Minnesota’s car insurance system is the centerpiece of a no-fault reform effort that officials recently announced.
Law enforcement authorities, politicians and insurance officials gathered last week to announce that the “comprehensive package of reforms” they are pursuing would, among other things, stiffen penalties for fraud and enhance collaboration between insurance and law enforcement agencies.
The National Insurance Crime Bureau (NICB) and Insurance Federation of Minnesota (IFM) hosted an Insurance Fraud Summit last year that highlighted “loopholes” in no-fault car insurance. Both groups expressed support for the recently proposed reforms for Minnesota no-fault car insurance.
In no-fault coverage, a policyholder’s insurer pays his or her medical bills and lost wages sustained because of a car crash, regardless of who caused the crash.
No-fault car insurance in Minnesota is currently mandatory for drivers at $20,000 limits each for lost wages and medical bills.
Legislation Includes Benefit Caps, Data-Sharing
Legislative proposals announced at the Thursday news conference at the Minnesota State Capitol would:
- Empower the state commerce commissioner with the ability to charge civil penalties for fraud
- Restrict public sales of crash reports
- Widen liability protection for insurance companies when they share claims data with law enforcement
- Establish a cap on prescription drug benefits under no-fault coverage
Sen. Vicki Jensen said she believes that “meaningful” legislation to combat fraud will be passed this current legislative session.
Report: Minnesota a Destination for ‘Reverse Migration’ of No-Fault Criminals
One of the news conference’s speakers was John Choi, attorney for Ramsey County, who said that recent crime trends illuminate Minnesota’s current struggle with no-fault fraud.
“I really see a lot of shift in our criminal activity where you’ve got people who may have been involved in dealing drugs who are now engaged in financial fraud schemes, and we see insurance fraud being a part of that,” Choi said.
Last year, a NICB report found that, between 2008 and 2011, organized criminal groups flocked to Minnesota in a “reverse migration.” Fraudsters, according to the report, were fleeing no-fault states like New York and Florida, where legislators had spent years hardening laws against staged accidents and bogus medical billing that are the foundation of no-fault crime.
Mark Kulda, vice president of public affairs for the Insurance Federation of Minnesota, said that the proposed reforms “send a strong message to folks that come here from out of state and even other countries to defraud Minnesota consumers.”
“That message is ‘go home, because you’re stealing our money,’” Kulda said at the news conference.
Officials: Minnesota Premiums Go Up as Criminals ‘Feed Their Greed’
Tim Lynch, the NICB’s government affairs director, said in a statement that Minnesota’s no-fault car insurance system “has been hijacked by” criminals who “feed their greed” with bogus claims payouts. Such claims seem legitimate when those criminals back them with intricate tactics that range from recruiting drivers who stage crashes to creating clinics that are billed for bogus treatments.
Authorities took aim at a no-fault scheme in Minnesota last October, when a federal lawsuit named dozens of chiropractic clinics throughout the state that they linked to a multi-year, million-dollar “kickback” operation.
In another no-fault case in Minnesota that was publicized last October, state authorities said a St. Paul man submitted fake medical bills to GEICO for a 2011 traffic crash in which he ultimately received more than $44,000 for nearly 200 treatments.
The package of legislative reforms, authored by Jim Metzen, Paul Gazelka and Jensen, comes after the state Commerce Committee convened a working group last year to discuss increasing instances of insurance fraud in Minnesota and possible laws to counteract it.
Metzen, who chairs the committee, said in a statement last week that a “subcommittee dedicated to insurance fraud prevention” will be permanently created.
Such crimes cost the average Minnesota family $1,000 a year, according to Metzen. He added that Minnesota car insurance prices could fall if “we are successful in our efforts to fight and prevent fraud.”
Mark Streed, president of the Minnesota Association for Justice, said in an editorial letter that insurers are focusing on insurance fraud while overlooking their “own claims handling practices.”
Streed pressed insurers to “turn the mirror on themselves.”
“Wrongfully denying and/or delaying legitimate claims made by their own premium-paying customers is not a good practice, either,” Streed said in his letter, which prodded officials for timing their announcement of legislative reforms during Minnesota’s “Insurance Fraud Awareness Week.”
“Perhaps next week we should recognize ‘Unfair Insurance Claim Practices Week,’” Streed said.