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Will New Anti Fraud Unit end No-Fault car insurance fraud?

September 18, 2018 by Steven M. Gursten

Created by Gov. Snyder, Insurance Commissioner’s Anti Fraud Unit doesn’t address fraud by auto insurers, fraud penalties or gender discrimination in pricing

Will Insurance Commissioner use new Anti Fraud Unit to put an end to No-Fault car insurance fraud?Will Insurance Commissioner use new Anti Fraud Unit to put an end to No-Fault car insurance fraud?

Will Gov. Snyder’s recently created Anti Fraud Unit, which is under the Insurance Commissioner’s control, bring an end to No Fault insurance fraud?

We’ve been told that eliminating fraud will save people money and lower the price of car insurance. And, as a car accident lawyer and a legal blogger, I’ve been aggressively pushing for more aggressive steps to stop the increasingly rampant and ugly fraud that I see. There’s no place in the legal profession for car accident lawyers who are ambulance chasing and committing fraud.

But while ugly and distasteful, it isn’t the lawyers who are committing fraud that is the major driver of high car insurance rates.

It’s the insurance companies.

And the question that car accident lawyers like me really want to know is whether this Anti-Fraud Unit will actually do anything to stop the rampant fraud committed by insurance companies.

Based on 25 years of experience with Michigan’s auto insurance companies, I’m not getting my hopes up.

Not surprisingly, the Executive Order says nothing about stopping No-Fault insurance fraud committed by the auto insurers.

This is a huge, glaring omission.

Had they taken seriously bills like House Bill 4672 and its proposed No-Fault fraud authority, this Executive Order wouldn’t have even been necessary.

Without targeting fraud committed by both car accident lawyers and the insurance companies, I can’t help but conclude that this Executive Order is largely a symbolic gesture:

  • First, the Executive Order doesn’t provide the Insurance Commissioner with necessary – and much-needed – enhanced powers to deal directly, albeit administratively, with insurers who commit fraud. Knowing that the commission of No-Fault fraud against an insured or a car accident victim could cost an insurer its privilege of doing business in Michigan could serve as a very compelling deterrent.
  • Second, the overly-broad scope of the Order seems unworkable. According to the order, in addition to investigating fraud related to Michigan’s No-Fault law, the Anti-Fraud Unit is charged with rooting out fraud related to 41 other laws, including Workers’ Comp, banking and mortgage fraud – just to name a few.

How the Anti Fraud Unit should be targeting auto insurer fraud 

The Executive Order is a significant missed opportunity for the governor and the Insurance Commissioner to take meaningful action to restore people’s faith in the government and the auto insurance industry.

Despite politicians’ reticence at tackling insurance fraud, the Executive Order could have sent a strong message by drawing from the substance of HB 4672 (which can still be acted on before the end of the 2017-2018 session).

Significantly, HB 4672 made the long-overdue, albeit far from revolutionary, proposal to create a fraud authority to go after insurer, as well as individual, No-Fault fraud and to target insurers’ unfair and bad-faith claims and settlement practices.

Anti Fraud Unit should start by first going after insurers’ illegal gender discrimination

If the Insurance Commissioner wants to build the public’s trust in the Anti-Fraud Unit and prove its effectiveness, then he would do well to make a top priority of ending gender discrimination in auto insurance pricing.

Specifically, as WXYZ reported in its recent stories, auto insurers appear to be gaming the insurance system by falsely claiming to be writing “group” policies so they can circumvent the Insurance Code’s rules prohibiting insurers from charging higher premiums to women and widows than they do men.

In fact, I told WXYZ that what Michigan No Fault insurers are doing is wrong:

“It is not legal … There is a law right on point that says women cannot be charged more than men, nor should they by the way, because statistically women are safer drivers.”

Insurance Commissioner’s new Anti Fraud unit for car insurance

On September 11, 2018, Gov. Rick Snyder issued Executive Order 2018-9 which creates an “Anti-Fraud Unit” as part of the Department of Insurance and Financial Services (DIFS) under the control of the Insurance Commissioner.

The Executive Order tasks the Anti-Fraud Unit with the following:

  • “The Anti-Fraud Unit is a criminal justice agency and shall have full access to criminal justice information and criminal justice information systems” to “investigate criminal and fraudulent activity” involving the “Insurance Code of 1956,” which includes Michigan’s No-Fault law.
  • The Anti-Fraud Unit may “[i]nvestigate claims of criminal and fraudulent activity in the insurance … market[] that, if true, would constitute a violation of applicable state or federal law, including … the Michigan Penal Code … [and] Michigan Insurance Code …”
  • Work with other “criminal justice agencies,” “local and state law enforcement and regulatory agencies to promote investigation and prosecution of criminal and fraudulent activities in the insurance … industr[y].”

Gov. Snyder’s press release announcing the Executive Order explained:

  • The Anti-Fraud Unit “will work in tandem with other law enforcement agencies to share information on fraudulent activity and collaborate to prevent the occurrence of future instances of fraud within the auto insurance … sector[].”

It also quoted DIFS Director Patrick McPharlin, who will control the Anti-Fraud Unit, as saying:

  • “This new Anti-Fraud Unit … will increase our ability to investigate fraud and will ultimately drive down the cost of insurance for Michiganders.”

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