When Stephen Perry came to the District of Columbia Department of Insurance, Securities and Banking in 2000, its fraud division saw five referrals all year, and none reached a courtroom.

Stephen Perry

In the last three fiscal years, fraud referrals to the DISB’s Enforcement and Investigation Bureau have averaged about 350 per year and risen 75% from fiscal 2007 to fiscal 2009, according to recently released statistics from the department.

“It is a combination of some new fraud-fighting technologies and our department’s success in gaining the attention of D.C. citizens to report fraud,” Perry, the DISB’s associate commissioner for enforcement and investigation, said. “Citizen awareness of insurance fraud, and its cost to them, has been growing over the years.”

Reporting suspicion of insurance fraud by regulated insurance carriers is mandated under the District’s insurance fraud law. Perry said the majority of referrals are electronically submitted using systems from the National Insurance Crime Bureau (NICB) for its members insurance companies and the National Association of Insurance Commissioners (NAIC) featuring both consumer and insurer referrals.

Perry’s bureau also works closely with its counterparts in the Maryland Insurance Administration, and in Virginia, through the state’s Bureau of Insurance and Virginia State Police, who investigate fraud cases.

“We’ve had information sharing meetings in the past, can exchange emails, and I’d say we have a ‘pick up the phone’ relationship and the lines of communication are working very well,” Perry said.

Statistical data

The largest number of fraud referrals to the enforcement and investigation division over the last three fiscal years concerned auto insurance, with a rise in auto owner give-ups, staged accidents and backdating actual dates of accident claims, Perry said.

There was a subtle drop, Perry noted, from fiscal 2008 and 2009, which he attributes in part to cooperation with the Maryland Automobile Insurance Fund (MAIF). The state’s insurer of last resort, MAIF has made more than 140 referrals to DISB regarding premium avoidance, where a District resident claims to have a Maryland address, thus securing a lower premium.

“Since MAIF set up the program with us, the word is out that MAIF and DISB will detect the fraud and possibly the claims won’t get paid,” Perry said.  “MAIF is a great partner.”

One statistic that may be a bit misleading, Perry said, is a rise in agent fraud referrals. In 2008, the DISB’s insurance and fraud bureaus combined their efforts in agent enforcement, which has resulted in more referrals for investigation, he said.

This story originally appeared in the January 2010 print edition of Insurance & Financial Advisor.