South Carolina Insurance Fraud Summit
March 15, 2016
While the decrease in violent crime in most states makes headlines, there is a quiet back story that does not— the increase in insurance fraud. South Carolina is experiencing a dramatic increase in insurance scams thanks to individuals enriching themselves through medical fraud schemes, staged accidents and phony injury claims—and everyone in South Carolina is paying for it.
The National Insurance Crime Bureau (NICB) and the South Carolina Insurance News Service (SCINS) hosted an insurance fraud summit to illustrate the scope of the fraud problems in South Carolina, their impact on consumers and potential solutions.
Law enforcement needs more fraud investigators, more targeted legislation and specialized training to effectively deal with this crime. At the summit, elected officials, law enforcement professionals, insurers, prosecutors and others discussed South Carolina’s insurance fraud problem and what we all can do, together, to defeat it.
The following White Paper was published following the event.
The National Insurance Crime Bureau (NICB) and the South Carolina Insurance News Service (SCINS) co-sponsored an Insurance Fraud Summit on February 2, 2016 in Greenville, South Carolina. The purpose of the summit was to identify the scope of the insurance fraud problem in South Carolina, its impact on consumers, and identify potential solutions. One hundred and fifty people attended the summit representing the insurance industry, federal, state and local law enforcement, regulators and the state legislature.
Over the past few years, South Carolina has experienced a dramatic increase in organized crime centered on medical fraud; namely bodily injury abuses and staged auto accident schemes.
Questionable claims submissions received by the NICB from South Carolina have increased 40% since 2010 and bodily injury questionable claims have doubled in just two years. South Carolina also ranks in the Top 10 nationally in the amount of suspected fraud per 100,000 population.
South Carolina has adequate insurance fraud laws with criminal penalties, mandatory reporting of suspected fraud and information sharing provisions among law enforcement, NICB and the insurance industry. The state also has a dual agency approach to combating fraud with the State Law Enforcement Division (SLED) handling investigations and the Attorney General’s Office handling the prosecutions.
Additional investigative resources are a concern, with only three investigators assigned to the entire state.
Topics addressed at the summit include staged auto accidents, bodily injury abuses, and the proliferation of “pill mills” in the state, prescription drug abuse, training resources, prosecutorial models and anti-fraud legislative issues.
South Carolina Director of Insurance Ray Farmer addressed the summit about the state and industry response to the catastrophic flash flooding events of October 2015. The importance of government and industry preparedness for natural disasters cannot be overstated.
South Carolina Attorney General Alan Wilson discussed the role of his office in fighting insurance fraud, namely its responsibility over handling fraud prosecutions. Insurance fraud has become an increasingly popular crime due to the “path of least resistance” and a potential high payout. Wilson discussed his philosophical belief in a limited size of government, but stated that South Carolina ranks “lowest in the nation” in the amount of state resources allocated towards insurance fraud. He urged attendees to advocate the need for more anti-fraud resources to state lawmakers.
South Carolina State Law Enforcement Division (SLED) Chief Mark Keel also spoke to attendees about the role of SLED in combating fraud and the need for more enforcement resources.
SOUTH CAROLINA INSURANCE FRAUD ENVIRONMENT
Jim Schweitzer, Senior Vice President & COO, NICB
Gary Healy, Director of Operations, Mid-Atlantic Region, NICB
NICB Senior Vice President and Chief Operating Officer Jim Schweitzer provided a wide overview of NICB’s services and our focus on organized criminal investigations.
Director Healy outlined the South Carolina insurance fraud problems which entail a dramatic increase in organized crime centered on medical fraud; namely bodily injury abuses, “pill mills” and staged auto accident schemes.
Questionable claims submissions received by the NICB from South Carolina have increased 40% since 2010 and staged accident and bodily injury questionable claims have doubled in just two years. South Carolina also ranks in the Top 10 nationally in the amount of suspected fraud per 100,000 population.
Director Healy indicated that NICB has five investigators and a field information analyst assigned to assist members and law enforcement in South Carolina.
ORGANIZED CRIME – STAGED AUTO ACCIDENTS AND BODILY INJURY ABUSES
Steven Bodge, SIU Major Case Manager, Nationwide Insurance
Jennifer Clanton, SIU Manager--East Region, Sentry Insurance
Margaret Fleming, Senior Special Investigator, South Carolina Farm Bureau
Panelists discussed how some organized crime rings in South Carolina are committing insurance fraud crimes as a financial means to obtain prescription drugs – which in turn they attempt to sell on the black market – and which has partially led to a proliferation of “pill mills” in the state. Due to insurance fraud being a low risk-high reward crime, it’s an easy funding method for drug seekers.
Insurance fraud has become a major financier of OxyContin, a highly addictive prescription pain killer. South Carolina ranks very high nationally in the number of painkiller prescriptions per population. Insurance industry and law enforcement input was recommended on South Carolina Governor Nikki Haley’s Prescription Drug Abuse Task Force, which was formed in 2015.
In addition to having elements of organized medical fraud abuses commonly found in states such as Florida, South Carolina suffers from fraud being committed by individuals acting alone or in conjunction with family members for purposes such as financing illegal firearms for gang activity. South Carolina law also has statutory loopholes with phantom vehicles and accident reports, which criminals are exploiting to their benefit. It was suggested to examine anti-fraud provisions enacted in Florida in 2012 (HB 119) to help combat this.
Recommendations discussed to combat these crimes included a stronger focus on medical clinic investigations, increased interagency communication and teamwork, statutory improvements, and use of predictive analytics.
