Michigan Law Targets Insurance Fraud

LANSING — Legislation signed by Gov. Rick Snyder Tuesday to crack down on individuals committing insurance fraud will help control auto insurance costs, according to a statewide insurance trade association.

Public Act 39 of 2012, introduced by Sen. Virgil Smith of Detroit, outlaws the use of runners, cappers or steerers to fraudulently obtain insurance benefits.

The terms runner, capper and steerer are used to describe a person who helps set up fake auto accidents or makes false insurance claims. “Insurance fraud is one of the most costly white-collar crimes in America, ranking second to tax evasion,” said Pete Kuhnmuench, executive director of the Insurance Institute of Michigan.

“Policyholders, taxpayers and the general public pick up the tab for insurance fraud through increased insurance rates, higher taxes and inflated prices for consumer goods and services. Everyone pays the price for insurance fraud.”

Insurance fraud may be committed at different points in the insurance transaction by individuals and organized fraud rings. Common fraud schemes include “padding” or inflating actual claims, misrepresenting facts on an insurance application, submitting claims for injuries or damages that never occurred or billing for medical services never rendered or unnecessary.

A study by the National Insurance Crime Bureau (NICB) found that questionable claims in Michigan rose from 2,973 in 2009 to 5,024 in 2010. Auto insurance has the greatest number of questionable claims.

An area that seems to be growing, according to NICB, is medical questionable claim submissions, which have increased by more than 130 percent over the past year.

In Michigan, motorists are mandated to buy unlimited, lifetime medical coverage under a no-fault policy, creating even greater opportunities for fraud to occur.

“The unlimited benefits contained in the state’s no-fault system are ripe for fraud,” according to Kuhnmuench. “Providing law enforcement with the right tools to fight this abuse helps keep costs down for everyone.”