Merged Let's Talk about Insurance Fraud!

[JonnyFive]

One of the many ridiculous things I've heard from the 9/11 "Truth" movement is that the attacks on 9/11 were somehow a huge case of insurance fraud on the part of Larry Silverstein, or the Illuminati, or someone.

I'd like to talk about that for a second.

The very idea shows that the people espousing this theory have a profound misunderstanding of the insurance business in general, and insurance fraud specifically. Let me explain:

Insurance is essentially a risk-balancing utility. Insurance companies take on the risks associated with their line of coverage in exchange for premium payments. The companies are able to make money because they spread the risk among many different kinds of insurance. Thus, money made through lower level risks takes some of the pressure off higher level risks. It is the job of actuaries to come up with acceptable mathematical formulas and calculations to deal with the distributed risks, and the job of underwriters to apply those formulas to specific cases, along with their personal experience and judgment. It is then the job of claims adjusters to negotiate payment of claims, and claims examiners and investigators to look for fraudulent or suspcious claims behavior and ensure that the company doesn't lose money on it.

Insurance business is intended to be renumerative, not profitable for the person receiving benefits. Commercial risks are insured for their actual values, and the insurance companies will become very suspicious if someone tries to take out more insurance than a property is worth. This is one area where insurance fraud enters the picture.

There are three main ways to commit insurance fraud, all of which piss the insurance companies off a great deal:

1. Insure something, then make a false claim when the thing is not actually damaged, injured, lost, etc.
2. Insure something for far more than its worth, then make a claim.
3. In disability-type insurance, you can continue a claim beyond the end of the actual disability the insurance was supposed to cover.

The insurance business employs a great number of people whose jobs are to assess risk, evaluate claims, adjust payment, and investigate fraud. If a company did nothing to protect itself against fraud, it would very quickly become financially insolvent and go out of business.

Insurance on commercial risks is designed to help ease the financial burden of a loss. Insurance will not always cover the full cost of replacing an expensive commercial risk, and it will never make a profit for the person with the insurance, unless they do not intend to rebuild the original risk but instead pay off any loans (banks don't like being defrauded either, you know), pocket the difference, and leave.

In the insurance industry, we are always looking out for suspicious risks. If you try to take out five times what your risk is worth in insurance, the company will simply not issue you coverage. They aren't legally required to, and underwriters are paid to ensure that such risks don't get past the front door.

So, my dear conspiracy theorists, how exactly did the massive insurance fraud of the twin towers work?

The replacement tower will cost far more to build than the policy on the twin towers was worth. Not only that, but the owner had to pay off the existing mortgage on the towers. This leaves a pretty big dent which is not filled by any insurance. If Silverstein was simply paying the mortgage and pocketing the difference that might be suspicious.

However, as a quick review of the Wikipedia article on the site shows, even Silverstein's best case scenario (which he didn't get, and which the insurance companies fought him viciously over) would only get him 6.8 billion in insurance dollars. Subtract the remaining mortgage on the towers, as well as the 10 to 12 billion in rebuilding costs, and you're looking at a big chunk of change still lost. He would be at least 4 billion dollars in debt. That's more than the site originally cost.

Not only that, but the twin towers were quite profitable, and had fairly high occupancy rates.

So, Silverstein wanted the money-making towers destroyed so he could collect a net loss from insurance funds, not to mention the loss of rental income in the time (which will probably be a decade at least) it will take to build the Freedom Tower. That makes sense only in fantasy land.

If that was insurance fraud, it was the single stupidest insurance fraud in the history of ever. I include those morons you see on the Maury show who are supposed to be on disability but can somehow lift a washing machine in that statement.

Yeah, you can quote me on that.

So, have at it. Any CTists here want to play the insurance game?

 

[Kiwiwriter]

Great post!

I nominated it.

About time we had some expertise on what really goes on with insurance to derail these conspiracy theorists.

I get tired of argumentum incredulum and argumentum ignorantium. (My apologies if I got the words wrong)

 

[JonnyFive]

I get tired of argumentum incredulum and argumentum ignorantium. (My apologies if I got the words wrong)

It gets old, doesn't it?

I guess they live in a magical world where insurance companies don't give a hoot about making a dollar, as long as the NWO somehow profits some kind of way from it.

Too bad the rest of us live in the real world.

Back to Star Wars beams and invisible planes, fellows, the financial industry is no place for you.

