Insurance Official Urges Crackdown on Fraud
Executives from the nation’s largest insurance companies convened in Los Angeles on Monday at the urging of California Insurance Commissioner Chuck Quackenbush, who called for an aggressive crackdown on insurance fraud.
“It costs insurance consumers in California about 30% more because of the existence of a rampant fraud problem,” Quackenbush said at a news conference at the downtown Regal Biltmore Hotel. “That translates into several hundred dollars per consumer in this state if we could completely eliminate fraud.”
During the daylong meeting, which was closed to the media and the public, executives from Allstate Insurance, State Farm Insurance, 20th Century Insurance and about 200 other companies were addressed by the staff of the Department of Insurance’s Fraud Division, who gave an overview of laws regulating insurance fraud and of some successful anti-fraud programs.
A man with a fraud conviction also addressed the executives, telling them that the leaders of insurance fraud rings know which companies have strong anti-fraud units and that they try to avoid them.
William Mellick, president and CEO of 20th Century Insurance, said that his company’s sizable investment in a 41-member fraud investigation unit is worth it. Mellick said his company saved $120 million from six years’ worth of cases in which fraud was uncovered because the company did not pay out those claims.
But not all insurance companies are so convinced, said Keith Newman, deputy commissioner of the Department of Insurance Fraud Division.
Although insurance companies are required by law to have an anti-fraud division within their organization, some need to make a greater investment in preventing and investigating fraud, Newman said. And that investment will pay off, he added. The companies will save $3 to $10 for every $1 invested in fraud prevention, he said.