Speaking for Nevada - October 2001

NEW INSURANCE FRAUD LAWS

HELP FIGHT WHITE COLLAR CRIME

by J. Marty Howard

The 2001 Nevada Legislature passed two bills aimed at fighting insurance fraud. Assembly Bill (AB) 134 increased funding for the Nevada Attorney General’s Insurance Fraud Unit (IFU) and AB 135 gave the IFU primary jurisdiction to prosecute insurance fraud. The bills were co-sponsored by Assembly Speaker Emeritus Joseph E. Dini, Jr. and current Assembly speaker, Henderson Police Captain Richard D. Perkins.

Insurance fraud is one of the costliest white-collar crimes in the United States, ranking second only to tax evasion. It is not a victimless crime. A recent study by Hartford, Conn.-based Conning & Co. estimated that fraud costs the insurance industry $96 billion dollars annually. The Conning report has turned a lot of heads in the insurance industry and among consumers. In particular, one figure stood out: Insurance fraud costs families $5,000 each year. This amount includes not only higher premiums, but also the consequential higher prices for consumer goods and services.

The Nevada attorney general’s office has been on the front line in the attack against insurance fraud. Under the direction of Attorney General Frankie Sue Del Papa, we have reorganized and devoted additional resources within our office to tackle this crime. Also, we have mounted an aggressive public information campaign to spread the message about this offense, and to deter those who may consider committing insurance fraud within our borders.

The IFU prosecutes those who make - or assist someone else in making - material misrepresentations on applications for insurance, and/or for making false claims for benefits with an insurance company. Insurance fraud is a felony in Nevada, punishable by up to four years in prison and a maximum fine of $5,000. Those convicted are also required to pay restitution to the insurance company that was defrauded. Convictions have occurred throughout the state, including the Las Vegas area, Elko, Douglas County, Reno and Carson City. Over the past three fiscal years, we have made 96 arrests, obtained 88 convictions, and realized in excess of $2.75 million in court-ordered restitution. We have encountered a 41.6 percent increase in referrals of suspected insurance fraud over last fiscal year.

The IFU receives no general fund dollars to operate; it is totally dependent on assessments from insurers. Prior to the 2001 Legislative Session, the IFU was facing the grim task of being forced to layoff state law enforcement personnel and cut resources. That’s why the passage of AB 134 was so critical. It increased the current fixed $500 assessment per insurance company to a pro-rata sliding scale amount, based upon the total amount of premiums written by the company in Nevada. The low end of the assessment is $500, with the maximum amount being $2,000. Eighty-five percent of this money will be distributed to the attorney general and 15 percent to the insurance commissioner’s office. It was agreed this formula is fairer than the previous one, in which all companies, big or small, paid the same fee. AB 134 provides a net increase of approximately $117,944 to the IFU budget and allows it to continue operating at current staffing levels.

AB 135 provides the IFU with primary jurisdiction to prosecute insurance fraud; empowers a judge to order those convicted of insurance fraud to pay the cost of the investigation and prosecution of their crime; establishes that insurance companies are victims for purposes of restitution; and broadens the scope of those entitled to immunity for reporting insurance fraud.

Howard Goldblatt of the Coalition Against Insurance Fraud, based in Washington D.C., testified in support of these bills. He confirmed the testimony and belief of the IFU that career criminals and organized crime groups are entering Nevada from other states to pursue their felonious operations. Goldblatt said, "They [insurance fraud rings] perceive a ‘Welcome’ sign at the border because of the lack of resources to fight insurance fraud in this state. Though the bureau’s relief funding is an important step, it’s only a partial answer to the budget shortfall. Over the long term, the fraud bureau will need a significantly larger budget to fund more investigators and other resources."

Persons who suspect that any type of insurance fraud has occurred may contact the attorney general’s toll-free hotline at 1-800-266-8688. The brochure entitled, You are a Daily Victim of Crime, can be found on the attorney general’s web site at ag.state.nv.us.

J. Marty Howard Director, Insurance Fraud Unit