Fraud unit is a good idea

State Insurance Commissioner Mike Kreidler wants to create an investigative unit in his agency to target fraudulent insurance claims.
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He’ll ask the 2006 Legislature for $2 million to fund a five-person unit to uncover insurance scams that could be costing the insurance industry, and ultimately law-abiding insurance policy holders, up to $400 million a year in this state.

The District of Columbia and 41 states have such units to go after what often is organized insurance scams that can involve everything from claims stemming from rigged automobile accidents to illegal medical insurance claims.

Kreidler’s proposal has merit and should be taken seriously by lawmakers. If the Legislature has concerns about future funding for the unit, funding of the investigative unit could be tied to its ability to get convictions and save insurance ratepayers money.

Kreidler and some officials in the insurance industry suggest this state is being singled out by scam artists because it doesn’t have investigators assigned directly to go after fraudulent insurance claims.

“We have people here who are operating in organized operations who came from California, came from New York,” said Greg Newell, a Fife-based investigator with the National Insurance Crime Bureau.
“Those states have insurance fraud units.”

If this state is seen as ripe for insurance fraud abuse, it’s a compelling reason for the state to have a unit of its own.

Neither local police departments nor Washington State Patrol have the staffing or resources to make insurance claim investigations a top priority. The cases are difficult and time consuming to investigate and even harder to prosecute.

The National Insurance Crime Bureau estimates that 10 percent of all insurance claims filed are fraudulent.

Fraud of all kinds, from organized crime rings to individual cheaters, add $200 to $300 a year to the typical household’s total insurance cost, the insurance crime bureau estimated.

Kreidler is on the right track when he says the unit needs to start small, develop a track record and try to build on its successes.

For the program to be a success, county prosecuting attorney offices, the state Attorney General’s office, the State Patrol and the Office of the Insurance Commissioner would all have to work together.

The evidence is there to show that the insurance fraud unit would be worthwhile. Now, it’s up to the Legislature to see fit to fund it.