Privacy Hurdles Trip Up Insurance Fraud Investigators
True story: A state insurance fraud bureau chasing a suspected swindler recently approached a large multinational bank where the man was a customer and sought his financial information. The institution refused, telling stunned investigators their target would have to be notified before the crucial data could be released. This was a federal privacy requirement, the bank insisted.
Now it doesnt take a Ph.D. in astrophysics to know that tipping off the suspect could wreck the investigation. But more to the point, the bank was dead wrong about federal privacy law.
The landmark 1999 Gramm-Leach-Bliley Act limits the ability of financial firms to share their customers personal financial information with outsiders. But it also explicitly allows firms to provide that material to law enforcement, which the fraud bureau people insisted they were.
In truth, most privacy laws such as GLB actually give information gatekeepers wide freedom to share private consumer information with state fraud investigators. But even so, many investigators–for states and private insurers alike–increasingly find their requests for crucial information are being denied by bureaucrats in government agencies and private companies.
The main causes of this obstruction are fear, confusion and misinformation about what personal consumer information is protected, what isnt, and when.
As a result, insurance probes are being slowed and often compromised. Time is lost, clues grow cold, vital witnesses cant be easily found, costs increase, and fraud suspects gain time to disappear or cover their tracks.
Often investigators can eventually find the material elsewhere, but the added time and cost can seriously damage fraud cases.
Continued refusals thus are creating a kind of death by a thousand cuts for fraud investigators. Unchecked, stonewalling can spread virally and create an atmosphere of knee-jerk information denial that unintentionally helps tip the balance back toward fraud criminals.
But ignorance, fear and confusion over GLB is only part of the problem. Americas heightened awareness about abuse of personal information also has made many well-intended gatekeepers very sensitive about releasing any consumer data for any reason.
The constant threat of costly invasion-of-privacy lawsuits has stifled information flow as well. Many private companies clamp a tight lid to reassure customers their data are well protected.
Further compounding the confusion are dozens of state financial privacy laws spawned by GLB, plus state and federal privacy laws governing release of peoples health information.
Small surprise that in todays privacy pressure cooker, many gatekeepers find it easier to just say “No”–even when fraud investigators believe they have every legal right to the information.
Consider these real-life anecdotes from fraud investigators. Theyre typical of what many investigators are experiencing with growing frequency:
One highway patrol official refused basic information an investigator needed about a fraud suspects driver license renewal.
Some doctors have refused to share patient information without a subpoena or medical authorization for insurer probes of suspicious injury claims involving auto accidents. Doctors have told investigators, “I know I can legally give you the information, but I dont have to, so I wont.”