Insurer fraud plans benefit from more uniformity

NAIC creating guideline for insurers and fraud bureaus Continue reading

Fraud plansThe Coalition has long called for insurers to be proactive in identifying and deterring insurance fraud.

To this end, our model state fraud law initially drafted in 1994 requires insurers to create anti-fraud plans that serve as blueprints for how they investigate suspicious activity.

The clear intent is to make combating fraud schemes cost-effective. That means a justifiable ROI, with insurers saving more money than they spend fighting this crime. Such a net-plus is good for business and consumers.

Uniformity is a central element: All states should have similar requirements for insurer fraud plans. That way insurers need not “reinvent the wheel” for each state where they do business.

This hardly means one template plan for every state. Rather, it means a basic framework driven by certain core principles. Insurers can shape plan specifics to the unique challenges they confront in a given state.

The NAIC’s antifraud task force is crafting a guideline for insurer fraud plans. The task force hopes to finalize the model at its November meeting.

We applaud this effort. The model will bring us a big step closer to much-needed uniformity. The Coalition already is discussing holding a meeting of regulators and fraud fighters in 2016. It will explore how, together, insurers and regulators will better know what is expected in crafting and maintaining their fraud plans.

Look for more developments as we finalize plans for 2016.

About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.

Set the prisoners free…and then what?


Fraud fighters funnel tremendous amounts of time and effort into detecting, investigating and helping to prosecute people who commit insurance crimes. That last step of the process — punishing people who defraud — is running up against a trend sweeping the nation: prison depopulation.

Grappling with crumbling budgets, state after state is facing the reality that they can no longer afford to incarcerate growing numbers of criminals, especially non-violent ones.

The number of prisoners in the U.S. is at an all-time high. The U.S. imprisons more people than even China, which has four times the number of citizens. Sooner or later, something has to give. That something, in part, is pressure to resist handing out prison sentences for white-collar crime, including insurance fraud.

Not only is there pressure on judges to resist incarcerating white-collar criminals, but sentences are becoming shorter. At least 19 states have taken action to cut their prison population by reducing sentences. Mississippi began allowing non-violent prisoners to be considered for parole 60% earlier than usual. New York, Rhode Island, Minnesota, Michigan, and New Jersey enacted similar sentence-cutting measures for low-risk inmates.

Budgets aren’t the only reason states are taking action. Overcrowding is another factor. California — under a Supreme Court order — will soon release at least 30,000 convicts to ease inhumane conditions. How many fraudsters currently locked up in California prisons will be let out to continue plying their trade?

This trend not only will put more white-collar criminals back on the streets, but likely will create a disincentive for prosecutors to take these cases in the first place. Plus, deterrence for committing fraud will diminish.

Michigan prosecutor Kym Worthy recently expressed her disappointment in Michigan’s prison system, pointing out that arsonists are keenly aware of the state’s lenient policies, and knowingly perpetrate these crimes because they “know they can get away with it.”

Fraud fighters and prosecutors need to meet this trend head on and come up with creative ideas as alternatives to long prison terms.

Out of necessity, some jurisdictions already are employing such measures. In Texas, one district attorney has cut plea bargains with auto giveup scammers to require them to appear in video PSAs talking about how dumb their crimes are and the impact on their lives. A prosecutor in Florida recently cut a deal with convicted clinic owners to fund a public outreach campaign about the cost of such crime and to alert citizens to report shady clinics.

Public service spots and public speaking mandates by remorseful fraudsters would further put a face on this crime, creating a lasting impression in the consumers’ experience, in a more direct way than reading about a conviction.

Public embarrassment is good, but much more thought needs to go into alternative sentencing. Increased fines on professionals who defraud would be a good start. Perhaps medical professionals who defraud should be sent to third-world countries for a couple years to provide free care. Convicted lawyers might be sentenced to long-term jobs at nonprofit legal centers providing services to the poor. Whatever alternatives, they must be sure, swift and somewhat painful to serve as deterrents.

If our criminal justice system fails to hand out effective punishment, deterrence will continue to diminish and fraud will continue to flourish.

OK to commit insurance fraud in OK?

Oklahoma fraudOklahoma is not the first state to fire fraud investigators en masse during the current economic downtown.

It is the first, though, to do so with the explanation that investigating claims fraud is not the business of the state.

Six of nine investigators got the axe yesterday — all six dedicated to investigating claims fraud.

Randy Brogdon, the deputy commissioner of insurance who recommended the firings was quoted in the local newspaper:

“The companies need to handle their own claims. Investigating policyholders is not a function of the Insurance Department.”

We respectfully disagree. The state law creating the fraud unit clearly says its function is to investigate any violation of Oklahoma’s insurance fraud statute, which includes claims fraud.

It’s a bit surprising that Mr. Brogdon doesn’t know this since up until a few weeks ago he was a state senator.

Following the firings, one of the soon-to-be displaced investigators was quoted as saying “If I were going to commit insurance fraud in Oklahoma, I would feel pretty confident I could get by with it.”

That’s not a message you want to send to a public that’s already too tolerant of unethical behavior when it comes to insurance.

And at the same time, insurers are being told fraud doesn’t matter. There’s no government agency to take your cases, so just pay the claims and increase your rates.

Insurers in the state are required to pay an annual assessment of $750 to fund the unit. They also are required to report any suspected fraud to the DOI. So . . . why would this regulation be in place if they fraud unit was not created to investigate claims fraud?

Nearly every other state has an active fraud bureau that partners with insurers and others to keep fraud in check. We’ve seen insurers increase investment in anti-fraud in states that adopt good laws and create effective fraud units. This partnership not only helps to detect, investigate and prosecute insurance crime, but the data suggest it creates a deterrence as well.

Oklahomans will end up paying more for insurance, no doubt. We encourage the insurance department to reconsider this decision.