Forty states in the nation have opened state agencies dedicated to investigating and prosecuting insurance fraud, according to the National Association of Mutual Insurance Companies (NAMIC). But Wisconsin isn’t one of them, and it won’t be joining their ranks any time soon. NAMIC is putting pressure on the holdouts to create dedicated state agencies to monitor and prosecute insurance fraud.
To combat insurance fraud that costs consumers an average of $200 to $300 per person annually, 40 states have established entities responsible for oversight of related investigations and prosecution efforts, according to a new analysis by NAMIC. The report is titled, "Insurance Fraud: Most States Act to Curb the Abuses, But Adequate Statutory Remedies Still Lacking in a Few States."
However, Wisconsin experts in the insurance industry say there is no need for another governmental agency to monitor and prosecute insurance fraud here, largely because there are several state and federal organizations already in operation that are doing a good job.
Insurance fraud is not a major problem here, said Jorge Gomez, Wisconsin’s commissioner of insurance.
"There is likely some fraudulent activity taking place in the state, but it doesn’t seem to be as epidemic as other states," he said. "We have a very competitive marketplace, and a huge number of property and casualty insurance companies and a healthy health care market. They’ve done a very good job of not being deeply impacted by local fraud activities."
The state Office of the Commissioner of Insurance (OCI), a state agency that regulates and monitors the insurance industry in Wisconsin, prosecutes fraud cases to the extent it has jurisdiction, Gomez said. Most of those involve complaints about people selling fake insurance policies, he said.
"We’ve also prosecuted agents and assisted local prosecutors in prosecuting agents that have embezzled money or have pocketed money from policies or who have made misrepresentations," Gomez said. "So, part of the answer is that we do prosecute our corporate agent and financial office fraud."
When the OCI doesn’t have jurisdiction, it assists local district attorneys, the state Attorney General’s office and federal prosecutors, Gomez said.
Often, the OCI does not have jurisdiction to conduct criminal investigations, but it is able to assist local DAs and federal authorities when help is needed.
The state’s laws regarding insurance fraud are well spelled out, Gomez said, specifically stating which state law enforcement agencies should be involved in different types of fraud cases.
"There’s a lot of teeth already to deal with the criminal fraud," Gomez said.
The current strong response by local, state and federal prosecutors to fraud cases in Wisconsin indicates that the state does not need more insurance fraud enforcement, he said. Creating a new function for the OCI’s office might cause more problems than it would solve.
"If our agency were to modify the current system in place, we would create an environment where we would have prosecutorial and investigative authorities," Gomez said. "We would have to deputize our attorneys to do investigations. We would have to have state statutes to be deputized for local law enforcement. And we would have to get money to do that."
Another reason a dedicated investigatory branch is not needed is that local insurance companies are good at referring cases of suspected insurance fraud to law enforcement agencies, Gomez said
"I think companies for the most part have done a good job of monitoring fraudulent claims," he said. "They don’t pay them out. And to the extent that they uncover fraudulent enterprises, most of them have gone to prosecutors."
Ronald Von Haden, executive vice president of Professional Insurance Agents of Wisconsin Inc., says he agrees with Gomez’s analysis. Insurance companies in the state, the OCI and prosecutors work well together, Von Haden said.
"Even though (preventing) fraud is important here in the state and it’s important to get our arms around it and control it, to establish another agency at this point may not have a cost benefit," Von Haden said. "We have insurance companies doing a great job of investigating complaints, the OCI office is doing a great job and the Attorney General is more willing to get involved in these cases and prosecute them."
Wisconsin tends to rank low in the country for insurance fraud – another reason more government oversight isn’t needed, said Von Haden and Eric Engulnd, president of the Wisconsin Insurance Alliance, a Madison-based lobbying agency.
"There is a direct correlation between the lower instances of fraud in our state and our ranking in the amount of average (property and casualty) insurance premium," Von Haden said. "If you look at it for auto, we’re down near the bottom for low cost. Homeowners’ costs are almost identical. That is indicative of less fraud and less litigation. It goes back to the work and fiber of our population."
Although other states created agencies to investigate and prosecute insurance fraud, creating another governmental agency in Wisconsin isn’t the right move, Englund said.
"In a world where finding efficient ways to solve problems is a challenge, creating new bureaucracies which appear to overlay existing public and private efforts that appear to be doing the job is pointless," he said. "In the past, this issue has surfaced, especially with worker’s compensation. When it’s looked at closely, people have gone away with the sense that the mechanisms in Wisconsin do as good a job of ferreting it out as in other places."
July 8, 2005, Small Business Times, Milwaukee, WI
