Dodging auto premiums should be crime

Lying about garaging vehicles burdens honest drivers

Summer driving season is in full swing. It’s a reminder that dishonest drivers are illicitly registering their vehicles in states where premiums are lower. The Coalition is calling for states to go after these drivers.

Using out-of-state addresses to insure a car illegally reduces the driver’s auto premiums. It also burden honest insurance consumers who insure their vehicles with their real address. They may pay higher auto premiums thanks to drivers who cheat the system.

North Carolina was the first state to tackle this issue by requiring new insureds to show proof of residence before an insurer could write a policy. Out-of-staters were registering their vehicles in North Carolina for the lower auto premiums.

North Carolina recently went a step further and put more teeth in the existing law. Trucking firms are falsely registering their fleets in the state yet have no operations there. The new law requires businesses to prove they ply the roads in the Tar Heel state.

Falsely registering vehicles in New Jersey is a specific insurance crime.

The Coalition seeks a similar law in New York. Bills have stalled, though we and our partners there are planning to reboot in 2017.

A Maryland bill would’ve let insurers rescind policies of drivers who falsely registered their vehicles in the state. The state held a public meeting. An insurer told about a claimed loss in Maryland by an insured who lived in New York — where the insurer doesn’t write coverage. The insurer paid the claim to avoid a baseless yet potentially costly bad-faith suit.

The statehouse will revisit legislation in 2017.

The Coalition strongly supports targeting auto rate evasion. Tough state laws can remove a driver’s incentive to take the risk.  Consumers who lie about where they drive to lower their auto premiums add burdens to the many thousands of honest drivers. This undermines the integrity of the auto-insurance system.

Fraud fighters have taken the forefront on this issue. Stay alert to auto-premium evasion in your state. Tell the Coalition and your state insurance department. Falsely registering a vehicle should be a ticket to jail, not an easy source of summer spending money.

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

New fraud laws start with open dialogue

Md. public meeting helped focus on needed reforms

Last week I took part in a public meeting the Maryland Insurance Administration held in Baltimore to review anti-frauds effort in the state. Part of the discussion surrounded anti-fraud bills that stalled this year when the 2016 session closed in mid-April.

The state insurance commissioner Al Redmer Jr. chaired the meeting. He stayed the entire time. He went beyond simply giving an opening statement, then handing the meeting to the fraud unit’s chief. Redmer’s lengthy presence showed a strong interest in strengthening state’s anti-fraud efforts.

I called for the state to redouble its efforts to target drivers who lie where they garage their cars to illicitly lower their auto premiums.

Maryland drivers should register and insure their vehicles in the state. Similarly, out-of-state drivers should pay a steep penalty for lying that they drive and garage their vehicles in Maryland to lower their auto premiums.

Maryland should be applauded for last week’s effort. The session started dialogue for targeting auto-premium evasion and other insurance crimes. This could spark renewed pushes for anti-fraud legislation next year. The 2017 legislative session opens in January.

Other states can learn from sessions like this one. A state’s anti-fraud effort is organic. Fraud fighters and the insurance department must continually review its direction and impact. No state should rest on its laurels, thinking it’s doing a great job. Nor should a state grow reluctant to act, believing the anti-fraud environment can’t be changed so why talk about it.

Maybe such a meeting in New York could help break up the logjam in Albany that has stalled so many worthwhile anti-fraud measures in recent years. Or, a state like Oregon which has no insurance fraud law or anti-fraud infrastructure. Imagine what the insurance departments and governors would learn if they held such meetings. Same with Michigan, which needs a fraud bureau.

More often than not, legislatures act in a vacuum when they look at anti-fraud laws. Too often they’re pulled in several directions, making it hard to focus on enacting anti-fraud laws.

Fraud fighters should assume leadership and start action-driven dialogue. Reach out to the state insurance department, insurance commissioner and state attorney general. Co-sponsor open meetings to review their state’s fraud trends, and where new fraud laws are needed.

These joint efforts can go a long way toward enacting needed laws and regulations that make a state’s anti-fraud efforts stronger than ever.

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

Anti-fraud efforts removed from MLR

Keeping in MLR improves healthcare for everyone

Health insurer anti-fraud expenses will be left from the Medical Loss Ratio  in a rule released by the feds. This decision deals with Medicaid managed care, and frustrated state and federal fraud busters. The impact will spread throughout the world of healthcare.

