Fraud fight up against budget shortfalls

Budget shortfalls have slowed the progress of fraud bills in many states around the U.S. while lawmakers feverishly work to find money to run their cash-strapped governments. Even so, reform bills clamping down on insurance schemes have popped up in several Southeastern states this year.

Louisiana is going after people who try to dodge expensive vehicle payments by dumping unwanted vehicles and lying to the insurer that someone stole them. A novel bill being pushed by the state police would tackle so-called “owner give-ups” by requiring drivers to sign an affidavit when reporting a vehicle stolen. The Louisiana bill has cleared the legislature and awaits the governor’s expected signature.

With the economy mired in the doldrums, many fraud investigators around the U.S. are alert to possible local spikes in owner give-ups. So if this bill passes, it will provide a solid preemptive law if these insurance cons do spread in Louisiana.

The Miami-Dade, Fla. police have a similar requirement. Prosecutors would have a signed lie as evidence to nail down a conviction. Thus it can be a strong evidentiary billy club in court.

Intimidation is another benefit. People may think twice before reporting a bogus theft if they have to sign an affidavit. Most people who fraudulently unload their vehicles aren’t hardened crooks. Usually they’re regular folks who make a bad spur-of-the moment decision, often driven by economic hardship. Requiring an affidavit could make many people think twice about risking a criminal record.

Owner give-ups are a fairly common insurance crime. Typically, someone buys or leases an expensive vehicle such as an SUV, but can’t afford the large payments and fuel costs. The owner might dump the vehicle in a remote wooded area, or sink it in a lake or river. Often the owner torches or strips the vehicle to add a touch of realism.

The owner then tells the auto insurer that someone heisted the vehicle from a mall or restaurant parking lot. The unknowing insurer pays off the vehicle’s balance, and presto, the owner’s financial problem is solved.

Over in Florida, legislators took a breather after last year’s bruising battle to renew the state’s beleaguered no-fault auto system. No new PIP fraud bills passed this year, despite the continued draining of auto insurers by widespread staged-accidents.

But Tallahassee did move against sleazy check cashing services and other money outfits that help launder stolen workers comp and health-insurance money. Crooked construction firms, for instance, often use check-cashing services to pay illegal immigrants under the table to avoid paying full comp premiums.

A bill awaiting Gov. Charlie Christ’s signature at press time would tighten licensing rules, make it easier to yank licenses, allow hiring of more examiners, and require audits of businesses every five years.

Tallahassee also passed a sweeping reform law targeting widespread scams by agents who con seniors into buying expensive and unsuitable life policies and annuities. Prematurely surrendering perfectly good annuities and life policies to buy new and unneeded ones only lines the agent’s pocket with fat commissions, and undermines the senior’s carefully built-up savings.

Among the new provisions, the reform stiffens fines, prohibits agents from forging client signatures to policies and using fake designations to imply financial expertise, and requires agents to objectively prove the new product is suitable for the senior. The Department of Financial Services was a leading champion of the measure.

An agent conned a Boynton Beach senior with dementia into liquidating six annuities she could have used without penalty for her living and medical expenses. She used that money to buy new annuities with 15 years of high surrender charges – basically wiping out her accessible savings.

In Mississippi, a bill that could have been a step backward quietly died. Property-casualty insurers would’ have had to pay claims within 90 days of filing. The goal was to help people get back on their feet after disasters such as Hurricane Katrina. But the bill didn’t give insurers more time to investigate suspicious claims. Most states allow added time for fraud probes.

West Virginia, meanwhile, has followed the lead of several other states by effectively banning a controversial life policy called a stranger oriented life insurance – or STOLI. Salespeople encourage seniors to buy life policies so others can invest in the policies and collect the benefits when the senior dies. But STOLIs are so rife with deception, especially of life insurers, that lawmakers swiftly booted the product from the state.