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Caution to California from Coalition against Insurance Fraud



In the first edition of the Coalition Government Lists of Leadership Publication in 2019, the coalition warned against a proposed amendment to the SIU Regulations in California that I warned in a previous question about Zalma's insurance fraud letters.

A sweeping draft of SIU regulation has the stated purpose of improving the quality of insurance fraud control references to the California Insurance Department. The goal is worthy. In my opinion and the coalition view, the draft goes too far and would make the investigation and prosecution of insurance fraud reporting much more difficult for those working in SIUs and, in my opinion, reduce the number of reports to the insurance department and prosecution for insurance fraud.

The coalition reported that many observers, like me, believe in the draft abuse. The department seeks initial comments before the formal public review begins and each insurer and SIU investigator must submit their comments to CDOI.

Among the first concerns mentioned by Coalitiion are:

  • Application documents cannot have any information edited from claim documents. This can invalidate the lawyer's privilege, as the defendant has the right to detect the files transferred by the insurer, including the lawyer's privileged documents and protected work product, if a prosecution has been filed.
    • The coalition proposed a potential change that allowed the insurer or SIU to simply provide the insurance department with a privilege log list that was edited.
    • In my opinion, it would be to instruct insurers to protect the work product of their lawyers and never reveal the lawyer's privileged documents.
  • Compliance training would also be required of engaged investigative contractors. However, the rule would unintentionally require training of suppliers that only help the insurance company SIU, rather than companies that perform "integrated" SIU functions.
    • This type of micro-management does nothing to help the investigations but increases the insurer's and its vendor's costs.
  • Insurers would need to insure the insurance department for authorization and refer referral data from across the United States
    • The coalition notes that this proposed requirement is potentially unnecessary and overreaching and provides the state of California with information that has no bearing on the investigation and reporting of any fraudulent claims in California.
    • There is no reasonable reason in my opinion for the state to know about insurance personnel in Alaska, New Hampshire or Vermont, let alone all states.

The insurance department's update is, and should clearly, attract a great deal of discussion within the insurance fraud prevention society around the United States, given California's size and regulatory framework.

The coalition actively participated in the insurance department's standing room meeting in Sacramento in March. The department sought introductory comments to help delay the draft before the public hearings began.

Requiring quality assurance case insurances from insurers is a worthy set of rules, the coalition called the insurance department. The insurer's "checkbox" method reduces valuable case management and allows more fraud to become uncomfortable. However, the rule should avoid establishing barriers that unintentionally defeat this goal, urged the coalition.

Many insurance companies have little or no staff in California, a state with more than 1

,400 insurers allowed to do business in the state. As a result, these insurance companies contract with an investigation firm to act as its California SIU. The proposed regulation would define it as follows:

(f) "procured entity" means an entity with which an insurer agrees to perform SIU or integrated anti-fraud agents or functions on behalf of the insurer. "Contracting entity" also includes subcontractors and subcontractors who are instructed to perform SIU or integrated anti-fraud agents or functions on behalf of the insurer. (Laying added)

In the case of procured entities, the proposed regulation requires special conditions in the contract between the insurer and the contracted entity and its subcontractors. The proposed regulation specifies enough details and requirements to make it economically impossible for a non-major insurer to find a contractor willing to act as its SIU.

Proposed section 2698.34 requires that documents be sent to CDOI without editorial including any "other information that the fraud department or an authorized authority considers relevant and important." This will put the insurer in a dilemma: follow the rules and waive the privilege of the lawyer or disobedient and punished by CDOI.

Insurance fraud, from my 51 years of experience, comes in many forms that rarely fit into a tight classification. The proposed regulation requires SIU to provide written procedures and lists of red flags specific to each line of insurance, a task that is almost impossible to complete and which may hinder the recognition of a fraudulent system that does not fit into the procedures.

The examination requirements of the proposed Regulation, cited in their entirety below, are a form of micro-management and place unnecessarily busy work which may not affect the investigation:

Modify Section 2698.36. Investigation of suspected insurance fraud.

a) SIU shall establish, maintain, distribute and comply with written procedures for the investigation of any suspected insurance fraud. SIU's written review procedures shall include all of the following:

(1) How to conduct a thorough analysis of a claim, application or insurance transaction, including consideration of factors that indicate insurance fraud.

(2) How to identify and interview potential witnesses who can provide information about the accuracy of the claim or application.

(3) A list of industry recognized

(4) How documents and other evidence obtained during an investigation will be preserved.

(5) How to write a concise and complete summary of an entire investigation, which is specific to the investigated study, is separate from any other document prepared in connection with the investigation and contains the investigator's conclusions on suspicion of insurance fraud and fraud and the basis of their results. The summary should answer the following questions:

(A) When was the reporting party suspected?

(B) What facts led the reporting party to believe insurance fraud

(C) What are suspected distortions and allegedly made them?

(D) How are the alleged erroneous materials and how (E) What are the relevant witnesses to the alleged distortion if there are witnesses?

(F) What documentation

b) Any investigation of suspected insurance fraud shall include at least performing the procedures specified in subsection a of this section 2698.36, to the extent that They are applicable.

SIU will, in my opinion, spend all its time fulfilling the regulations and some time to carry out a thorough fraud prevention.

Proposed section 2698.40 requires an SIU annual report requiring the identification of all SIU staff, a description of the insurer's methods and copies of written procedures used by SIU. This report and its details will always be quoted in civil law proceedings as alleged by the anti-fraud officer who will claim that he or she was wrongly accused and failed to comply with any nit-picking and micro-handling required by the proposed amendments to SIU Regulations a jury as evidence of evil rather than a decision by the SIU investigation to determine whether or not a fraud attempted.

Every insurer doing business in the state of California should prepare comments on the CDOI requesting it to reconsider the proposed amendments that make it more difficult, more expensive, and more difficult to defend complaints made by fraud claiming that their claims of fraud were rejected was a vicious crime. . SIU investigators are insurance fraud and should be allowed to investigate every potentially fraudulent claim thoroughly and in accordance with their professional competence without prejudice to repressive regulations that impede, slow and expense the task of investigating and acting against any fraudulent claim.

Read this and more than 2600 posts at http://zalma.com/blog

I've written a book of compliance with the current SIU regulations that can help you understand the proposed change and lead you to Create comments to submit to CDOI who has the coalition against insurance fraud.

  California SIU Regulations: California Participating in the Investigation of Insurance Fraud Investigation California SIU Regulations are designed to help California Insurance Personnel, Professionals, Independent Insurance Adjusters, Special Anti-Fraud Officers, Private Investigators for the Insurance Industry, Industry Leadership, Lawyers Serving industry and all integral California anti-fraud personnel recognized insurers to comply with the California SIU Claims Regulations.

The State of California, by Charter, requires all recognized insurance companies to maintain a special investigation unit ("SIU") that meets the requirements of the SIU Regulations ("SIU Regulations") and educates all integrated anti-fraud personnel to recognize insurance indicators fraud.

Available as a Kindle Book.

Available as a paperback.


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