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On to 1997 …
NAIC Planning Busy Year
The anti-fraud committee of the National Association of Insurance Commissioners is moving forward on several fronts for 1997.
The committee will be working on guidelines for insurance departments and insurers to meet the requirements of the 1994 federal insurance fraud law. That law made certain aspects of insurer fraud a federal crime and prohibited persons convicted of crimes involving dishonesty or breach of trust from working in the insurance industry unless granted a waiver from a regulator. The guidelines will help define “dishonesty” or “breach of trust” and give regulators a basis for granting waivers in a systematic fashion.
The NAIC also is drafting model legislation prohibiting the denial of a claim on an application for insurance solely on the basis that the material was filed by a victim of domestic abuse. A panel discussion was held at the Atlanta winter meeting where insurers raised questions about a possible increase in fraud if the current draft of the model is approved. The special committee that is drafting the model will continue to study the issue during 1997.
Uniform Fraud Warnings:
Many fraud fighters have long considered uniform fraud warnings a useful tool to help combat insurance fraud. Both the NAIC and the Coalition Against Insurance Fraud recognize the value in mandating warnings on claims and applications forms by requiring them in their model fraud acts. The coalition has noted anecdotal evidence that fraud warnings reduce fraudulent claims. Prosecutors say fraud warnings are helpful in proving an intent to defraud. Approximately 20 states currently require them, and several more are likely to do so in 1997.
However, requirements run the gamut from permitting an insurer to draft its own warning (as long as it meets a state standard) to requiring exact language for each form, as is the case in several states.
The coalition, in advocating fraud warnings, believes a generic fraud warning is the most cost efficient. It makes little sense for insurers to have to print individual forms for each state because of a disparity in the fraud warning language. Most insurers contacted by the coalition tend to produce their claims and applications forms out of a central location. However, if an insurer is required to meet exact or different language in specific states, that would increase costs. The coalition thinks that doesn’t make sense and is working to encourage a uniform standard.
Workers’ Compensation
The coalition recently surveyed state workers’ compensation boards about the authority of judges to compel restitution or notification of state license boards when a licensed provider has committed workers’ compensation fraud.
The coalition heard from 60 percent of the states. By a margin of two to one, the survey showed that states do not give judges the authority to compel restitution to a fraud victim. Similarly, by a margin of three to two, states do not give the adjudicator the authority or obligation to notify the state license board when a licensed provider commits fraud. And by a two-to-one margin, respondents thought that expanding the role of a judge to include ordering restitution and notifying license boards would help fight fraud.
The coalition recommends that these workers’ compensation adjudicators be empowered to order restitution to victims and to seek regulatory sanctions against abusive medical providers. Further, insurers should be encouraged to print a voluntary fraud warning on the back of indemnity checks.
… And Beyond
The state legislatures all have ended their 1996 sessions and are readying for action for 1997. Anti-fraud activity is expected from states in all regions of the nation – including Arkansas, Ohio, Virginia, South Dakota, Kansas, Oklahoma, New Mexico, Nevada and Oregon.
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