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(The Star-Ledger file photo)
By Ken Kobylowski
A Brick physician receives kickbacks for referring patients to a health care provider.
A Camden man fails to notify his auto insurance company that his adult daughter resides with him and is a resident driver of his car.
A Princeton medical provider charges an insurance company for services it did not perform.
A Glen Gardner woman submits an insurance claim for pre-existing damage on her car.
A Trenton man lists an out-of-state address for his car on his insurance policy.
What do all of these fictitious, yet very plausible, scenarios have in common? Insurance fraud.
Insurance fraud occurs when an insurance consumer, agent, adjuster or other business commits deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, filing a claim or underwriting insurance.
As we mark October as Insurance Fraud Awareness Month, I want to remind consumers of the crime’s far-reaching economic impact, point out some popular misconceptions about it and make sure consumers recognize some of the most common types of insurance fraud.
Insurance fraud is not a victimless crime. National experts estimate insurance fraud costs the economy approximately $80 billion a year. Fraudulent claims cost insurance companies money, which translates to higher premiums for consumers. So the answer to the question: “Who pays for insurance fraud?” is “We all do.”
A common misperception about insurance fraud committed by consumers is that the only parties involved are the policyholder and the insurance carrier. Insurance carriers are required by law to report suspected insurance fraud to the state Department of Banking and Insurance, which is mandated to investigate and impose fines or other penalties, if warranted. Our involvement provides deterrence and restitution. Last year, the department’s Bureau of Fraud Deterrence, which investigates and prosecutes civil insurance fraud, opened more than 4,100 cases and levied more than $4.1 million in civil insurance fines.
One of the most frequently investigated types of insurance fraud committed by consumers is application fraud — that is, misrepresenting information on an insurance application, such as failing to name a driver on a policy, misrepresenting an address or where a car is garaged, knowingly not listing a household student driver on an auto insurance application form in order to avoid a higher premium payment, for example.
Another kind of insurance fraud occurs when a lie is told or facts are omitted to secure a claims payment. An example in auto insurance would be to claim physical damage due to a single collision when another accident had previously occurred.
Insurance fraud in New Jersey falls under the jurisdiction of two state agencies: the Office of the Insurance Fraud Prosecutor within the Department of Law and Public Safety, which investigates and prosecutes criminal insurance fraud, and the Bureau of Fraud Deterrence within the Department of Banking and Insurance, which investigates and prosecutes civil insurance fraud.
The civil component of insurance fraud was transferred from the Office of the Insurance Fraud Prosecutor to the Bureau of Fraud Deterrence in October 2010 as part of the state’s 2011 fiscal budget. The bureau consists of 90 civil investigators and staff who are veteran fraud investigators.
For the remainder of October, the department and its partners will continue to work to raise public awareness of insurance fraud with press releases for consumers on how to avoid auto and health insurance fraud and through two statewide events for fraud insurance professionals.
The Insurance Fraud Summit, scheduled for Oct. 21, is a statewide event for regulators and law enforcement professionals in the insurance fraud field. The following day, the New Jersey Special Investigators Association (NJSIA) will host its annual insurance fraud seminar on the current law enforcement and regulatory issues in insurance fraud.
NJSIA, a non-profit organization that represents insurance fraud investigators, conducts a seminar annually following the insurance fraud summit. Together, these two events create a synergy that enhances the combined public and private efforts to combat insurance fraud.
While October is Insurance Fraud Awareness Month, the Department of Banking and Insurance and the Department of Law and Public Safety work diligently 12 months a year to aggressively investigate and prosecute insurance fraud. In October, we review the year’s efforts, give particular focus to emerging issues in the field and strive to increase public awareness of this issue.
I invite New Jersey insurance consumers to review the bureau’s new enforcement web page to gain a better understanding of real insurance fraud examples and their financial consequences — visit www.state.nj.us/dobi/, click the “Insurance Division” tab, then click the “Bureau of Fraud Deterrence” tab.
Anyone who believes he or she has been a victim of insurance fraud or who has information about an individual or entity who may be in violation of the law should call 1-877-55-FRAUD, 1-800-446-7467 or e-mail NJInsuranceFraud@njdcj.org.
Ken Kobylowski is commissioner of the New Jersey Department of Banking and Insurance.
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