State fraud bureaus long on arrests; Short on convictions

State fraud bureaus are delivering record results in combating swindles, but the positive figures may mask deeper weaknesses in some areas of performance, says a study of 47 state agencies by the Coalition Against Insurance Fraud.

“For the most part, fraud fighters are priming the pipelines with fresh cases that could create a new generation of convictions in the years ahead. Still, the lack of growth in convictions and cases opened is a cause for concern,” says the report.

The full report is downloadable at www.InsuranceFraud.org.

Key measures of success–fraud convictions, cases opened, referrals received, cases sent for prosecution, and court-ordered restitution — all rose between 2004 and 2005, the study says.

But on the downside, 18 fraud bureaus reported declines in convictions, even though fraud convictions rose 6.4 percent overall.

The average docket of new cases also has stayed flat since 2001, the coalition’s study says. New cases increased 6.4 percent overall mainly because two new units started feeding cases into the pipeline.

Despite the clear warning signals, fraud bureaus are making progress and may be setting the stage for even-stronger results over the next several years, the coalition’s study concludes.

Insurers and hotlines are sending fraud bureaus far more cases to investigate than ever — a 19-percent spike over 2004.

Budgets also rose enough for fraud bureaus to hire 280 more investigators.

“Convictions — the bottom line for fraud-fighting — thus may spike in the next few years as growing investigations mature into full-blown prosecutions,” says Dennis Jay, the coalition’s executive director.

More specifically:

Prosecutions. While the total cases presented for prosecution–5,467–rose 6.5 percent, most of the growth appears to come from newer fraud bureaus as their early cases wind through the pipeline. Fraud bureaus with dedicated prosecutors, such as Florida, had the largest growth in cases.

Convictions. California continues to convict more insurance swindlers than any other state–one of every three convictions in the U.S. The Golden State’s fraud bureau logged a record 1,546 convictions, well ahead of runnersup Florida (493), New York (450) and New Jersey (354).

Cases referred. Nearly three of four fraud units reported increases in receiving referrals of suspected frauds from insurers, hotlines and other sources. A half dozen fraud bureaus each received an increase of 50 percent or more. California reported the most referrals (27,687).

Cases opened. Fraud bureaus opened more than 29,000 investigations in 2005, a 6.5-percent increase. These units opened about one case for every four they receive. Each investigator handled an average of 84 cases in 2005.

Budgets. A total of $134 million was budgeted for 42 bureaus reporting that data in 2006. California is the richest at $36.8 million. New Jersey is second with $29.7 million. But nearly three of four budget dollars were spent by just five states. Overall, budgets averaged about 65 cents per state resident.

“Though fraud bureaus show encouraging gains on several important fronts, fraud fighters should be wary of too much celebration. The sobering truth is that America’s fraud problem may be much larger than people realize,” the report concludes.

Source: Coalition Against Insurance Fraud