California Assembly Insurance Committee passes fraud measure

California’s Assembly Insurance Committee has passed Assembly Bill (AB) 1401 on a bi-partisan 8-0 vote.

According to the California Department of Insurance, the measure would provide the DOI with additional investigators to fight insurance fraud. AB 1401 also would require the CDI to post investigative program performance outcomes on its Web site.

AB 1401, as amended, would increase the per company fraud assessment from $1,300 to $5,100 but would not change the existing $1.80 per vehicle fraud assessment.

CDI estimates that insurance fraud totals $15 billion per year in a $118 billion per year industry. This essentially imposes a “fraud tax” of nearly $500 per year on every man, woman and child in California, Commissioner Steve Poizner said.

Since 1973, insurers have been required by law to pay an annual fee to help California combat insurance fraud. AB 1401 would increase this assessment to $5,100 per insurer. CDI said the assessment has seen virtually no raises in the past 34 years, with the exception of a $300 increase in 2000.

AB 1401 would adjust the assessment for inflation, CDI said, helping it to fill approximately 22 vacant positions in the fraud division.

The Association of California Insurance Companies said it was “neutral” on the bill and anticipated further discussions with the DOI.