 

[defaultdotxbe]

once i asked why the insurance comapnies arent pursuing fraud charges, i twas told because all the insurance companies are owned by the same guy and they are all in on it too

naturally the followup was "then arent the NWO just defrauding themselves?"

i was expecting a claim of money laundering for the 2.3 trillion "stolen" from the pentagon, but i guess the CTers arent thinking that far ahead, he just changed the subject

 

[Horatius]

naturally the followup was "then arent the NWO just defrauding themselves?"

Thus, money made through lower level risks takes some of the pressure off higher level risks.

Don't you see, man? They're taking the money from Aunt Millie's fire insurance, and using it to pay off the WTC insurance!


Just ignore the fact that they already have the money from Aunt Millie, and are obligated to pay out if she has a fire, okay? Otherwise you're being left-brained! And then my argument won't work! [/28th Kingdom]

 

[JonnyFive]

once i asked why the insurance comapnies arent pursuing fraud charges, i twas told because all the insurance companies are owned by the same guy and they are all in on it too

So, I must be wasting my time trying to develop competitive rates on the cases I underwrite, since all the premium money's going to the same place anyway.

Maybe I should ask the Illuminati for a substantial pay raise.

 

[boloboffin]

I would like to play! I don't believe any of this of course, but in my dealing with CTers, I've gotten some really laughable responses to my poor rendition of your excellent post above. I'll share my favorite one with you.

To wit, the anthrax attacks. My CT guy says that the insurers, rather than do an extensive examination of the Silverstein claim, realized that further anthrax attacks could completely devastate their industry, so in a fit of patriotic fervor they let Silverstein have their money and said, "Government, go get those bad guys!"

My first response was to laugh for a while. My second response was to express that laughter in a post and then say that if the CTer actually thought insurance companies just paid out without sniffing all around for fraud and the like, the CTer wasn't operating in the real world. I was then accused of minimizing the importance of the anthrax attacks.

I never really nailed this person down as to who they thought was pulling off the anthrax attacks, and my two suggestions as to anthrax "protection" money was rejected. So the objection seemed to be just as I stated above - the insurance companies felt the risk of terrorists attacking their insured buildings with anthrax to be so great that they didn't interfere with Silverstein's claim.

 

[JonnyFive]

To wit, the anthrax attacks. My CT guy says that the insurers, rather than do an extensive examination of the Silverstein claim, realized that further anthrax attacks could completely devastate their industry, so in a fit of patriotic fervor they let Silverstein have their money and said, "Government, go get those bad guys!"

My first response was to laugh for a while. My second response was to express that laughter in a post and then say that if the CTer actually thought insurance companies just paid out without sniffing all around for fraud and the like, the CTer wasn't operating in the real world. I was then accused of minimizing the importance of the anthrax attacks.

Yes, they do seem to believe that the world works like that. If the companies really believed that Silverstein was somehow using the anthrax attacks to bully them into paying, they would have their lawyers on him faster than you can say "star wars beam weapon".

Also, that would imply that the anthrax would cause significant life or disability claims (3 billion dollars isn't chump change), and that the insurance companies were the same ones that insured the towers (oh wait, they're all owned by the same people... silly me), and that nothing could be done to stop the anthrax, despite this theory being predicated upon Larry Silverstein being behind the anthrax.

Oh wait, I'm working in "real world" again, not crazy Illuminati moon man world. Silly me.

Besides, they didn't even pay his full claim. Silverstein wanted 6.8 billion, and he ended up getting a total award of about half that.

Oh well, I guess if you can convince yourself the one world government blew up the towers, you can convince yourself of anything.

 

[TriangleMan]

My CT guy says that the insurers, rather than do an extensive examination of the Silverstein claim, realized that further anthrax attacks could completely devastate their industry, so in a fit of patriotic fervor they let Silverstein have their money and said, "Government, go get those bad guys!"

As you suspect this is wrong on many levels:

1) Anthrax attacks might devastate life insurance companies. These companies are in most cases, not the same ones that insure buildings for damage. Anthrax would not damage the building.

2) Much, I'll daresay more than 50% (but I can't back it up), of the insurance money was provided by non-US companies. In the end Lloyds, and reinsurers based in the EU and Bermuda, paid a substantial chunk of the claim. 'patriotic fervor' doesn't really add up.

3) after 9/11 many insurance companies stopped selling terrorism coverage, or specifially excluded it from their policies. Further attacks would have little impact on their capital base and would certainly not cause massive disruptions in the industry. In response a number of speciality lines reinsurers were incorporated to take advantage of the lack of coverage being sold because they could charge big premium for the coverage. But most of those were separate companies not owned by the original older companies so even if there were more attacks it would only impact these new specialty reinsurers.