First, a short history: The Affordable Care Act requires health insurers to spend 80 or 85 percent of costs on claims and health services. This limits how much insurers can spend to run the business.

Regulators were left to decide what insurer expenses will be included in the MLR. The Coalition and other fraud fighters diligently tried to show federal and state regulators why anti-fraud expenses should be included. Effective fraud fighting is directly linked to the quality of healthcare that consumers receive in many cases.

What makes this decision a bit grating is that federally funded health programs like Medicaid are required to have anti-fraud efforts. Yet those expenses are excluded from the MLR, and thus, health plans have little incentive to invest more in combating fraud.

This decision has impact well beyond state-federal Medicaid.

States usually look to the feds for guidance when writing their own regulations. If the feds exclude fraud expenses from the MLR, then states will be reluctant as well.

We’ve urged insurance regulators to include the MLR. They’re often sympathetic, yet gamely stick to excluding anti-fraud expenses.

Fraud fighting is essential to quality patient care; this isn’t mere overhead. Scams often harm patients with worthless and botched treatments that also can max out their policy limits. Stopping money-draining schemes also helps reduce the cost of health services. This benefits everyone.

That’s the rub. Fraud fighters know that good anti-fraud efforts reduce healthcare costs and improve services. Yet regulators stubbornly stay reluctant to even consider including anti-fraud expenses in the MRL.

It’s time for fraud fighters to speak out, and tell regulators and policymakers that fraud-fighting expense should be included in the cost of paying healthcare claims.

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

Pay me now or …

Police are responding less and less to minor auto accidents

If you crash cars for a living in New Orleans, your life may be getting a bit easier.

Thanks to a bill in the state legislature, police in the Crescent City may no longer be required to respond to fender benders. If you’re involved in a minor accident, just head over to your local police station, give them the details, and they’ll  hand you an accident report you can use to file your insurance claim.

Crashers will no longer need to  stage a collision. Just report it. How convenient.

The bill aims to relieve the cash-strapped city so police can focus more on violent and more-serious crimes. Responding to some 14,000 minor accidents each year is a drain on city resources, according to news reports.

That argument is hard to argue with. And it’s one that more and more jurisdictions are grappling with as cities continue struggling with adequate funding for police.

The extra dollars residents likely will pay in auto premiums rarely gets discussed in these deliberations. It’s a hidden tax that’s better spent paying for more police.

So while fraud fighters likely won’t win this policy battle, they can try to minimize the losses by educating the public and beefing up anti-fraud training of claims reps.

Pay now or pay later. Either way, this legislation will cost taxpayers and consumers.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Tag team is winning formula for fraud bills

Investigators wield impact as expert constituent voices

A couple of years ago I blogged about how fraud investigators can be key to enacting strong fraud laws.

The state legislative season is heating up, so let’s revisit. We need to think of how to mobilize for action.

Lobbying legislators can be top-down and bottom-up.

Top-down involves national groups like the Coalition or insurers raising the issues with legislators. Often we testify before committees or the full chamber. That carries weight. We discuss the big picture, and how a state bill is good (or bad) for combating fraud from a larger viewpoint.

The bottom-up approach is the grassroots level. Investigators and other frontliners can take a lead role.

Investigators can wield great influence. State lawmakers listen to constituents. Local people put a local face on fraud bills. Investigators also are respected crime-fighting experts. That voice speaks convincingly to lawmakers. They may know little about a fraud bill — or the crime it combats.

A tag team is the best formula for rallying support for fraud laws: Local investigators work with national groups like the Coalition. We all bring vital strengths to the table.

State legislators usually don’t receive letters or messages about fraud issues. So when an investigator writes a letter, that could be the first time a legislator hears about the fraud bill, and why it’s good for the state.

This leads to my Rule of Five. One constituent letter raises few eyebrows in a legislator’s office. Five letters, and the legislator thinks about the issue. And 25 letters signals a groundswell of support. That can convince a legislator to support a fraud bill.

Enacting strong fraud laws has four positive goals. 1) Create an infrastructure for insurers to investigate and report scams; 2) Give fraud fighters laws and regs that are pillars for chasing down swindlers; 3) Oppose weak bills that undermine the fraud fight; and 4) Educate lawmakers about the benefits of strong fraud laws.

Together, our influence can place more fraud laws onto the books. We will educate lawmakers about how strong fraud laws benefit consumers throughout a state.

