let alone testify before Congress. So how have those roles kind of helped you in the current position you're in, and tell us a little bit about, take us behind the scenes of DHS and how the FBI think about this type of criminal activity.

DAVID GLAWE: Sure. As Nick was talking about earlier, it all comes back to data and intelligence, and then operationalizing with resources and people to mitigate those threats. So, we're talking here about vetting. So, before I left, we set up the National Vetting Center. So, you heard about it from probably the political term, extreme vetting. Putting that aside, bipartisan support to how do we commingle data to identify bad actors that are trying to come into the United States or bad actors that are inserting themselves in supply chains or actually supply chains issues.

It is about vetting of information to identify those threat vectors, organized crime, terrorists, spies, cybercrime individuals that are virtual, putting information together. So as the undersecretary, I was in charge of over about 1,000 datasets classified and unclassified, and the algorithms that were put on top of that that we report to Congress to identify those unknown criminal actors. Now we've been doing that for 20 plus years after 9/11 we put it on, I'll use the term, put it on steroids. We've done it really, really well.

You can see that at how we mitigate threats. But these criminal networks, these criminal actors, are getting better and better. We're bringing that same ideology to the National Insurance Crime Bureau. We now have the NICB cloud in partnership with the carriers. We have unique regulatory carve-out in generally 50 states and with the federal government that allows us to commingle data from the carriers, from relationships with the Department of Homeland Security and the FBI, and the carriers, and state regulators and local law enforcement to identify these unknown criminal actors, and to pass that information to the carriers, so they're not paying those fraudulent-related claims.

Now we have to continue to evolve these programs in partnership with Travelers, who are really leading the industry, and others on how we identify those criminal networks so we can use our unique place to pass information, so they don't pay for those fraudulent claims. But also, deterrent. We've got to put these bad actors in jail. We need to seize their assets. We need to stop these criminal rates. And right now, with the crime in the United States, NICB is actually serving as the investigative and the analytic arm to do that for the industry and on behalf of them.

JOAN WOODWARD: Wow. OK. I didn't realize the NICB played such a role in warehousing all this data and information. So, tell me about what you're seeing outside of auto theft and, you know, carjacking. Talk about 18 wheelers we see rolling down the road and cargo theft. Is that on the rise?  And what are you seeing there, Dave?

DAVID GLAWE: Yeah, so, taking the first question, cargo theft. Absolutely. Since the COVID-19 pandemic, goods and services are having to be transit in the United States. We've had personal protection devices, the counterfeit of that as well, going across. We have seen unprecedented interstate transportation stolen goods in partnership with the FBI in an Intel report we recently did last year. But also, on the theft of it. Organized criminal networks know there’re supply chain issues, there’re demand issues.

A rip-off load? They steal it and then they resell it in areas of the United States or abroad. So, going back to as Nick was talking earlier, the sophistication of criminal networks. This is all about making money. Making money and exploiting vulnerabilities in systems. So how we put the resources and the data programs, the intelligence on top of it for the operational outputs to interdict this before it happens or as it happens.

And then also to have the policies and procedures in place to prevent it upstream. Very complex, because the criminal organizations, it's a business and it's about making money. And they're very good. So, it's constantly this yin and yang of identifying the threat, implementing policies and operationalizing it.

JOAN WOODWARD: OK. Back to you, Nick. I want to talk about the challenges you face because clearly you have the data, the analytics, the technology. You're a very innovative team at Travelers. Everyone should know that our Claim operation is always on the forefront of things we'd like to test and learn from. And Nick has been leading that way. So, walk us through the process though of how you identify, really assess, and rectify crime that took place using all the technology and tools and innovations you've rolled out really in Claim in the last five years.

NICK SEMINARA: Joan, just before I answer that question –

JOAN WOODWARD: Yeah.

NICK SEMINARA: I'll just follow up on Dave's answer regarding cargo theft, and share that there's some great collaboration in NICB, Travelers and law enforcement does in the world of cargo. So, Travelers years ago invested in a sting trailer. So, this is a trailer that has sophisticated tracking devices in it. And we'll locate an area that's been hot with cargo theft, and it's amazing -- it has cameras embedded in it that you really can't see. And it's amazing. We'll park that trailer, working with NICB and local law enforcement, and within minutes, it's either broken in or just taken. And we've had some great success where some of these things have been moved across the country into yards that have dozens of other stolen trailers. So, we've had some great success in the cargo area, and that's an area we have specialists in.

JOAN WOODWARD: Wow, see -- I knew you were always on the forefront of the innovation of this stuff. So great example.

NICK SEMINARA: So, getting back to your question on how do we identify, assess and rectify crime. So, you know, we talked about detection or identity and so we do use technology. We use that, we have the data analytic teams within TIS. We have data, a large data analytic team, data science team within Claim, one at an enterprise level. And then NICB is very steep and has their own team.