 

[JonnyFive]

As you suspect this is wrong on many levels:

1) Anthrax attacks might devastate life insurance companies. These companies are in most cases, not the same ones that insure buildings for damage. Anthrax would not damage the building.

2) Much, I'll daresay more than 50% (but I can't back it up), of the insurance money was provided by non-US companies. In the end Lloyds, and reinsurers based in the EU and Bermuda, paid a substantial chunk of the claim. 'patriotic fervor' doesn't really add up.

3) after 9/11 many insurance companies stopped selling terrorism coverage, or specifially excluded it from their policies. Further attacks would have little impact on their capital base and would certainly not cause massive disruptions in the industry. In response a number of speciality lines reinsurers were incorporated to take advantage of the lack of coverage being sold because they could charge big premium for the coverage. But most of those were separate companies not owned by the original older companies so even if there were more attacks it would only impact these new specialty reinsurers.

#2 is a good point for the US-centric CTists. With high risks, or very large risks, you often find multiple companies jointly insuring the risk in order to spread it out. That's exactly what happened with the WTC towers. I believe there were something like four or six different insurers, not all based in the US.

I'd have to look up numbers for specialty coverage (I don't work with those lines of coverage, so I don't have firsthand knowledge of numbers), but I would think there might be some reluctance to insure certain higher risk segments of that specialty market. That kind of coverage, IIRC, is often sold to people working in areas where it presents a real risk. Depending on where they are and what they do, it might be considered a very high risk (for example, if you're a contractor in one of the worse parts of Iraq, the coverage might be denied or issued only at a ridiculous rate).

Many disability insurance and other such policies, as well as some life insurance policies, will not cover injury (or death) resulting from terrorist acts. The company can always decide to stop issuing new coverage that covers terrorism-related injury/death if their analysts feel that the risk is too great.

And, lo and behold, there have not been masses of anthrax-related deaths and Larry Silverstein didn't get 6.8 billion dollars. Weird how that fits in better with the "not insurance fraud" explanation than with the "was insurance fraud" explanation.

 

[defaultdotxbe]

3) after 9/11 many insurance companies stopped selling terrorism coverage, or specifially excluded it from their policies. Further attacks would have little impact on their capital base and would certainly not cause massive disruptions in the industry. In response a number of speciality lines reinsurers were incorporated to take advantage of the lack of coverage being sold because they could charge big premium for the coverage. But most of those were separate companies not owned by the original older companies so even if there were more attacks it would only impact these new specialty reinsurers.

ive been tryign to find out the specifics of silverteins "terrorism" coverage but im not finding much outside of CT site, maybe you could help

was it a specific terrorism policy, or was it just explicitly stated in the standard policy?

from what i understand terrorist acts were an implied coverage in a standard policy, but after 1993 its udnerstandable they would want it explicitly covered at the WTC

 

[JonnyFive]

ive been tryign to find out the specifics of silverteins "terrorism" coverage but im not finding much outside of CT site, maybe you could help

was it a specific terrorism policy, or was it just explicitly stated in the standard policy?

from what i understand terrorist acts were an implied coverage in a standard policy, but after 1993 its udnerstandable they would want it explicitly covered at the WTC

Insurance policies issued for property generally list what they won't cover rather than what they specifically will cover (for example, many home insurance policies specifically exclude flood damage, hence the need for specialty flood insurance). In the case of the WTC towers, one of the big issues was that "acts of war" are excluded from coverage (as they are with most insurance policies). The insurance companies apparently did not try to use this to avoid paying, so this has been a non-issue.

So, it seems from the information available that the policy probably didn't specifically mention terrorism, but obviously didn't include a terrorism exclusion (or else the companies wouldn't have been liable for anything).

Given the infrequency of terrorist acts in the US, I don't see why Silverstein would have required specific terrorist acts coverage. I would think that would be highly unusual outside of areas where it is a major enough risk to warrant specialty coverage.

