Massachusetts Crackdown on Insurance Fraud Sets Milestones

Five years after the creation of Massachusetts’ first local anti-insurance fraud team, the state’s Insurance Fraud Bureau says the combined local task forces have charged over 1,000 people with insurance fraud.

The crackdown stems from a network of 11 separate anti-fraud units in urban areas across the Bay State. The first, in Lawrence, was created in Oct. 2003 after local police discovered that a 65-year-old woman, Altagracia Arias, died in an auto accident while participating in a scheme to stage accidents and file false bodily injury claims.

That investigation led to the creation of the first Community Insurance Fraud Initiative (CIFI) task force to combat fraud at the local level. It combined the resources of the Insurance Fraud Bureau of Massachusetts, the Lawrence Police Department, the Essex County District Attorney’s Office, the Massachusetts Attorney General’s Office and several insurance companies and became the model for ten more task forces that were established over the next several years.

Additional task forces were launched in and around cities with higher-than-average rates of suspected auto insurance fraud – Springfield/Holyoke, Brockton, Lynn, Boston, Lowell, Randolph, Chelsea, New Bedford/Fall River, Revere and Worcester.

To date, investigations by the 11 CIFIs have led to charges or arrests of more than 1,000 individuals for alleged insurance fraud, including lawyers, chiropractors and “runners” who have facilitated these schemes.

“The communities where CIFIs have been established have witnessed a reduction in reported accidents that has translated into millions of dollars in fewer insurance claims coming from those cities,” said Daniel J. Johnston, executive director of the Insurance Fraud Bureau. “The long-term benefit, of course, has been lower insurance rates for those in the Commonwealth who bear the brunt of paying for this serious economic crime.”

The number of injury claims filed per 100 accidents, a prime indicator of fraudulent activity, has dropped in Lawrence from 141 claims per 100 accidents in 2002 to 52 claims per 100 accidents in 2007. The statewide average over the same time period has dropped from 43 to 28 claims per 100 accidents. In addition, auto claims payments in the CIFI communities had declined by a total of more than $252 million by year-end 2007.

“While other factors also contribute to the decline in claims – such as yearly weather conditions, road conditions, general driving habits, intensified fraud legislation and heightened awareness of the anti-fraud efforts – the elimination of fraud has the biggest impact on these positive trends” Johnston added.

The efforts of the task forces were credited by Massachusetts officials with contributing significantly to a more than 20 percent total reduction in state-set average auto insurance rates over the period from 2006 through 2007.

Established in 1991 by Massachusetts law, the Insurance Fraud Bureau of Massachusetts is the only investigative agency of its kind in the country that is privately funded by the state’s insurance industry. It refers cases of suspected criminal insurance fraud to local, state and federal prosecutors and licensing agencies of the state and federal governments.

Source: Insurance Fraud Bureau of Massachusetts