Insurance Fraud Bureaus: Convictions Double, But Gains are Fragile

July 27, 2001

State insurance fraud bureaus have doubled their criminal convictions for scams since 1995, but many states remain ill-equipped to combat a crime wave that’s increasingly dominated by organized crime rings, says a study by the Coalition Against Insurance Fraud, a national watchdog. Between 1995 and 2000:

Criminal convictions from fraud-bureau investigations doubled;

Cases presented for prosecution by fraud bureaus more than doubled;

Civil actions more than tripled;

Two of three states increased their fraud-bureau budgets;

The coalition statistically studied 41 of America’s 46 state fraud bureaus covering 41 states. These agencies investigate suspected insurance scams and refer cases for prosecution.

Insurance fraud costs Americans $80 billion a year, or nearly $1,000 per family, the coalition estimates. Despite the intensified crackdown, many fraud bureaus lack the funding and size to effectively combat an ominous new trend: organized crime rings are rapidly entering insurance fraud.

Without adequate fraud-bureau funding, the rapid spread of fraud rings could ignite a costly spike in insurance scams in many states.

Fraud bureau investigations led to 2,123 criminal convictions in 2,000 — more than double the 961 total of 1995.

Fraud bureaus referred nearly three times more cases to prosecutors, from about 1,500 to nearly 4,000. Florida leads the nation with 688 referrals in last year, and South Carolina’s 355-percent referral growth was America’s highest.

More fraud bureaus also are pursuing insurance cheaters in civil court, thus bypassing the often-overburdened criminal courts. Civil actions tripled to nearly 1,200 in last year, up from 344 five years ago.

Overall, fraud bureau budgets grew by a third, to more than $100 million in 2000. Eight fraud bureaus reported double-digit budget increases between 1999 and 2000. New Jersey’s funding grew a healthy 139 percent to a nation’s-best $25.8 million.

Twelve new fraud bureaus were created between 1995 and 2000, a 30-percent increase that means 46 fraud bureaus in 41 states and the District of Columbia (some states also have workers-compensation fraud bureaus).

Other findings, however, suggest these gains are fragile:

Many fraud bureaus lack the money, staff and authority to keep up with the growing caseloads and sophistication of complex schemes.

More than half of America’s 1,240 fraud bureau employees work in just three fraud units: New Jersey (262), California (220.5) and Florida (171).

Ten states lack a central agency to oversee fraud investigation or prevention.

Only 13 states have authority to pursue civil court actions.

The report is available from the coalition, and can be downloaded at www.insurancefraud.org.

The Coalition Against Insurance Fraud represents consumers, regulators, legislators, insurers and others. The coalition works to reduce fraud through public education, and by enacting tougher anti-fraud laws and regulations.

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