 

[defaultdotxbe]

im pretty much just looking for the kernel of truth that may or may not be at the heart of the CT claims

Given the infrequency of terrorist acts in the US, I don't see why Silverstein would have required specific terrorist acts coverage. I would think that would be highly unusual outside of areas where it is a major enough risk to warrant specialty coverage.

like i said, given that the towers had been a target in 1993 it wouldnt surprise me if someone had wanted the policy to explicitly state terrorism was not excluded

although i guess short of getting a copy of the actual policy and reading it we'll never know

 

[JonnyFive]

like i said, given that the towers had been a target in 1993 it wouldnt surprise me if someone had wanted the policy to explicitly state terrorism was not excluded

although i guess short of getting a copy of the actual policy and reading it we'll never know

I had thought of that as well, but I'm not sure that it would make much difference from an actuarial point of view.

You're right, of course. If the policy didn't contain an exclusion and the event was within the parameters of coverage, then it can be assumed to be covered. If the insurers were concerned about another terrorist attack, they would have either excluded those acts from coverage (which they didn't, because they are willing to pay the claims), or charge higher premiums (which I don't know).

Even if we did have a copy of the policy, I'm sure the CT response would be something about it being fake, altered, or whatever. It actually contained a clause about faking terrorist attacks in order to steal the billions in gold from under the towers!

 

[TriangleMan]

ive been tryign to find out the specifics of silverteins "terrorism" coverage but im not finding much outside of CT site, maybe you could help

There was an old thread a while back where someone asked that question and while I had some knowledge of it a poster named LashL searched and found the details. The thread is here.

 

[pgwenthold]

All I know is that when my jeep was "totalled," the check we got from the insurance company was for an equivalent replacement, not for a new jeep. The idea that the insurance company will buy you a new car if you wreck the old one is laughable. You get more than standard trade-in value, but that's about it.

 

[TriangleMan]

I had thought of that as well, but I'm not sure that it would make much difference from an actuarial point of view.

You're right, of course. If the policy didn't contain an exclusion and the event was within the parameters of coverage, then it can be assumed to be covered. If the insurers were concerned about another terrorist attack, they would have either excluded those acts from coverage (which they didn't, because they are willing to pay the claims), or charge higher premiums (which I don't know).

I'm pretty sure (sadly that's the best I can do right now) after 1993 the policies were not reworded to exclude terrorism. I don't think the insurance & reinsurance companies seriously considered the destruction of the towers to be a realistic scenario so had no problem covering it. They lost a lot of money, despite one group of insurers winning the court case and paying half what Silverstein wanted. I know that for its 3Q2001 SEC filing ACE Reinsurance (a Bermudian reinsurer) upped its loss reserves by US$560m due to 9/11. Other reinsurers lost even more. No way the premium paid covered that.

 

[JonnyFive]

All I know is that when my jeep was "totalled," the check we got from the insurance company was for an equivalent replacement, not for a new jeep. The idea that the insurance company will buy you a new car if you wreck the old one is laughable. You get more than standard trade-in value, but that's about it.

Yep, they'll depreciate the policy to the current value of the vehicle. As the vehicle gets older and is worth less, the policy premium should also decrease.

It cost me a lot less to insure my old '93 Cadillac than my '06 Hyundai, for example.

 

[TriangleMan]

All I know is that when my jeep was "totalled," the check we got from the insurance company was for an equivalent replacement, not for a new jeep. The idea that the insurance company will buy you a new car if you wreck the old one is laughable. You get more than standard trade-in value, but that's about it.

For big property insurance the policies almost always state the maximum amount payable rather than 'replacement value' or other ambigous terms. The major court case with one group of reinsurers was that the policy stated something like $3.5b per occurence, and the argument was whether two planes hitting two towers was one occurence ($3.5b payout) or two ($7b payout). Courts ruled that due to the wording of the contract it was a $3.5b payout.

 

[JonnyFive]

I'm pretty sure (sadly that's the best I can do right now) after 1993 the policies were not reworded to exclude terrorism. I don't think the insurance & reinsurance companies seriously considered the destruction of the towers to be a realistic scenario so had no problem covering it. They lost a lot of money, despite one group of insurers winning the court case and paying half what Silverstein wanted. I know that for its 3Q2001 SEC filing ACE Reinsurance (a Bermudian reinsurer) upped its loss reserves by US$560m due to 9/11. Other reinsurers lost even more. No way the premium paid covered that.

Again, unless we can find the policy we'll never be 100% sure, but I agree with you based on the actions of the companies, as well as from a risk-analysis standpoint.

I wouldn't have considered the destruction of the towers to be a likely risk either. If the companies thought there was a high probability of it happening, they surely would have included an exclusion clause in the policy.

With massive claims like this, the companies always lose money. It's distributed by other policies where the loss isn't as much (or doesn't exist), and by investments made with the premium money.