INSURANCE FRAUD DETECTION AND PROSECUTION – TRAINING RESOURCES
Tom Welsh, Vice President--Training, NICB
W. Scott Harkey, Financial Crimes Prosecutor, North Carolina Conference of District Attorneys
The NICB Training Department offers numerous programs to address the educational needs of members and law enforcement agents. These programs provide fraud and theft fighters with the detection skills and expertise necessary to combat fraud. Ranging from online courses to multi-day academies, NICB trains thousands of insurance industry investigators and members of law enforcement annually.
The National Insurance Crime Training Academy (NICTA) is an Internet-based training resource that allows students online access to anti-fraud courses and investigative resources. NICTA programs, available at www.nicta.org, support claims professionals, insurance investigators and law enforcement officers.
The National Insurance Crime Bureau provides free online anti-insurance crime training to law enforcement professionals at a specially designed website: www.nicbtraining.org. This site features a variety of online training programs, streaming videos and downloadable reference material that can be used in roll calls and other internal law enforcement training programs.
Through a relationship with the National Association of Prosecutor Coordinators, the NICB has developed relationships with state prosecutor associations in states such as Illinois, Texas and Minnesota. In these states, NICB has become a valuable ally to prosecutors for our data and investigative capabilities.
The North Carolina Financial Crimes Initiative is a program the North Carolina Conference of District Attorneys established to advance the prosecution of non–violent criminal offenses motivated by an attempt at personal or organizational financial gain, including insurance fraud. The Initiative, founded in 2013 and funded with a national settlement with banks over fraudulent mortgages, has four regional prosecutors charged with prosecuting offenders.
The Initiative has had several cases involving insurance fraud, including one such case that had over 20 victims across eight (8) North Carolina counties. Insurance fraud cases are complex and often multi-jurisdictional.
Industry and law enforcement attendees were urged to take advantage of NICB training services. The North Carolina Initiative has also developed essential training and valuable resources for prosecutors, law enforcement and allied professionals.
SOUTH CAROLINA ANTI-FRAUD LEGISLATION AND CURRENT ISSUES
Note: State Senator Ross Turner (R-Greenville) was due to be on this panel, but could not attend the Summit due to committee hearings in Columbia the day of the event.
Melissa Manning, Director of Insurance Fraud, South Carolina Attorney General’s Office
Mark Tilkin, State Counsel, State Farm
The Insurance Fraud Division of the South Carolina Attorney General’s Office was founded in 1994, and currently has one prosecutor, three investigators (assigned by SLED) and administrative support. In addition to property and casualty claims fraud, the division also handles workers compensation, arson, and life insurance fraud.
The division has historically been understaffed, but has demonstrated the ability to gain more convictions and civil fines when additional prosecutors and investigators have been assigned, as was the case several years ago. Additional funding was secured in 2015 for two additional SLED investigators, via an appropriation in the state budget.
Attorney General Wilson has worked with Representative Ralph Kennedy and others to introduce legislation to provide his office with additional tools to fight insurance fraud, House Bill 4339. The legislation would add insurance fraud to the list of crimes that are eligible for state grand jury investigative powers, suspend the driving privileges for those who violated state driving laws while committing insurance fraud and add the word “attempted” to the insurance fraud statute. The bill has been approved by a subcommittee and is awaiting a hearing in the House Judiciary Committee.
Attorney Tilkin addressed attendees on some successes in other states with enacting insurance fraud legislation, namely in Georgia. He placed emphasis on the importance of having these new laws properly enforced, and the value of working with NICB to help enact meaningful anti-fraud legislation at the state level.
• To help combat organized fraud rings in the Atlanta area, legislation was passed in 2013 to combat roofing fraud schemes and in 2014 to criminalize the actions of runners who prey upon accident victims. The roofing issue received some media coverage, specifically on convictions of some of the bad actors thus raising the value of the enforcement piece and the increased benefit of public awareness of the problem. In 2013, South Carolina enacted a bill very similar to Georgia’s to combat roofing fraud.
Tim Lynch, Director – Government Affairs, NICB
Director Lynch recapped the main points from the panel discussions and outlined recommendations for future action:
• Attain additional anti-fraud resources for the State Law Enforcement Division and the Attorney General’s Office for fraud investigations and prosecutorial support.
• Support passage in the 2016 legislative session for House Bill 4339 which will give the insurance fraud unit statewide grand jury power and other important tools.
• Support and encourage Grass Roots Political Action.
• Education of key state agencies on prescription drug abuses and the inter-relationship with insurance fraud as a funding source.
• Increase public awareness of insurance fraud.
• Eliminate exploitation of insurance fraud as a funding resource for other crimes.
• Education and training for insurance industry and law enforcement on identification of insurance fraud.
• Research the feasibility of legislation similar to House Bill 112 from the State of Florida (2012).
• Determine the applicability of sentencing guidelines for fraud convictions.
• Determine severity of staged accidents and payments of Med-Pay benefits.
About the National Insurance Crime Bureau: Headquartered in Des Plaines, Ill., the NICB is the nation's leading not-for-profit organization exclusively dedicated to preventing, detecting and defeating insurance fraud and vehicle theft through data analytics, investigations, training, legislative advocacy and public awareness. The NICB is supported by more than 1,100 property and casualty insurance companies and self-insured organizations. NICB member companies wrote over $395 billion in insurance premiums in 2014, or more than 78 percent of the nation's property/casualty insurance. That includes more than 93 percent ($176 billion) of the nation's personal auto insurance. To learn more visit www.nicb.org.
About SCINS: For almost 40 years, the South Carolina Insurance News Service has been providing free insurance information to consumers and the media about property and casualty insurance issues.
For more information, contact the South Carolina Insurance News Service at 803-252-3455 or use our contact form.