N.J. Gov. Moves Against Insurance Fraud

The moves outlined by Gov. McGreevey were the latest in the state's effort to placate insurers that have been leaving the state complaining that the regulatory climate keeps them from making a profit.

His proposals include:

? Rules to make it easier for insurers to cancel the policies of drivers who lie on their applications.

? Legislation to create a new crime of insurance fraud to give prosecutors a tool that, he said, is much needed to punish those who defraud insurance companies.

? Legislation to expand the crimes that trigger automatic license revocation or suspension for healthcare professionals and others who commit health insurance fraud.

? A plan to create a counterfeit-proof auto insurance card for New Jersey.

With the governor as he made his announcement were Holly Bakke, commissioner of the Department of Banking & Insurance, Attorney General David Samson, First Assistant Attorney General Peter C. Harvey, Insurance Fraud Prosecutor Greta Gooden Brown, John Tiene, president of the Insurance Council of New Jersey, and Ken Pringle, general counsel of the New Jersey Special Investigators Association.

Gov. McGreevey praised Insurance Fraud Prosecutor Brown, who reported that her office this year has doubled the number of criminal fraud convictions obtained and civil sanctions imposed in 2001.

He repeated his commitment to fight high auto insurance rates by implementing a "zero tolerance" policy against uninsured drivers and impounding the vehicles of individuals who drive without insurance.

"Insurance fraud is wrong, it is costly, and it will no longer be tolerated," Gov. McGreevey said. "Those who commit insurance fraud take notice: we are going to find you and make you pay."

He added that "an estimated 10 percent of the insurance bill of every New Jersey family goes to the cost of insurance fraud. We are going to work in partnership with the insurance industry to vigorously enforce the laws we have, while creating tougher laws to crack down on fraud."

The governor said new rules adopted by the Department of Banking and Insurance will permit auto insurance companies to cancel the policies of drivers who lie on their applications within 60 days.

"Our role is to make sure that insurance companies have the tools they need to fight fraud at the underwriting level," Ms. Bakke said. "Insurance companies, in turn, must do their part to fight fraud and not just pass along the costs to consumers."

According to the governor's office, his administration is also drafting legislation to expand the Health Care Claims Fraud Act, which provides for automatic permanent forfeiture of healthcare licenses for those convicted of healthcare claims fraud in the second degree, and a one-year suspension for those convicted of healthcare claims fraud in the third degree.

Gov. McGreevey's third initiative is aimed at preventing counterfeiting of auto insurance cards in New Jersey. He said he is also proposing legislation to create a new crime of insurance fraud, a second-degree crime.

The state previously created the crime of "healthcare claims fraud," which has enabled the Office of Insurance Fraud Prosecutor to bring indictments for second degree crimes–and the threat of real jail time–to cases of fraud involving less than $75,000, Gov. McGreevey's office noted.

For crimes against insurers that do not involve healthcare claims, the state must still prove that over $75,000 is at issue before it can allege a second-degree crime.

"The legislature lowered the dollar threshold for healthcare claims fraud against insurers," Gov. McGreevey said. "We need to lower the threshold for other kinds of fraud against insurers."

The governor said he has also asked the attorney general to draft legislation that creates financial incentives for people to blow the whistle on insurance fraud.

Attorney General Samson said his Office of Insurance Fraud Prosecutor, the Department of Banking & Insurance, and New Jersey's insurance industry have strengthened their joint commitment to reducing insurance fraud targeting uninsured motorists and auto claim fraud, as well as health insurance and Medicaid program benefit fraud.

According to Ms. Brown, her office has realized a 132 percent increase in defendants charged, a 120 percent increase in guilty pleas in insurance fraud cases, and has collected $4.3 million in penalties–up from $2.6 million last year.

First Assistant Attorney General Harvey, who oversees the Office of Insurance Fraud Prosecutor as director of the Division of Criminal Justice, reported that as part of the continuing effort to attack insurance fraud, the office has developed a new training initiative designed to assist local law enforcement officers detect phony auto theft claims.

The Insurance Council of New Jersey's Mr. Tiene said its 32 insurance company members joined Gov. McGreevey in his "zero tolerance" policy against insurance fraud.

Mr. Tiene said he believes the governor's proposals will be well accepted in the legislature. " The challenge is writing them up into bill form and getting them into the legislative process," he said.

Richard Stokes, government affairs representative for the Alliance of American Insurers' Northeast Region, said the Downers Grove, Ill.-based organization welcomed the governor's efforts. He called Gov. McGreevey's push for a new insurance fraud law "an unprecedented step in the fight against insurance fraud that places New Jersey in the forefront of the battle to provide prosecutors with the tools necessary to put insurance cheats away."

"Only when we get a handle on insurance fraud and enact several other key reform measures will we see this state begin to drop from its perennial spot in the top rankings of the National Association of Insurance Commissioners' annual average auto premium list," said Mr. Stokes.