So we do daily scoring models all the time across as I mentioned. We have proactive prevention programs that we work with our insurance with. We have pattern identification of organized ring activity. We have certain participants that we see, medical providers usually, that we can flag for suspicious behavior. Sometimes we put a lock on their payments until certain extra steps could be verified. And, again, we have a lot of specialized units focused on detecting that organized crime type of activity.

From an assessment standpoint, again, we use great big use of social media, internet research, we use industry databases through NICB and others, industry alerts that come out of NICB. We have regional teams all around the country, as well. I mentioned some of our specialists’ teams. We also have regional teams. These are trained investigators that know prosecutors in a jurisdiction. They know law enforcement in a jurisdiction. They know the necessary players.

They have an NICB local counterpart as well that they work with. We provide expertise to our Claim partners and our customers, and that back and forth. And, again, we work with NICB, state insurance fraud bureaus is another important partner. And then law enforcement at every level and prosecutors as well. And then to rectify our commitment is to towards prosecution as well as fraud awareness. So that includes working with our dedicated legal partners, we have dedicated legal partners to fraud, and we pursue affirmative litigation, civil litigation against bad actors.

Often, again, in the medical space that are billing millions and millions of dollars for things they shouldn't be billing for. We pursue criminal prosecutions and partner with local prosecutors. When we do find a fraud ring, we involve media relations and government affairs to make sure that people know this is not a crime without a consequence. And then we collaborate back with all the stakeholders, internal stakeholders, business partners, distribution partners to make sure that we can share the lessons learned. So that's just a little bit about how we approach it.

JOAN WOODWARD: No, it's a holistic view. We're going to take some audience questions now. We have a whole bunch coming in so I'm going to kind of group them together. Dave, first you. How do you differentiate between hard fraud and soft fraud?

DAVID GLAWE: So soft fraud would be what I would say the embellishment of a lawful claim. So a claim comes in, say, on your vehicle that it was damaged in some sort of an incident, but it was already damaged before, so you elevate that up. Or, you had a burglary of your home and you had your items stolen and inventory, and then you want to do a little bit extra to cover those premiums you paid for two years.

So, you know, Nick mentioned earlier, as the fraud of embellishing or expanding upon a legitimate fraud claim but pumping it up. Then there's the hard fraud of organized crime -- criminal organizations, the medical providers, the lawyers, the suspects that are involved in a staged accident, of a stage accident, or a slip and fall. Those are the real criminal rings. The criminal organizations that affect multi-carrier, multi-claim, multi-state. Those are the cases we work with the FBI, the secret service, Homeland Security investigation, postal inspectors, state regulators and the carriers.

We are working numerous undercover operations in the U.S. targeting these groups. We recently had a case in New York -- multimillion dollar loss. I believe 26 carriers; 29 subjects were indicted by the U.S. Attorney's office up there. That's the kind of stuff we're talking about, being forward leaning into these crimes and bringing resources to bear.

JOAN WOODWARD: OK. Another question coming in. Nick, you mentioned telemedicine. Tell us more about what types of fraud you're seeing in telemedicine.

NICK SEMINARA: Well, just in medical in general from a dollar standpoint, I would say medical fraud is the biggest hit and the biggest challenge. So, we see providers working directly with certain injury lawyers. We've had some very public prosecutions of organized rings, but the problem really is multifaceted and spreading. And let me give you sort of a real-life example of what we see in medical fraud. We did an analysis on spinal fusion surgeries. We saw a real rise in spinal fusion surgeries for auto accident victims. And we were curious about that.

And when we did the analysis, what we noticed is that lawsuits against our insurers where there was a spinal surgery had a very high correlation with available insurance limits. And so if there was a high insurance limit, that extra surgery was ordered and taken to pump up the value of that claim. And when there was a low insurance limit, that surgery wasn't recommended. And we saw that in that correlation very, very significant in certain geographies.

So, again, it just kind of shows you the type of things that people will do for money. The auto sectors with injuries are probably the most affected by fraud, due to just the frequency of it. But, again, medical impacts across lines, obviously, workers comp and general liability. And then we see, you know, from a geographic standpoint, the places you might imagine -- New York, New Jersey, California, Florida. These are these are states that are very tough environments. It's a combination of very strong plaintiff bars, high attorney rep rates. A lot of these states are PIP states, loose legal regulations -- you know, just tough environments in general.

JOAN WOODWARD: OK. I have a very interesting question coming in from an insurance professional. What are some ways for an insurance professional to build their skill sets to either pursue a career in investigating insurance crime or to become a better person at determining issues within the claims process relative to crime? So this person sounds like they're really interested in this. Is this a career, first you, Dave, that you would suggest to people? You obviously spent your whole life in it. But what about just making an insurance professional more aware of these kinds of issues so they can help their clients better.

