TRENTON
– According to the Coalition Against
Insurance Fraud, New Jersey's Office of
Insurance Fraud Prosecutor led the nation
by huge margins in the number of civil
actions it took against insurance fraud
perpetrators last year and in the overall
number of cases, criminal and civil, that
it opened in its war on fraud, compared
to other state fraud bureaus. A report
released today by the Coalition, a national
organization of insurers, law enforcement
agencies and consumer groups, spotlights
the success of the five-year-old Office
of Insurance Fraud Prosecutor, which the
statistics show has hit its stride under
the leadership of Attorney General Peter
C. Harvey, Director Vaughn L. McKoy of
the Division of Criminal Justice and Insurance
Fraud Prosecutor Greta Gooden Brown.
The
study by the Washington, D.C.-based coalition,
titled "A Statistical Study of State
Insurance Fraud Bureaus," reports
that New Jersey's Office of Insurance
Fraud Prosecutor (OIFP) took 2,590 civil
actions against fraud perpetrators in
2002, accounting for 86 percent of the
total civil actions reported in 2002 by
all 43 state insurance fraud bureaus included
in the report. The report notes that "New
Jersey's Office of Insurance Fraud Prosecutor
more than doubled its 2001 count of civil
actions in 2002."
New
Jersey's Office of Insurance Fraud Prosecutor
also was first in the nation in the total
number of new insurance fraud cases opened
in 2002 – civil and criminal. New
Jersey's total of 4,986 new cases opened
in 2002 was more than double that of second-ranked
California, which opened 2,237 cases.
That figure further highlights the surge
in productivity of New Jersey's OIFP in
2002.
In
2002, New Jersey's OIFP realized a 143
percent increase in indictments over 2001,
according to state statistics not included
in the report. The report indicates that
New Jersey had 302 criminal convictions
for insurance fraud in 2002, ranking third
in that category.
"This
report establishes unequivocally that
our Office of Insurance Fraud Prosecutor
leads the nation when it comes to fighting
this costly crime of insurance fraud,"
said Governor James E. McGreevey. "Insurance
fraud costs the average New Jersey household
$200 to $300 a year in added premiums.
That's why I signed a law that created
the new crime of insurance fraud, with
stiffer penalties, giving our Insurance
Fraud Prosecutor a new weapon to fight
fraud."
"Insurance
fraud is among our top priorities,"
said Attorney General Harvey. "We
have dedicated significant resources to
investigating and prosecuting insurance
fraud to stabilize insurance rates in
New Jersey. We're fighting insurance fraud
on three fronts: criminal prosecution,
civil sanctions and forfeiture of the
licenses of professionals who engage in
insurance fraud. We've used that triple
threat to make our Office of Insurance
Fraud Prosecutor one of the nation's foremost
fraud fighting agencies."
"We're
bringing major resources to bear on this
crime of insurance fraud," said Division
of Criminal Justice Director McKoy. "As
long as criminals believe that crime pays,
we're going to see more crime. In New
Jersey, we're sending a powerful message
to those who would engage in insurance
fraud: Do it here, and you'll be the one
who pays."
"For
years, law enforcement paid little attention
to insurance fraud, because they viewed
it as a minor, non-violent crime,"
said Prosecutor Gooden Brown, who is the
subject of the cover story in the latest
issue of Fraud International magazine.
"Meanwhile, the volume of insurance
fraud and the sophistication of its perpetrators
grew exponentially, until now we're faced
with an $80 billion illegal enterprise
nationwide. We're fighting back in New
Jersey, in partnership with the insurance
industry, and making a real impact."
"New
Jersey leads the nation in the number
of criminal and civil actions taken against
fraud perpetrators," said Dennis
Jay, Executive Director of the Coalition
Against Insurance Fraud. "Tougher
fraud laws in New Jersey and aggressive
action by the Office of Insurance Fraud
Prosecutor have coincided with a dramatic
increase in staged auto accidents in New
York City. It appears that New Jersey's
tough stance is chasing fraud rings out
of the state. While it's hard to put a
price tag on how much the state saves
by deterring people from committing insurance
fraud, it's a safe bet that all New Jerseyans
would pay more for insurance if fraud
were allowed to run rampant."
The
Office of Insurance Fraud Prosecutor fines
insurance swindlers or puts them behind
bars through a coordinated, statewide
effort. OIFP was charged by the Legislature
with responsibility for coordinating the
insurance related anti-fraud efforts of
all state and local agencies, as well
as those of the insurance industry, to
provide for the most effective and efficient
use of fraud fighting resources possible.
