This week I spoke to the Insurance Regulatory Examiners Society on state fraud bureaus and why they are integral to any state’s anti-fraud effort.
The vast majority of states (and District of Columbia) have fraud bureaus, with most housed inside the insurance departments. Several states have placed these bureaus within the state attorney general’s office, and a couple are housed inside the state police. Still, a handful of states led by Illinois, Michigan and Wisconsin do not have a fraud unit. And Oregon has neither a fraud bureau nor a specific crime of insurance fraud. It is the only state with that distinction.
After working on diverse fraud issues for more than two decades, I feel strongly that a full state infrastructure is essential to effectively fighting this crime. That means a strong insurance-fraud law, insurers doing their part, supportive and alert consumers, and the state having a bureau with prosecutors willing to take on cases.
States with fraud bureaus have their hands full trying to keep up with the flood of case leads. So you can imagine how much scamming is going untouched in states without a functioning anti-fraud infrastructure.
A Wisconsin regulator at my session said fraud cases usually are referred to the U.S. attorney’s office. The western part of the state is more likely to take cases, she said.
But that’s hardly the most efficient way to combat fraud. First, cases that go to the U.S. attorney invoke charges of mail or wire fraud. That’s because insurance scamming is not a federal crime, except for health-insurance scheming. So the feds must find an unrelated law to charge someone. Most U.S. attorneys also have a fairly high threshold before they even consider trying a case. Not efficient at all.
Fraud bureaus help complete the state infrastructure. Where does an insurer or consumer go with a case lead unless the state has a fraud bureau? Should a local police or sheriff’s office be relied upon to investigate a case? Would a local prosecutor take a case? That’s far from certain.
A state created a fraud law and fraud bureau several years ago. A legislator there said his state didn’t have much of a fraud problem until the law and fraud bureau were activated. He understood that the crime exists but goes unreported without the infrastructure. He was joking, but legislators in states without an anti-fraud apparatus can’t afford the luxury of joking.
Common sense tells us that we must spend enough time, budget funds and political will to have an impact on this crime. And that begins with an insurance-fraud law and a fraud bureau. The return will be a large benefit for consumers, and the state itself.
Ultimately, everyone — except fraudsters — comes out ahead with a broad, well-funded anti-fraud infrastructure. Most states seem to “get it.” Now we need the remaining states to realize this commitment is in everyone’s best interest.
About the author: Howard Goldblatt is director of government affairs for the Coalition Against Insurance Fraud.