Tougher Laws Key in Fight Against Insurance Fraud

Lack of money is another big roadblock to fraud fighting today. Many state fraud bureaus are being forced to pinch pennies.

How do you convince overworked state prosecutors to chase down often stale-sounding insurance swindles when their case files already are bulging with high-profile crimes such as drugs, robbery and murder?

Insurance-fraud laws are great motivators: State prosecutors can convict con artists much more easily using laws written with insurance crimes in mind.

Wisely, nearly all states have made insurance fraud a specific crime, with stiff penalties. Only a few stragglers are left. These states have no fraud laws, or weak ones that pack little legal punch. But that small stragglers’ club could shrink this spring.

Indiana has a fraud law, but it’s so vague that it’s virtually unusable. The state’s criminal code might as well be blank. It only makes bogus claims a crime, ignoring schemes like agents who steal client premiums, people who lie on applications, and crimes by insurers. But a new measure would expand the dragnet, covering all insurance crimes and beefing up penalties for frauds that steal more than $2,500.

The rickety fraud law in Kansas is so poorly worded that no one bothers to use it. In fact, some regulators didn’t even know Kansas has a fraud law. Lawmakers had a golden chance to put a law on the books this year, but in March a bill fizzled after making it through the Senate. We expect it will return for another go-around next year.

Vermont is one of four states without any insurance-fraud law, but could move from a fraud-fighting backwater to a state that’s inhospitable to insurance crooks. A proposed bill would make fraud a crime and slap jail sentences and large convicted schemers. It’s based on the model bill written by the Coalition Against Insurance Fraud generally considered the stiffest package in the U.S.

Vermont’s legislature is edging toward passage, but the outcome is far from assured. Bills often move fastest when there’s a crisis, but Vermont has no insurance crisis. The sponsors are trying to sell the bill as an antidote for when fraud does spike.

On another fraud front, staged-accident rings are literally driving up auto premiums in several states.

A predatory gang even killed a nice old grandmother in New York two years ago when her car crashed during a botched staged accident in Queens. But neither death nor some of the highest auto premiums in the U.S. have convinced New York’s legislature to strike back. Even modest bills making it a crime to recruit henchmen into the staged-accident gangs have fizzled in Albany for several years.

Inbred gridlock and feuding between Senate and Assembly leaders have kept reforms on the shelf while auto premiums remain among the highest anywhere. A similar bill is floating around Albany again this year, but most observers consider it a quixotic effort.

Declining auto premiums could further deflate odds of passage. What New York lacks in useful reform laws it’s law enforcement and prosecutors make up in sheer tenacity.

This inaction contrasts with Massachusetts, which in January decisively passed an aggressive law leaning on recruiters and crooked chiropractors after a public outcry over widespread staged accidents and high auto premiums. The effort began when a great grandmother was killed in a staged accident she was helping set up.

Florida also remains a hotbed of accident rings. A bill just passed there imposes a minimum mandatory jail term of two years for filing fake police accident reports. Medical clinics also would have to post the hotline number and reward information sponsored by the Department of Financial services. (See related story on page 13.)

Lack of money is a big roadblock to fighting fraud. Many state fraud bureaus are being forced to pinch pennies. Budgets for these crime-busting agencies are flat, materially affecting their efforts. Updated computers are rare. Some investigators don’t have money to travel for investigations. Nevada’s fraud-bureau has to scrounge for bookshelves and cash for training.

Lawmakers are going to bat in some hard-hit states, however. The Nevada legislature has passed a bill boosting the fraud bureau’s budget 50 percent. However, the governor has vetoed the bill, though supports are considering a vote to override the veto.

And in South Carolina, the AG would get six more insurance-fraud prosecutors if a Senate committee can convince lawmakers to pony up another $400,000 annually. Right now, the attorney general has only one fraud prosecutor-who somehow handles 600 cases a year.

Effectively fighting fraud requires tough laws, bright budgets and defiant willpower. Different states have different mixes of each.

Howard Goldblatt directs the Coalition Against Insurance Fraud’s government affairs. He has headed CAIF’s legislative strategy since the coalition was founded in 1993. Visit www.InsuranceFraud.org.