Yet another variation on an old scam – and a grave one!

I thought I knew most scams apart from some new cyberfrauds.

I found this new scam in Zelma’s Insurance Fraud letter, which is a source of much information and entertainment. Barry Zelma does a lot to expose and combat insurance fraud, for which I applaud him. We need to see how frauds work, if we want to put arrangements in place to prevent them, as I will try to show in this example.

What’s grave about this new scam?

The fraudster, Joel McGuire of West Virginia USA, was an undertaker who arranged insurances to cover clients’ funeral expenses. He collected the premiums, paid them to the insurers and made the claims on behalf of his deceased clients. On the face of it, this was a commendable practice, which ensured clients’ families were not faced with large unexpected bills at a difficult time.

How did the scam work?

He put in excess claims and kept the proceeds, as the insurers paid him direct. He did not involve the clients’ families in the process. The claims included many for people who were still alive. Presumably, the clients would have then become uninsured, despite paying all their premiums. Otherwise, unless the insurers would have to be willing to pay out a second time for the same client. (What do you think?)

How can you avoid such a scam?

You should ensure that the arrangements with your insurers go through you. Above all, ensure that they make payments of claims to you, or your family/executors, and not to the undertaker or other intermediary. You could also ensure the insurers contact your family/executors, if they receive a claim.

You may wish to read about a corporate insurance fraud and what I have written about other kinds of scam.

Man with magnifying glass - looking for a scam
Man with magnifying glass – looking for a scam


Is Productivity an essential goal or another misleading statistic?

Why is productivity in the news a lot recently?

Productivity often comes up when people discuss how well the British economy is doing. Commentators usually link this with the debate about Brexit: the worse we are doing, the more  they blame our imminent departure from the EU. On the other hand, the better we are doing the more people say we are going to benefit from leaving. I do not intend to enter that argument in this blog post. People use various statistical measures to show how we are doing. These include growth, of which I have written recently, and unemployment. The debate about unemployment turns on whether you think an increase in part-time, low-paid or zero-hours jobs is a sign of success.  (For whom?)

What about productivity?

One statistic which many people look at to support their arguments is productivity. Almost everyone agrees we want this to increase, but unfortunately most of the evidence suggests we are lagging behind other comparable countries in this respect. Many people, rightly, have been discussing why that is, but I want to ask a different question: is productivity a meaningful measure of our economic performance? But another question comes first.

What is productivity?

Productivity is the measure of output per person per year (or per day or hour if you like). It seems obvious that you want to produce more for the same inputs or to produce the same amount with reduced inputs, right?

What’s wrong with using it as a measure of performance?

It sounds simple. That’s the trouble. Real life is not so simple and is getting less simple every day. It was probably simpler  when most economic activity involved producing physical products. This could be cars, fridges, tins of beans, eggs or even computers. Increases came from improved working methods. In Britain, we once had a lot of inefficiencies built into our production processes, partly due to the reluctance of workers, and especially the trades unions, to agree to change anything. It was also partly due to management’s failure to review and innovate. Therefore, we made big strides forwards when attitudes changed. That was years, possibly decades, ago. There is less scope for such big, simple improvements now.

How can productivity be improved?

It usually comes from mechanisation, meaning the use of more efficient machinery or of better IT. Of course, you can also achieve it, at least in the short run, by making people work harder, through either incentives or penalties. That approach often yields poorer results as time goes by. It is also most effective when people are working at fairly simple, repetitive, easily-measured-tasks. Apart from questions of exploitation and job-satisfaction, that approach has severe limitations. Nowadays we need people to work not just harder or faster, but better. Think how you would measure the productivity of a computer programmer, a carer, a fitness instructor. Even in agriculture, we now want a more sophisticated attitude. It is not just about maximising food production. What about quality? Animal welfare? The environment?

Don’t businessmen (and women) understand productivity?

I think they understand it better than politicians and journalists. They want to maximise profits. That means increasing output only if there is a demand for more of the product, otherwise you get overproduction. Money spent on marketing does not improve productivity, but it might improve profits.

Doesn’t improved productivity lead to more unemployment?

Some people fear that improved production techniques will lead to job losses, unless there is enough demand to sustain greater output. In any one business that could be true, and it could also be true in any one sector. In the economy as a whole , the level of unemployment depends of the total amount of economic activity, which is driven by government policy and international factors, not by technology. (Am I a keynesian? You bet!)

Should we stp measuring productivity?

Not necessarily. It might highlight areas of the economy that need attention. However, more sophisticated measures are needed and we need to ask what we are trying to measure. You might like to read, or re-read, my article on the Three E’s of Management.  

Or you might like my book How to Avoid Being Misled by Statistics.

The seventh and final (?) phase of the creative process: implementation

What is implementation?

I have written about creativity in business and looked at six of the seven phases. Now it’s time to consider implementation. This is when you go live. In the case of a novelist, it is when you publish.

Are you ready for implementation?

It sounds simple. You know it won’t be. Make sure you have gone through all the other six phases properly and acted on all the lessons you have learnt on the way, especially Phase Six – Monitoring and review.

Is implementation the end of the process?

Yes and no!  Don’t stop monitoring and reviewing and don’t be afraid to change anything in the light of new information, even after you have gone live. If problems appear, that you hadn’t come across in the pilot, don’t ignore them. Now it’s time to get on with your next project. Hopefully you have always got a few at different stages. Creativity need not end just because you’ve finished one project. I’m always working on my next book.

An early author writing his manuscript.
An early author writing his manuscript.

If you want more on creativity in business go to James Taylor’s website. I learnt a lot from him.

Is all insurance fraud equal? What about the corporate variety?

Is there a kind of fraud I have not mentioned before?

I have often written about fraud in general and fraudulent insurance claims in particular. There is one type I have so far omitted to mention. I thought of this when reading a post by Barry Zelma in his insurance fraud letter, which is the source of a lot of useful and entertaining information.

Man with magnifying glass - looking for evidence of fraud
Man with magnifying glass – looking for evidence of fraud
Businessmen defraud insurers!

Barry points out that some businessmen give false information to their insurers in order to reduce their premiums. This can include the total number of employees, the nature of the work (to understate the risk) and total turnover.

The fraudulent reductions in premiums can easily amount to many times more than the amount a claimant would get in a typical personal injury claim.  Tens or even hundreds of thousands compared with a few thousand.

Are insurers are the only victims of this kind of fraud?

Perhaps you think this does not affect you, whereas a fraudulent claim against your business obviously would. Think again! The insurance companies must recoup their losses somehow. Guess! Yes, it’s our premiums.

The other victims of this kind of fraud are genuine claimants (they do exist!) who find the insurers  refuse to pay their claims and either lose out completely or have to drag the money out of the business by a time-and-energy-consuming court case.

I hope you are not among the perpetrators of such frauds. Play fair!