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Statutory Remedies to Curb Fraud Abuse Spreading Across U.S., Says NAMIC

INDIANAPOLIS (May 25, 2005)—To combat insurance fraud that costs consumers an average of $200-300 per year, 40 states have established entities responsible for oversight of related investigations and prosecution efforts, according to an analysis by the National Association of Mutual Insurance Companies (NAMIC).

NAMIC’s just released Issue Brief “Insurance Fraud: Most States Act to Curb the Abuses, But Adequate Statutory Remedies Still Lacking in a Few States:”

  • provides background information on insurance fraud and its development as a public policy issue with wide-spread ramifications for consumers,
  • describes the formation and role of the Coalition Against Insurance Fraud (CAIF),
  • synopsizes what states have done to curb fraud, and
  • details encouraging legislative developments.

The brief highlights the creation of CAIF in 1993 as an important step in the fight against insurance fraud. CAIF has developed a set of model law elements it considers important for states to adopt in order to effectively combat and deter insurance fraud. These include laws to:

  • define claims, underwriting and insurer fraud
  • classify insurance fraud as a felony
  • require anti-insurance fraud plans
  • require Special Investigative Units (SIU)
  • require annual reporting
  • require auto pre-inspections
  • provide immunity
  • require licensing board notification
  • require fraud warning statements
  • create insurance fraud bureaus

A majority of states have taken action to adopt most or some of these key legal provisions. NAMIC’s analysis of state laws pertaining to insurance fraud identifies just nine states– Alabama, Georgia, Mississippi, Missouri, North Dakota, Oregon, Vermont, West Virginia, and Wyoming—that have approved three or fewer of the provisions advocated by the CAIF.

At least 17 states so far this year have introduced legislation to combat insurance fraud. Bills introduced in Missouri, Maine and West Virginia would establish important new anti-insurance fraud elements.

Other key findings include:

  • Of the ten states (Alabama, Colorado, Illinois, Indiana, Maine, Michigan, Oregon, Vermont, Wisconsin and Wyoming) that have not yet acted to create insurance fraud bureaus, state lawmakers from Alabama and Maine debated legislation in 2005 to create special insurance fraud bureaus.
  • Insurance fraud is estimated to cost the P/C industry alone $30 billion annually, which translates to an extra $200-$300 in premiums each year for the average household.

Fraud bureau budget, employment, prosecution and conviction data are presented in an appendix. A second appendix lists which states have enacted which of the CAIF model law provisions.

The Issue Brief will be distributed to NAMIC’s multi-line member companies, state legislators, and insurance regulators to provide them an insight into a state’s regulatory climate.

The Issue Brief can be downloaded from NAMIC’s website, NAMIC Online.

Posted: Wednesday, May 25, 2005 12:00:00 AM. Modified: Thursday, May 26, 2005 12:09:31 PM.

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