The landscape for insurance investigations and corporate due diligence is constantly being reshaped by numerous events, factors, and influences. From political turmoil or natural disasters to the broadening reach of technology and communications, our industry is witnessing unprecedented change. As a result, investigation practices must constantly evolve and adapt to this continually changing environment.

In 2013, the following trends will challenge companies and their investigation teams and call for effective, agile responses.

1. The Privacy Mandate Goes Global

Europe and the U.S. pioneered elaborate privacy frameworks governing financial (e.g. Gramm-Leach-Bliley) and healthcare (e.g. HIPAA) records. That movement has now spread across the world as privacy laws become more stringent in a growing number of nations – including many third-world countries. These laws – with varying restrictions and requirements – are having an increasingly problematic impact on the ability to verify information and obtain medical records for contestable claims. The solution to many of these medical privacy roadblocks is a special authorization, often called a “medical power of attorney.” Unfortunately, this can lengthen investigation cycles and require greater beneficiary participation/cooperation.

2. Maturing Chinese Economy Means Greater Fraud Activity in Southeast Asia

As the Chinese economy matures and salaries grow, it’s creating a ripple effect across southeastern Asia, where we’re seeing increased incidence of fraud – particularly in Cambodia, Laos, and Vietnam. These countries are hotbeds of low-wage employment, and the movement of commercial operations to these locations creates a labor arbitrage of sorts and increases the possibility of fraudulent schemes and criminal activity. For instance, it is very easy to purchase a new identity in this region. Also counterfeit products and increasingly sophisticated documentation forgeries will necessitate greater vigilance for goods and paperwork from this region.

3. Mexican and Central American Investigations Becoming Increasingly Dangerous

With increased drug trafficking from Mexico through Central America, we’ve seen an escalation in violence and heightened risk exposures for investigators who look into murder-for-hire cases and high-stakes fraud. And as gangs, and cartels infiltrate law enforcement agencies, it becomes more difficult for police to properly investigate and prosecute crime. With few criminals arrested or held accountable and criminal elements becoming more aggressive, we’re nearing a tipping point where it simply becomes too dangerous to conduct investigations in these regions.

4. Unrest in Venezuela and the Tri-Border Region in South America

With the death of Hugo Chavez, it becomes prudent to heighten our monitoring of claims and activities within Venezuela. The present situation is just as – or perhaps even more – challenging than what we face in Central America. As the domestic economy retreats, crime waves have continued to increase. We have seen increased fraud activity in the Tri-Border Region with more fraud schemes and criminal activity. We also continue to see a greater propensity for forged documentation facilitated by corruption in the region.

5. High Case Volumes in China and India

When it comes to insurance investigations – including death verifications – China and India have been sources of increased claim activity due to migratory changes. Most deaths that we investigate are legitimate. However, it is still essential to scrutinize the paperwork, conduct the interviews, and ask the proper questions. We’ve found a higher probability of substitutions that can involve material medical misrepresentation. That means it’s essential to have solid, experienced investigative and translation teams that can decode the jargon and present clear analyses of these claims.

6. Turbulence in Africa and the Middle East

Unfortunately, Africa and the Middle East remain as turbulent as ever. Fighting in Syria and civil unrest in Egypt will make these two countries some of the most challenging for claims verification – something we don’t anticipate will change in the near future. The need to have agents in these countries (as well as Iran) is essential and companies must be sure to hire agents who are approved by the U.S. Office of Foreign Asset Control (OFAC). This can complicate and delay many investigations and continuous unrest can also significantly limit investigators’ accessibility to people, sites, and records.

7. Costs are Spiraling

Finally, as commodity prices continue to increase globally, there’s no escape from spikes in airfare and other travel costs. Unfortunately, there is every expectation that investigations to combat fraud will grow somewhat more costly in the coming months. Equally unfortunate: As many countries attempt to recover from the economic recession, there are fewer resources to fight fraud. The desire to cut budgets may make companies vulnerable to a double-edged sword. To fight fraud, it’s a good practice to partner with a company that is well-versed in local customs, experienced in fraud cases, and equipped with the right resources to detect and deter fraud.

Richard Marquez, CFE

Diligence International Group

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