So let’s add a fifth goal for fraud laws: Empower consumers and insurers to better fight back against insurance fraud.

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

Oregon needs insurance-fraud law

Would court rule against an insurer if Oregon had fraud law?

Oregon fraud failNearly every state in the union has made insurance fraud a specific crime. Oregon and Virginia are the only states without a specific insurance fraud law.

At least Virginia has a fraud unit, housed within the state police. There are robust investigations, and prosecutors use the state’s false pretense law to convict scammers.

Oregon has little anti-fraud infrastructure to call on. The governor vetoed a bill back in 1997 because it wasn’t “good enough.” Efforts to make fraud a specific crime have been garaged ever since.

And here’s the fallout: An Oregon appellate court recently ordered an insurer to pay a $10-million loss after a claimant’s expensive home burned down. The insurer suspected a misrepresentation that could’ve been fraud. The insurer refused payout, and a lower court agreed.

My first reaction was that the appellate court wouldn’t have required that payout if the state had a robust insurance fraud law. An insurance-fraud law would’ve allowed the insurer to investigate, and refer the case to a prosecutor if it suspected fraud. Instead, the court decided the claim had to be paid, without a whiff of looking at whether fraud was involved.

Some 48 states plus Washington, D.C. have insurance-fraud laws, and for the most part, they work well. They all reference willfully misrepresenting or filing a false claim. Insurers thus have a potent tool for seeking justice when they suspect a false claim. Fraud laws adroitly cover willful and knowing lies about a claim and loss.

The Oregon case involved, among other things, the cost of chandeliers destroyed by the fire. The insurer believed the claimant had misrepresented by inflating the cost of those chandeliers.

Insurance fraud laws protect insurers and consumers from schemes. Insurers can keep premiums down if convictions can help reduce pass-along cost that scams impose.

Oregon has no insurance-fraud law, dedicated fraud prosecutors, or even a state agency to lead investigations. Instead, we have state courts coming down with questionable decisions like the latest one.

It’s high time Oregon joins the rest of the nation by making insurance fraud a specific crime.

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

Drone for anti-fraud cases ready to fly high

Laws and regs should allow legitimate use of insurer surveillance

drone photoDrone use has left the launch pad and is increasing rapidly. Insurers are showing a big interest in drones for anti-fraud operations, underwriting and claims handling.

The feds and states are working to impose order on the evolving dronescape. Recreational users soon will have to register their machines. The Department of Transportation is creating task force with the Federal Aviation Administration to develop a registration system.

Using these little eyes in the skies for anti-fraud operations and other functions is drawing considerable attention in statehouses as well. Privacy is the main issue driving drone debates, says the National Conference of State Legislatures.

Some 45 states considered more than 100 drone bills and inked 20 laws this year alone.

Several bills also required law enforcement to obtain search warrants for drone use. Others were skyway-safety measures limiting where drones can be used (e.g., away from commercial airports).

These bills harken back a decade or more when states began imposing stricter control of video surveillance.

A New York bill, for instance, tried to make it a crime for insurers to shoot surveillance video unless they had permission of the persons being filmed. Critics said the language was so broad it would’ve criminalized tourists filming the sights and sounds of Times Square.

Most state legislation during this time recognized a legitimate insurer purpose in using surveillance video. Society struck a rational balance between allowing crime-fighting while protecting people’s privacy.

New York is back again with another potentially over-reaching surveillance bill. Unless it’s carefully worded, it could put the kibosh on legitimate insurer drone use for anti-fraud operations.

The national debates over proper drone use are gaining steam. Protecting privacy rights will be a major aspect of the debates once again. Rules and limits will be imposed. Upcoming laws, regulations and court decisions also must allow legitimate insurer use of drone surveillance to protect society from insurance schemes.

It’s time to fly high with a national dialogue on insurer drone use. And fraud fighters should be front and center.

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

Insurer fraud plans benefit from more uniformity

NAIC creating guideline for insurers and fraud bureaus

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.

Michigan needs sledgehammers to level crash rings

Fraud units are crucial players taking down rings in Mass. and Fla.

As if we need another reminder that states benefit heavily from fraud bureaus, just look to a lengthy article posted on Mlive this week.

“Lawsuits and legal filings by insurance companies and others describe an insurance fraud network of ‘accident runners,’ who work with lawyers and doctors to find clients involved in auto accidents and milk their (often unnecessary) medical treatments for maximum payouts, through private insurers and under Michigan’s no-fault insurance law,” the article notes.

