While Minnesota insurance regulators saw an uptick in the number of fraud case referrals during 2019, agent and broker fraud referrals were down significantly that year, the most recent for which insurance fraud statistics for the state are available.
In its annual report for the year 2019 published on Nov. 16, 2020, the Minnesota Commerce Fraud Bureau (CFB) shows a 57 percent increase in total case referrals over the past five years and a 14 percent increase between 2018 and 2019. A total of 3,236 cases were referred to the CFB during 2019.
The CFB is Minnesota’s primary law enforcement agency responsible for conducting criminal investigations into cases involving insurance fraud and related criminal activity. It is the sixth largest law enforcement agency in the U.S. focused on insurance fraud investigations. California is first with 283 full-time law enforcement officers followed by Florida with 112, North Carolina with 40, Virginia with 25, West Virginia with 23 and Minnesota with 16.
The five largest areas of suspected fraud reported to the bureau during 2019 were:
- automobile insurance
- health Insurance
- homeowners insurance
- workers’ compensation insurance
- agent and broker fraud
There were 106 cases of agent/broker fraud referred to the CFB in 2019, a 41% decrease year-over-year from 2018. There were 151 agent/broker fraud cases referred to the CFB in 2015; 196 in 2016; 164 in 2017; and 181 in 2018.
The types of criminal action tracked by the CFB include senior scams, identification theft, medical ID theft, fraudulent health insurance claims, businesses illegally trying to avoid paying workers’ compensation premiums, cyber-crimes, property casualty insurance schemes and funeral insurance fraud.
In total, fraud bureau investigations that resulted in state and federal criminal charge filings had an economic impact of $29,252,691 in 2019.
Typically, the CFB gets case referrals from:
- the general public
- insurance companies
- law enforcement agencies
- other governmental regulatory agencies
Overall, case referrals increased by 13% in 2019 compared with 2018. Over the five-year span of 2015 to 2019, total case referrals to the CFB increased by 57%.
Between 2015 to 2019, the number of auto insurance fraud cases referred to the CFB increased 146%; health insurance fraud decreased by 27%, with a 16% decrease between 2018 and 2019; and homeowners insurance fraud referrals grew by 118%,with a 44% spike between 2018 and 2019.
Reported workers’ comp insurance fraud cases also rose between 2015 and 2019, with a more than 16% increase from 2018 to 2019. There were 105 workers’ comp referrals in 2015, 101 in 2016, 120 in 2017, 129 in 2018, and 150 in 2019.
Due to the nature of insurance fraud investigations, the number of cases referred in a calendar year are separate from and independent of the number of cased charged or settled. In other words, cases investigated by the CFB can remain open and ongoing for more than one calendar year.
In 2019, CFB investigations resulted in the filing of 85 state and federal criminal charges against defendants. During the previous five-year period, the CFB obtained an average of 134 criminal charges against defendants annually.
One of the largest cases investigated by the CFB in 2019 involved an auto insurance fraud scheme that resulted in convictions against a chiropractor and an attorney. Dubbed “Operation Back Cracker,” the long-term investigation uncovered a multi-million-dollar scheme perpetrated by chiropractors, attorneys and runners. Runners who worked for the chiropractors and attorneys steered people who had been either involved in a crash or staged a crash to collect auto insurance policy personal injury protection (PIP) benefits. In April 2019, the U.S. Attorney’s Office honored several members of the CFB with an award for Excellence in The Pursuit of Justice for their work on the Operation Back Cracker case.
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