Arizona Mulls Shutting Insurance Fraud Unit

By | December 18, 2009

With a $2 billion state budget deficit looming, Arizona may become the first state in the country to abolish the anti-fraud unit of its Department of Insurance.

Should Arizona do that, insurance rates in the state could well rise, warned a group led by the Coalition Against Insurance Fraud.

Recently, Gov. Jan Brewer asked the state’s departments and agencies to submit to her proposals for how they could cut their budgets by 15 percent. The state faces a $2 billion shortfall this year, and a projected $3 billion shortfall next year.

The Department of Insurance, and its director, Christina Urias, proposed cutting the department’s four-person anti-fraud investigations unit, among other things. Until last year, the unit number 14 persons. But it has been reduced by previous cuts.

But that would be short-sighted, says the group, which includes the National Insurance Crime Bureau and the International Association of Special Investigation Units.

Arizona’s fraud unit reportedly receives about 2,500 reports of fraud each year.

“Without a dedicated unit leading the investigating of these possible fraud cases, you are not going to have the investment from law enforcement to investigate cases,” said James Quiggle, the Coalition’s director of communications. “They’re not going to pick up the slack.”

If the insurance companies have to pay out more in the state, because fraud is not picked up, they are going to charge more in the state, he added.

Gov. Brewer has not said yet given out any word on want she is going to do with the proposals she has received, according to a spokesperson for the department, Erin Klug.

The state Legislature is meeting today to discuss budget cuts. The governor also has proposed a temporary one-cent increase in the state sales tax.

Quiggle says that fraud investigation units in other state insurance departments have taken cuts, according to a survey the Coalition is currently conducting. However, Arizona is the only state considering eliminating the unit altogether.

“No other state has ever raised that as an issue,” he said.

Forty-seven states have anti-fraud units in their insurance departments, according to the coalition.

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