Organized rings are feeding off of the state’s unlimited no-fault benefits — the most-generous in the U.S. Arguably an entire culture of crime has sprouted around the no-fault feeding trough, with many rings operating in the Detroit area.

Economically hard-pressed Michigan hardly needs another set of troubles, yet the state has no fraud bureau to act as a central coordinating agency for pushback against rings that most observers agree are widespread and contributing to high auto premiums for drivers.

Fraud fighters are gearing for another push to seek a new law creating an auto-fraud prevention authority for next year (see Howard Goldblatt’s FraudBlogs, July 11 and June 23).

If anyone has to ask why Michigan needs a fraud unit, just look to Massachusetts and Florida.

The Massachusetts fraud bureau was a driver in creating task forces that continue rolling back staged-crash rings. The scammers were almost literally out of control in the early 2000s. The task forces intervened with thudding impact. They’ve saved drivers in targeted cities at least $875 million in lower premiums with fewer dirty injury claims to hike auto premiums.

Then comes Operation Sledgehammer in South Florida — another region where staged-crash gangs have spread out like cockroaches. Body shops were wrecking cars with sledgehammers — get it, Operation Sledgehammer? — to inflate insured damage. Chiro and other clinics have lodged hundreds of thousands of dollars in false crash injury claims. It’s a familiar pattern, though involving exceptionally large networks of criminals.

At least 92 suspects have been charged, with numerous convicted.

The takedowns involve a coordinated federal-state-local collaboration. The Division of Insurance Fraud has been a central player in the effort.

Imagine how far behind the investigations would be today if Florida had no fraud unit to bring statewide staffing, strategic thinking and real-time field intelligence to bear.

How many premium dollars could Michigan drivers save if the state had its own Operation Sledgehammers and task forces to apply steady pressure on insurance criminals? How much safer would the roads be with fewer predatory vehicles trying to maneuver innocent drivers into wrecks for insurance payouts? Right now, a much-needed Operation Sledgehammer in Michigan isn’t possible.

 

Michigan needs an auto authority, and a law to create and fund the unit. Just ask drivers who pay the premiums, and insurers who must pass those increases along to their policyholders.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Strong fraud bills stall in N.Y. statehouse — again

Committee staff seeks mere misdemeanors prosecutors will ignore

New York crashesLast week Dennis Jay wrote a blog arguing about the need for stiffer penalties for those who cynically camouflage insurance arsons as hate crimes. Yet sometimes our desire for stronger penalties face other challenges — lack of strong felony laws.

New York is the poster child of a state that has yet to enact stronger auto insurance-fraud laws even though false treatment claims by crash rings have helped make auto premiums for New York drivers among the highest in the U.S.

For years we’ve have spoken about the dysfunction that surrounds how the state legislature is managed and works.

This year is a prime example: The Assembly speaker and Senate leadership were federally indicted, forcing them to resign their leadership positions. So both chambers ended up with new leaders and lost momentum in mid-session. Not a prescription for success.

The Coalition and our fraud-fighting partners were pushing three automobile-fraud bills: Make it a crime to lie about where you garage your vehicle … Make it a crime to recruit for staged-crash rings and medical mills; … Let insurers rescind a policy if premiums are paid from a bogus bank account. None of the bills went to the governor for his signature.

That’s where the dysfunction takes a twist. Take the premium-evasion bill. The committee chair overseeing the bill was supportive; the Assembly majority leader was the sponsor, and the new speaker sounded supportive.

So why did the bill stall?

Committee staff opposed the stiff penalty — a felony that could mean serious jail time. Staff thought the penalty was too strict and insurance fraud shouldn’t be a felony, they figured. Prosecutors also should take cases regardless of the penalty.

These staffers misunderstood how prosecutors and the courts work in New York. Most prosecutors who’d consider fraud charges come from the densely populated areas of New York City and its suburbs. There are plenty of felony cases to try— of all kinds. Few prosecutors would bother with mere misdemeanors.

The courts are similarly jammed with felony cases. What judge would look kindly on further crowding the docket with misdemeanors?

Yes, we need stiffer fraud sentences. Sometimes the problem, however, is less with the prosecutors and judges. Sometimes the problem involves the lack of strong fraud laws — and the vacuum of political will to enact them. New Yorkers deserve better.

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