News media and state reports indicate that there has been a significant rise this year in both suspected and actual fraud cases affecting all lines of insurance. As the economy continues to struggle, there is no clear sign that a downward trend will occur any time soon. Currently more than half the states have fraud warning statement requirements for applications and /or claim forms across multiple lines of business, while approximately one third of the states require insurers to maintain an anti-fraud plan.
Given the increase we have seen in insurance fraud this year, it is noteworthy to take a look at some of the legislative enactments thus far which are designed to combat fraud. Hawaii’s HB 262, effective July 1, 2009, established an insurance fraud investigations branch within the Hawaii Insurance Division to replace the existing insurance fraud investigations unit which had limited investigative authority. The newly created branch is invested with the powers to investigate and prosecute insurance fraud in all lines of insurance except workers’ compensation. The bill also provided for administrative, civil, and criminal penalties for offenses of insurance fraud in all covered lines of insurance, with the resulting fines and settlements amounts routed into the compliance resolution fund to help the insurance fraud investigations branch cover the cost of preventing, investigating, and prosecuting insurance fraud. Interestingly enough, prior to the enactment of this bill Hawaii did have a fraud warning requirement for motor vehicle applications and claim forms. HRS 431:10C-307.7, formerly required that these forms contain the following, or a substantially similar statement, in a prominent location and typeface as determined by the insurer: “For your protection, Hawaii law requires you to be informed that presenting a fraudulent claim for payment of a loss or benefit is a crime punishable by fines or imprisonment, or both.” However, this requirement was repealed by HB 262. Hawaii was not alone in addressing fraud issues this year. Texas’ HB 148 prohibits the contacting or soliciting of a victim for 30 days after an accident or disaster.
Other states have proposed legislation aimed at establishing additional steps with the existing state’s anti-fraud framework. For example, New York has a number of no-fault reforms pending, while Pennsylvania has multiple initiatives, including one proposing to revise the definition of insurance fraud to include one who:
- Organizes, plans or knowingly participates in an intentional motor vehicle accident or a scheme to create documentation of a motor vehicle accident that did not occur for the purpose of making a tort claim or claim for personal injury protection benefits
- Creates, markets or presents a false or fraudulent financial responsibility or other insurance identification card with intent to deceive
- Pays a bribe, in cash or in kind, to induce the referral of patients from or to a service provider or health care facility
- Solicits or receives a commission, bonus, referral fee, kickback, rebate or bribe, in cash or in kind, or engages in a split-fee arrangement of any sort in return for acceptance or acknowledgment of treatment from a health care provider or a health care facility.
From anti-fraud plans and required warnings to increased enforcement presences and penalties, it is clear that steps are being taken to address fraud in this legislative session.
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