DAVID GLAWE: Well, I'm going to sell our insurance internship program. We'd love to have them as an intern or apply to be an intern at the National Insurance Crime Bureau. Analyst positions, as Nick talked about earlier, having that background, holistic approach to how you can utilize data responsibly to identify threats, criminal threats, but just the use of data and analysis of data is a key component here. It's an incredible career. We love people to come work at an NICB, our internship, or one of the carriers for SIUs.

And if people want to utilize this as a stepping stone for positions with a carrier or in federal law enforcement or national security, I talked to a lot of our newer younger employees that are coming up that are looking for careers to help the community help the public. So, we welcome you at internships but any positions here at NICB, or to facilitate positions at the carrier, we welcome the opportunity to talk to them about preventing insurance fraud and crime.

JOAN WOODWARD: OK, great. And Nick, you had lots of experiences with terrific agents that have been partners for years, right, on identifying fraud, and personal lines as well as business insurance or small business workers comp. What would you tell an agent who wants to get smarter on this stuff?

NICK SEMINARA: So, what I would say to an agent is you know there's a lot of things they can do in their current practice to look at and try to identify insurance fraud. So new customers rushing to get new policies, existing customers rushing to add coverages, folks seeking limits in excess of what you would seem too normal -- agents who look for a prior claim history. You know, just making sure that they're following their gut and reaching out for help. But, you know, Travelers does offer, TIS does offer services, proactive services, and we're happy to partner with our distribution partners that are interested in learning more about fraud and helping them get more sophisticated. And we welcome everybody to the fight.

JOAN WOODWARD: Good. Can you talk to us for a minute about litigation funding, Nick? I know this is kind of one of your specialties and of interest, and we are all very interested in social inflation. But talk about litigation funding what that's really done to the industry recently.

NICK SEMINARA: So, it's becoming more and more of an issue. We were actually very early in tracking litigation funding in Travelers’ litigation. And so probably eight, nine years ago, we started adding that to our normal discovery requests trying to try to find where that litigation funding existed. And, again, if you think about it, any injury lawyer who offers a contingency, that's a form of litigation funding, but you know really how we're thinking about it today with the lender.

And what we saw is that it really, for a lot of those years, was focused in intellectual property disputes, class action disputes, not our bread and butter cases. You know we're seeing it particularly in certain jurisdictions, New York, New Jersey, Florida, again, where we're seeing those funders come in. And it does create a lot of problems. It changes the ability of the injured party to settle not necessarily in the terms they want to settle. It requires them to pump up damages even more so. And so, I think it's a growing problem.

I also think it's an industry that will saturate, and some of the early wins will be harder for that injury over time to achieve. So, we're very, very focused on it as is the industry, and you know I think that they're becoming more influential. We're seeing them actually shape -- when I say “they,” insurance, I should say litigation funders shape legislation. That's a big concern as well. As they're trying to gain better data to help underwrite what risks they lend on.

JOAN WOODWARD: All right, Dave. I'm going to give you the last word here on this litigation funding or anything else you wanted to kind of talk to our viewers about before we close the show.

DAVID GLAWE: I just want to close with, I really appreciate the opportunity and the continued partnership. Nick and his team is just a pleasure to work with. They are really at the forefront of looking at data and intelligence to identify these criminal networks, litigation funding being one of those as the criminal conspiracy involving a lot of actors, basing on maybe a little bit of the gaps and seams in regulation and resources that are out there to address crime. But thank you again for the opportunity here to speak with you and your audience today and look forward to maybe some future opportunities as well.

JOAN WOODWARD: That sounds terrific. Well, listen, Dave and Nick, thank you so much for your time today. Really, really, the hour just flew by for me, anyway. I learned a lot. And we're going to have you back because we think this is a critically important issue for not only our industry, but it raises prices for everyone. Every crime, every theft raises prices for innocent people out there just trying to get the right insurance. So, thank you, again. Appreciate it. And I want to talk to my audience just for a minute about our upcoming programs.

So, on May 4, I'm going to host the former Surgeon General of the United States, Jerome Adams. He was Surgeon General during President Trump's administration during the whole time. And he dealt with the pandemic and we're going to hear lessons learned from him. And then on May 11, a little bit of a lighter topic, we're going to take you live behind the scenes of the Travelers Championship which is our PGA Tour event in June. And so, we're going to talk to tournament director Nathan Grube and our own Andy Bessette, who works on that all year long.

And then on May 25, we're going to talk about telematics and how telematics in our programs as well as generally can help everyone drive better and reduce distracted driving among other distractions. So, register for any of these programs, my friends. Connect with me on LinkedIn. Happy to always have you. We are very active on LinkedIn, talking about our programs, posting the replays. And so, again, thank you to my speakers today. And stay safe, everyone. We'll see you next week.

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