By Sandy Praeger, Kansas Insurance Commissioner
The Anti-Fraud Division of the Kansas Insurance Department (KID) worked nearly 850 cases of suspected insurance fraud in Kansas during 2013. That’s a pretty hefty number for our four-person division, but that figure is an average one for us, unfortunately.
On a national level, if insurance fraud was a business, it would be a Fortune 500 company, according to national reports. It is, by all accounts, the second largest economic crime in America; only tax evasion exceeds it.
This type of fraud is the intentional misrepresentation of facts and circumstances to an insurance company in order to obtain payment that would not otherwise be made.
Insurance fraud costs upwards of $80-120 billion annually, but most importantly, it adds hundreds of dollars to your annual insurance premiums, as companies have to include that cost of doing business in the premiums you pay.
The fraudulent activity comes in all shapes and sizes, from accident insurance and annuities through health insurance and homeowners claims to renters insurance and travel insurance. It also includes application or policy fraud, where the applicant—or an unscrupulous agent – provides false information or forged documents.
The reasons for committing fraud are as numerous as the people who commit it—the need for money for some legitimate (in their minds) or illegitimate activity, or maybe just plain old greed. But whatever the motivation, when our anti-fraud division receives a report of suspected fraud, our investigators first make a determination about the alleged activity in terms of who should actually follow up.
Some reports are clearly not insurance fraud and are placed with an appropriate outside investigative agency. Others are not insurance fraud but are consumer issues or market conduct issues that other divisions in KID would investigate. For example, if our anti-fraud investigators determine the activity is not criminal insurance fraud but a problem with agent conduct, then KID’s Producer Licensing Division will receive the report.
Information from consumers is often forwarded to an insurance company’s special investigative unit for followup, and some cases that are clearly violations of federal law are referred to a federal investigative agency such as the FBI.
If our anti-fraud investigators determine that suspected fraud falls within the insurance law in our Kansas Statutes, then our investigators interview witnesses, take statements and collect and analyze evidence. Once everything is complete, we make a decision on the merit of the case by asking two simple questions: Was it really insurance fraud? Did the facts warrant a prosecution?
If the answers are Yes, then we submit an affidavit to our In-House Special Assistant Attorney General to determine who prosecutes the case and where the case will be filed. This process involves our Legal Division and the Attorney General’s office.
The process can be lengthy, but it is thorough, and I would put our investigators up against any agency’s in terms of making sure no stone is unturned.
If you suspect any type of fraudulent Kansas insurance activity, contact the KID Anti-Fraud Division by calling 1-800-432-2484. You will be doing your insurance premium dollars a favor.