OIFP is uniquely situated to achieve economies
of scale and spot emerging patterns of
abuse. An investigator gathering facts
from many companies can solve the case
faster than a single company acting alone.
Although
insurance fraud remains a big, complex
problem in the State, the success of New
Jersey's anti-fraud effort is reflected
in recent trends in insurance rates. New
Jersey's average auto insurance premiums
and rates have remained relatively stable
compared to those in other states. Insurance
fraud is so rampant in New York that rates
in the high-risk market there recently
soared 20 percent.
The
work of New Jersey's Office of Insurance
Fraud Prosecutor is certainly one reason
why New Jersey ranked 50th when the National
Association of Insurance Commissioners
looked at how much average premiums rose
between 1997 and 2001. It should be noted
that while the average premium did rise
between 2000 and 2001 in New Jersey, insurance
rates were stable; this occurred, in part,
because 1.3 million new cars and trucks
– out of 5 million insured vehicles
– were registered during the two-year
period. As every driver knows, a new car
costs more to insure.
The
tremendous rise in productivity of the
Office of Insurance Fraud Prosecutor in
2002 and 2003 should increase the deterrent
effect on fraud and the downward pressure
on rates. In 2003, OIFP filed criminal
charges against 318 defendants by the
end of November. By that time, its 2003
tally of civil actions was already approaching
the record total of 2002.
New
Jersey's Office of Insurance Fraud Prosecutor
was created by the 1998 New Jersey Automobile
Insurance Cost Reduction Act, a legislative
effort to address the skyrocketing costs
of auto insurance in New Jersey. With
the exception of the Medicaid section,
OIFP is funded by the insurance companies,
which contribute each year to the cost
of running the Office in proportion to
the net premiums they receive for writing
policies in the State.
Because the Legislature required the insurance
industry to fund OIFP, the marriage between
the Office and insurers was, at first,
an uneasy one. In five years, however,
it has grown into a strong partnership
that is producing increasingly dramatic
results.
Insurance
industry special investigative units are
the primary source of referrals about
suspected fraud, reporting all suspicious
claims to OIFP under a statutory mandate.
With a large staff of investigators and
attorneys, OIFP has the resources to make
the case against fraud perpetrators, so
that instead of facing only a denied claim,
they will face criminal charges or major
civil sanctions. New Jersey law provides
stiff civil penalties for insurance fraud,
including fines of $5,000 for a first
lie about a claim; $10,000 for a second
lie; and $15,000 for each additional lie.
The
insurance industry has recognized that
having a powerful state fraud fighting
agency in New Jersey is a vital deterrent
to insurance fraud. Industry organizations
such as the Insurance Council of New Jersey,
the Alliance of American Insurers and
the New Jersey Special Investigators Association
have played an important role in New Jersey's
fraud prevention efforts.
"Our
productive working relationship with the
insurance industry has been crucial to
our efforts to alleviate the insurance
fraud problem in New Jersey," said
Attorney General Harvey. "Working
in concert, we're getting the job done."
"This
report reaffirms our view that New Jersey
is a national leader in fighting insurance
fraud and points to the hard work and
dedication of the Office of Insurance
Fraud Prosecutor," said Richard Stokes,
the Northeast Regional Manager for the
Alliance of American Insurers. "The
report also reflects the importance of
a strong partnership between government
and the private sector – the kind
of partnership insurers in New Jersey
have with the Office of Insurance Fraud
Prosecutor and with Governor McGreevey,
whose legislative reforms will help us
combat fraud and hold the line on premiums."
In
order to identify suspicious activity,
OIFP also relies upon the cooperation
of concerned members of the public, resourceful
law enforcement officials and conscientious
individuals within the medical field and
other professions where individuals engage
in insurance fraud. OIFP provides training
to local law enforcement officials to
help them detect fraudulent accidents
and crime reports.
In
addition, the insurance industry has funded
a major advertising campaign, coordinated
by the Attorney General's Office, to inform
the public about insurance fraud and to
encourage reporting to the State's toll-free
tip line 1.877.55.FRAUD. Anti-fraud
legislation signed this year by Governor
McGreevey – which created a new crime
of insurance fraud with stiffer penalties
– also provides for rewards of up
to $25,000 to persons who provide information
leading to the arrest, prosecution and
conviction of insurance fraud perpetrators.
